The 7th Law Firm CFO Institute, held annually in the late winter, visited Miami for its most recent conference. The event, co-sponsored by Accounting and Financial Planning for Law Firms and organized by Northstar Conferences, attracts some 75 Chief Financial Officers, Executive Directors and others with an interest in law firm financial matters. The topics were timely and focused, and the speakers knew their subject matter well and kept the discussions moving.
The Supreme Court of the United States has rescued Interest on Lawyers' Trust Accounts (IOLTA) programs from a vigorous constitutional attack, ruling 5'4 that states may pool clients' escrow funds in bank accounts and give the interest to legal aid programs.
The Enron examiner is back. And a few law firms can't be too happy about it. R. Neal Batson, the court-appointed examiner investigating the exotic financing schemes that contributed to the Enron Corp.'s bankruptcy, publicly released his much-anticipated second report on March 5.
For a closer look at these recent accounting-financial items, take a quick trip to the Web.
In Part One, the author introduced the overall challenge of fiscal management in a law firm, and explained key metrics for understanding cash flow, cash gaps and revenue (collected fee receipts). This article's explanation of key performance metrics for law firms continues with measures for productivity, pricing and profit margin. We'll conclude with a brief discussion on where to focus in addressing profitability concerns, plus a few general comments on the effective use of numerical results in the larger context of organizational management.
Editor's note: In February's edition of the A&FP newsletter, an article and accompanying worksheet provided an overview of various law firm resources that might need to be committed to a proposed ancillary business. That article focused on how an ancillary business might unexpectedly challenge the physical, financial or service resources of the law firm. This month's article examines somewhat the reverse issue: financial strains on the ancillary business that could unexpectedly result from its association with the law firm.
For a closer look at these recent accounting-financial items, take a quick trip to the Web.
Imagine the CEO of a major international corporation saying to her Board of Directors, 'We are doing a great job of managing 70% of our productive capacity.' And the Board responding, 'Great job, here's your bonus.' Or another CEO who says, 'We don't need to hire managers for our regional plants, because 70% of our capacity is in the main plant anyway. Let the others do what they want.' Hard to imagine, isn't it? Of course it is, because the concept of ignoring 30% of your business' productive capacity ' leaving it to 'manage itself' or, worse, considering it unimportant ' would get you fired in any business in the world.
Understanding a law firm's fiscal affairs is not that difficult. One need only understand a few basic concepts ' concepts that are no different for the law firm or the law firm's clients. The trick is not in understanding the numbers but in managing for results. For a law firm, this is an even greater challenge. Its owners are well educated, strong willed, success driven, practice focused, independent minded and, at least for trial lawyers, somewhat more argumentative than the general population. The owners are also large in number relative to the total number of employees and are active in the day-to-day operations of the firm.
San Francisco will be the site of the 16th annual conference and workshops on Law Firm Management & Economics, hosted by our Board member Joel A. Rose on March 20-21.
