A foundation article
It’s all about the metrics….
In this foundational article, we are focusing on an aspect of effective practice management which is fundamental to your legal practice.
This topic is tantamount to knowing exactly how your legal practice is performing. At all times. By staying on top of your law firm’s most important metrics, you can be certain of what’s working, and identify what changes need to be made. What are we talking about? Management reporting, obviously.
As we have said before (something we believe bears repeating) – how you think of managing your legal practice needs to change. Legal practitioners across the board, need to start managing (and running) their legal practice in the same way they would manage or run any business. Because again, that is what your legal practice is – a business.
The same business principles will therefore apply – achieving the desired outcome within an agreed timescale and according to the projected or agreed budget. And those principles will ring true, whether it is for a law firm or a business. Time, cost, and quality are the building blocks of every project – business and legal alike. Remember that.
Central to these concepts of time, cost and quality in a business comes down to truly understanding the metrics that make up the actual performance of the business/project/legal practice i.e. how are you really doing?
Reporting will go a long way to help you understand all the going’s on in your legal practice. Provided they don’t take up all your time. Because that would be ironic – drawing a report to enable the boosting of productivity, only to spend a large amount of (wasted) time doing so. Do we sense a “Duh” here?
As we go through this topic, we would like you to keep the following quote in mind –
“Law is not a profession at all, but rather a business service station and repair shop” – Adlai E Stevenson
Management reporting is kind of like a source of “business intelligence” that helps business leaders make more accurate, data-driven decisions. And law firms are no different. In order to run a successful legal practice (and therefore a business) you need to know how your legal practice is performing (really). At all times. By tracking your law firm’s most important metrics, you can stay on top of what’s working and identify what isn’t.
Wait, what are metrics?
Metrics (especially in a business sense) are quantifiable measures that are used to track business processes in order to judge the performance of your business (ditto for your legal practice). There are so many variations of these metrics because there are so many distinct kinds of businesses, each with different processes (again – ditto with legal practices).
To elaborate on the above, the real purpose of “management reporting” is to inform managers of various aspects of the business in order to help them make more informed decisions. And what do we always say – ditto for legal practices. You see, there are multiple areas that will affect how a legal practice is doing. Remember what we said about case management being the same as project management? Well management reporting here would do wonders in helping a legal practitioner better prepare for their case or matter.
Management reporting involves collecting data (or metrics as we explained above) from various departments of the company in order to track key performance indicators (KPIs). These metrics (or data) show the worth of your legal practice/business over a specific time period by disclosing various operational information (which can include financial info, if applicable).
Reporting, whilst tedious and monotonous (except if you use AJS products) empowers decision-makers to find the right path to increase operating efficiency and make pertinent decisions to remain competitive (especially in today’s highly saturated and technologically advanced markets).
But with so much already on your plate (as a hectically busy legal practitioner), running reports that don’t serve or are not relevant to your long-term goals, seems like a huge waste of time and energy.
Therefore, limiting the amount of time you spend on reporting is crucial. Narrowing down what is important for your legal practice will help immensely with this. Here are three examples of some reports you may find worthwhile running –
- Client Acquisition – for a lot of legal practices it is important to know their conversion rate i.e. determining whether your lead (aka potential new client) translated into a sale (aka became a retained client). Provided of course that each legal practitioner open clients as “potential clients”. This is not a run-of-the-mill report but could be extremely worthwhile in the long run. You see, running a monthly client acquisition report can help you determine where your clients are coming from (i.e. social media, advertising campaigns or referrals), what the value of their case or matter was and situations where a client made an appointment but never showed up for the consult. Why is this important? Well, it can help you understand how your lead conversion pursuits are panning out. If your data analytics show that you have had an increased amount of consult “no-shows” then perhaps you need to change how you are engaging with clients – are you keeping them engaged? Are you managing to turn leads into repeat clients? Is your marketing strategy working? Are you appealing to the right demographic for your practice? Usually, a poor lead to client conversion rate is an indication that you need to improve your client intake process. If you aren’t using a client intake software that tracks leads automatically from start to finish, then it can get incredibly laborious manually keeping up with each contact. But it is important to keep in mind that the number of matters opened at your law firm is directly connected to the amount of revenue that your law firm produces. New clients are critical for the success of your law firm’s future, so make sure that you pay attention to whether your client acquisition rate is where you want it to be. Often it takes trying a few things until you find a formula that works for your legal practice. So, keep at it.
