It’s important to track and measure your law firm’s performance. If you don’t, how will you know what’s working and what’s not? Of course, like many things in life–and business–it’s easier said than done.
How do you know what types of processes you should be tracking? And what reports should you be running? And what do you do with the information you’ve been tracking once you’ve obtained it? These aren’t always easy questions to answer when managing a law firm.
Fortunately, in April at ABA Techshow in Chicago, there was an entire seminar devoted to this very topic. During a session titled “Five Law Firm Management Reports You Should Be Running And Why,” Haley Odom Ackerman and Peggy Gruenke discussed the ins and outs of law firm reports while Stephanie Crowley took visual notes of this session on behalf of MyCase. The visual notes from that session can be found below along with some of our favorite tips from the session and links to sites that provide further information (click to view larger image):
1. Track each case’s life cycle.
Manage your law firm reporting by collecting and analyzing data about the life cycle of each case your firm takes on. Use database software to collect information and run reports about each case and include information such as:
- Intake date
- Filing date
- Discovery deadline
- Trial date
- Settlement date
- Payment date
Then run reports to determine:
- The actual valuation versus case cost over the life cycle of each case
- How long it takes to handle different types of cases
- Whether the value of the case increases as costs increase
- Which attorneys and types of cases are the most profitable
2. Track referral sources.
For most law firms, referrals are a key source of cases. That’s why it’s so important to track and nurture referral sources. To do this, the presenters recommended that, for each referral source, you track: 1) the number of referrals, 2) the value of each case, and 3) the time and investment spent on each referral source, including time spent networking and money spent on fees and/or gifts for the referrer.
3. Track time spent building up your business.
The presenters recommended using software like Excel or CRM software to track referrals and networking efforts. Other suggestions for managing your law firm included color coding networking activities on your law firm’s calendar system and establishing and tracking your firm’s networking goals. That way you can assess your success at reaching the goals and then determine which networking methods work best for your law firm as a whole and for each lawyer within your firm.
4. Track your law firm’s finances.
The presenters emphasized the importance of understanding your law firm’s overall financial picture and the basic concept of profitability, along with typical billing variables found in law firms, such as the billable rates, the billing realization rate (discounts), and the collection realization rate. Important financial metrics to track include: 1) the number of new matters, 2) actual monthly billing, 3) money collected, 4) work in progress, 5) accounts receivable, 6) writeoffs, and 7) the effective hourly rate.
5. Track your expenses.
And last, but not least, carefully track and manage your law office’s expenses. Compare your monthly budget with your actual expenditures and understand your law firm’s typical monthly cash flow. That way you’ll be able to predict how much you actually have left on the table at the end of each month.