Small Law Firm KPIs
You may run a solo law firm or a solo plus one firm. What strategy should you implement when tracking metrics and your law practice?
It is easy to get caught up in the day-to-day business of your law firm work and not step back and design a financial strategy for your future. We work with many smaller firms and getting our clients to stop and take the time to look at their accounting records is always challenging. Add to that, getting time scheduled to create some long and short-term goals - that sometimes become next to impossible.
Here are a few questions we ask our clients as we start to help them strategize their future:
What is your most significant pain point?
- Is it your cash flow?
- Or do you not have enough clients?
It typically lands in one of these two places. Sometimes both.
We like to plan, set goals, and strategize because it's far easier to do so with a smaller law practice. Once we put the 3-month goal, the 90-day goal, and the one-year and 5-year goals, we have taken action to plan.
You may be asking yourself, what types of goals are best? You can start with a simple revenue goal. Next, you will review how to obtain that. The thing about a KPI is that it's connected to your goals. A good financial professional can help you get to that goal. Reach it.
But you don't have to stop at revenue or even profitability. Below are my favorite small law firm KPIs. Tracking these will set your firm up for success:
- Accounts receivable over 90 days
- Net Client promoter score
Accounts Receivable (AR) over 90 days
There are a few ways you can start to unclog AR problems. Review your current overdue clients. Decide who needs to be written off. Then the rest of these clients need actionable steps for collection. Hire an accounting firm to handle collecting the old debt. Sometimes a phone call or letter is all it takes to get paid for the work performed. Offer to get paid by credit card. This one tip alone will improve your cash flow at your firm. We recommend Gravity Legal as a merchant services provider for law firms.
Don't forget that cleaning up old AR is excellent but look to the root problem that caused the AR to be left unattended. Use workflows, a feature of QuickBooks Online Advanced, to ensure your clients are automatically reminded that their invoices are left unpaid.
Most smaller firms do some marketing. Many times, it is done by the firm owner. Whether organic or paid marketing, tracking how that marketing works is wise. Is it effective? It's also imperative to track your leads. Tracking your leads from first contact through engagement is critical to a successful marketing strategy. A great way to do, that is to use a program like Mailchimp, now owned by Intuit and part of QuickBooks, or HubSpot or Salesforce - apps you can embed right into QuickBooks.
Net Promoter Score
Now that your leads are managed into clients, how do you get them to be your biggest fans and refer you to other potential clients? A net promoter score all comes down to client experience and client expectations. Are your clients happy with their experience at your law firm? Were they pleased with the onset, mid-case? How about at the conclusion of the matter? These points should be measured at specific times throughout the case's life cycle. Use a service like Survey Monkey. Aggregate the data. Analyze.
At this point in the article, you probably expect me to provide you with a phenomenal app to track these KPIs. You don't need pricy software. A Google sheet or google doc will get your firm on the right track.
Some practice management tools have this metric tracking built in, like Clio, Zolo Suite, and Lawcus. All three of this software provide beautiful dashboards. QuickBooks Advanced will also offer an attractive visual in the performance center when set up correctly.
Delegate, delegate, delegate
One of the areas we see the biggest issue is that small firms, and solo law firms do not like to delegate. They think they can handle all tasks on their own. By delegating, you are leaving time to do what you do best, legal work and caring for your clients. Hiring a good accounting firm to assist you with these financial strategies will help your firm grow profitability.