Law firms as a business are unique in their own way. They consist of a lawyer(s), paralegals and office support staff that all work together to resolve a conflict for the client. In any law firm, there are extremely talented lawyers and paralegals who move with high energy and at a fast pace. They know the law in detail, which deadlines need to be met for a hearing or deposition, and how to communicate effectively with all parties involved in their current case load. Law firms know the importance of not missing deadlines.
The work gets done by selling time to the client at a specified rate. Sounds simple right? But it isn’t really. Along with this activity comes the business / financial side of a law firm: invoicing clients, collecting accounts receivable, payroll, paying and filing taxes timely, keeping detailed financial records of all business transactions, and providing whatever financial support is needed to help the business to keep moving forward. This is the behind-the-scenes work that Lawyer/Owners don’t have time for while working for the client.
This is where a Chief Financial Officer (CFO) might make things run a little more smoothly. The business might not warrant a full-time CFO, but maybe part-time or on contract. This position has the talent to help take the business burden from the Lawyer/Owner so the legal team can focus on taking care of the client. The CFO should run monthly key metric data to see how the firm is truly performing to the expected budget and confirm that all accounts receivables are being collected timely. Does the firm have enough billable work to cover all overhead costs? If not, there may need to be a discussion with the Lawyer/Owner about marketing and trying to bring more business in the front door. What if the owner has decided to expand their business brand in other markets and grow their coverage? A CFO can prepare a financial Pro-Forma with a few different scenarios showing the amount of capital needed to expand in another location or region and how many years it would take to break-even on this project. Maybe a firm wants to pick up a few niche lawyers that specialize in a certain area of law. A good financial person can help put together a plan on paper and communicate this to the Lawyer/Owner and see if this task is feasible or not.
At the end of the day, lawyers and paralegals need to be available to spend their days working for their clients. But remember, they have families too. They like to go on family vacations, take the kids fishing or hiking, attend sports activities with them, or maybe go on date-night with their significant other. Having a full-time or part-time CFO can be a strategic move to improve your law practice and put more productive time back into the day for the Lawyer/Owner, at the same time creating a better work-life balance.
– Written by Clayton Kolodziejczyk
