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Accounting and Financial Planning for Law FirmsKickerFeaturesTopicsLaw Firm ManagementSectionsNewsLJN Newsletters

Communicating Firm Finances to the Partnership

By Jonathan S. Kuo
March 26, 2010

It's no secret that 2009 was a year where many law firms began to intensively focus on their finances. Unlike in the past, it is not just firm leadership taking a close look at the firm's books these days. The focus on finances has extended to law firm partners, involving a wider audience than the managing partner and management committee. In firms grappling with the severity of the economic crisis, legal management consultants, such as the author's firm, have noticed many encountering unexpected challenges when communicating the firms' financial results with the wider partnership. In some firms, for example, many partners have widely varying perspectives on practice profitability, office profitability, utilization, expenses, and overhead allocation. We have even found some partners from the same firm referencing different values for supposedly the same performance metric.

We believe most financial misunderstandings and shortcomings can be avoided if firm management were to use some fairly straightforward communication techniques with their general partnership. In this article we have compiled a few considerations for a law firm's head-of-finance (CFOs, EDs, etc.) to contemplate when communicating with his or her respective partnership.

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