by Dan Bodner
There are many ways to go about improving both the profitability and cash flow of a law firm, which often go hand-in-hand. Here are some important pointers to consider from documents available through LOMA (Law Office Management Assistance Program), a free service of the State Bar designed to aid lawyers in managing their practice.
• Managing accounts receivable. A problem with clients who do not pay or pay late can be turned around by doing several things. For example, be careful who you accept as clients. One of the LOMA hotline's participating consultants recommends the following (LOMA document 210-004):
1. Develop a credit interview form that provides background on a client.
2. Pre-qualify the client through a credit screening process.
3. Identify and separate clients with questionable credit.
4. Require an agreement detailing hourly rates and legal costs.
5. Implement a billing and collection system that ensures delinquent accounts get worked by mail and phone.
6. Ensure your main billing and collection person is adequately trained and familiar with all applicable state and federal laws, including the Fair Debt Collection Practices Act.
7. Develop a relationship with a third party collection company.
Another way to ensure payment is to take credit cards. The American Bar Association has made arrangements for this purpose through U.S. Bankcard Center (see LOMA document 210-007).
• Use a modern time and billing system. Sometimes profitably is low because attorneys are not properly tracking their time and do not bill all the hours they spend, or they spend too much time each month reconstructing timesheets and proofing bills. Demonstration copies of popular time and billing software are available through LOMA.
• Staffing. Many attorneys share the impulse to do everything themselves. Getting the appropriate amount of support staff can often improve client satisfaction, profitably, office efficiency and one's stress level (see LOMA document 440-020).
• Controlling overhead. Especially for those starting out, it's easy to spend too much money on office rent, equipment and other overhead costs. LOMA document 345-006 offers some money-saving tips such as setting up in an office co-op to share costs.
Acquiring used or reconditioned furniture is also a way to save money, but it is probably more cost-effective to invest in a new, rather than used, computer system.
• Marketing. A good clientele can solve a whole world of other problems and help make your practice enjoyable and lucrative. Marketing consultants often argue that "niche marketing" holds the key. According to LOMA document 325-008, niche marketing comes from two general areas: personality and culture of the firm or attorneys and an industry or special interest group that has market potential. To help focus on a niche, attorneys and other key staff members of a firm should be given a survey asking them to list some of the following things:
1. All memberships and affiliations with civic, fraternal, professional, trade, religious, service and philanthropic organizations.
2. Causes, passions and social issues of interest.
3. Hobbies, special skills and non-legal areas of expertise.
Dan Bodner is program director of the Law Office Management Assistance Program (LOMA). Call 1-800/ YES-LOMA for more information or visit LOMA's web site at www.lomex. com.