- Productivity – tracking how well you are performing at both an individual and collective level is so important as it leads to an understanding of areas that can be improved upon, ways to boost productivity and efficiency whilst at the same time boosting revenue. Tracking the total amount of matters being worked on by an individual user, compared to matters that have been completed or settled on a weekly basis can be extremely helpful in identifying areas for growth. By measuring (and analyzing) how many matters or cases an individual user is managing versus matters that have been closed can help you make decisions on how to boost productivity with the incorporation of powerful (and integrated) legal tech into day-to-day operations with software such as AJS Express, AJS Pro and AJS Enterprise which are cloud-based, full-featured accounting and practice management systems that allow for customisation of invoices and statements and scheduled reports, together with automated task and workflow, document generation and bills of costs, document management, time recording, contacts management, FICA management, an asset register as well as the all-important reporting feature).
By measuring productivity, you can identify where you are losing the most amount of time and thereby make the necessary changes so that you can focus your time on the areas that produce the most profits. The end result is a profitable business and less time wasted on time-draining manual processes. Think of it as an analysis of time, which is exactly what you are selling (together with your expertise). And this can be especially useful (and therefore beneficial) when comparing time that has been billed versus time that is still sitting as a Work in Progress (WIP). This would ultimately inform you of how much time each user is converting to fees. Or not.
In our article on our new Version 4 Updates – User Tasks, we also set out how our User Task function can make reporting easy-peasy, and this ties directly into measuring productivity –
With progress notes on your specific cases or matters automatically added by the system, progress can easily be seen under “my tasks” (tasks that are assigned by you or to you). User tasks enables you to generate reports that –
- “Can easily export the task list as filtered (i.e. whatever view is selected) by virtue of an excel spreadsheet, making the process of collating tasks and understanding what is outstanding a cinch – clients can easily be appeased by letting them know everything is well and truly on track. With proof.
Need to search for completed tasks (that you have assigned to yourself or that have been assigned to you) and view all notes? It is easy – just view the task history.
- Revenue – your overall profitability is the foundation of any business’s overall success. Again, the same can be said for a legal practice. It therefore goes without saying that attention must be paid to the amount of revenue that is being brought in. Pay attention to reports such as total revenue billed over the month compared to what was actually collected, as well as your net overhead, average fee per matter and most revenue-producing marketing sources. Monitoring your revenue can make a significant impact on your strategy, and results in better planning and more informed decisions.
The following reports (which we offer as standard in our software) have been found to also be extremely useful (making reporting an absolute breeze) –
- The new management report – consolidates all the most relevant (popular) information such as debtor ageing (who owes you), creditor ageing (who you owe) as well as who your top 10 clients are;
- Ageing report – offers up to the minute, time, and fee summaries per user (for management);
- Work in progress (WIP) report– shows all work that is currently still in progress and which amounts are unbilled (per user). The calculated value of unbilled work in the WIP report is vital to your practice as it gives you a clear understanding of the (actual) overall value of your files/matters/cases/projects within your practice. Without this, it will be impossible to understand your businesses (legal practice’s) true value, and
- Client report – lists the top 20 or 50 clients of your legal practice (and this becomes an extremely valuable tool when it comes to client relations).
Essentially the point of reporting is to keep everyone on track, ensuring things are running smoothly, efficiently, and effectively and taking the necessary corrective action, where and when needed.
By incorporating the correct legal tech into your business, you can not only stay on top of all the “goings on” in your legal practice, but you can also ensure swift corrective action is taken in order to stay ahead of your competition.
AJS has a wide range of products that can assist with drawing reports with the touch of a button (thereby reducing a huge amount of wasted time in drawing up a report that is meant to help you boost productivity – again, ironic really).
Being an efficient, affordable, and reliable legal practice has never been easier. And has never been more necessary.
As Thomas A. Edison said –
“There’s a way to do it better, find it”
Just because it is a foundational principle, doesn’t mean it cannot be improved upon. So, do that. Seek to continually improve your legal practice – incorporate legal tech to become more efficient, accurate and affordable and make an effort to boost your revenue, your productivity and client retention in order to build a successful operation.
If you have questions on management reporting (or how you can make your legal practice more efficient), get in touch with AJS today to see how we can support you.