Top 10 New Year resolutions for the Legal Sector in 2021 to improve and take your business forward in the current business environment

Some New Year business resolutions which should just be a reminder checklist of best practice plus others to help you manage your firm’s profitability, cashflow and future success.

Business new years resolutions:

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Cashflow and projections

Many firms will have taken advantage of tax deferrals and loans over the last 9 months – these need to be paid back, and whilst there is the ability to pay these back over time, that can that we kicked down the road is almost upon us.  Make sure these are built into your forecasts and ensure points and processes raised in this article attack some low-hanging fruit so that these forecasts do not look quite so painful.  A three-way forecast integrating profit & loss, balance sheet and cashflow is ideal.

It is these early warning systems via cashflow projections that served many firms so well in April and May especially to assess their way through the lockdowns, how that affected their business and key decisions to be made.  Contingency planning around finances and your business generally is now part of most management teams’ toolkit.  This planning could be called upon if your business becomes impacted negatively or positively as Brexit business environment becomes clearer and your clients’ needs of your suite of services becomes known.

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Tax payments

Practices will be searching (or perhaps even borrowing) to pay balancing tax payments at 31 January 2021 on results in the basis period 2019/2020 that were likely pre any Covid impact, and with increased payments on account adding to the pain; it’s worth reviewing those though.  So how come you do not have the cash sitting there with you all smugly paying these amounts a little early?!!  Perhaps because other people still have your money?!!

Therefore, once again, time to focus on the following:

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Improve your credit control

Ensure your credit control department is adequately resourced, empowered and supported by all fee earners.  Monitor your collection procedures to speed up collection of fees and thereby reduce the potential impact of bad debts.  Set targets for monthly collection rates and debtors days for each team.  Once again, (your) cash is king!

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Work in progress (WIP)

Ensure all fee earners are fully recording their time and not making billing decisions when posting time.  Agree in advance with your clients to interim bill, and always bill at the height of clients’ satisfaction, normally at the completion of a great job.  You are more likely to be able to bill your full costs and you will collect your cash quicker.  Fee earners should be regularly reviewing the WIP on their portfolios for billing opportunities and looking to hit billing and WIP day’s targets.  Make fee earners aware that WIP doesn’t always have to go up, managed well it stays reasonably constant throughout the year.  If you do not bill it, you do not get paid!!

Interaction between management team and heads of department as absolutely crucial in relation to both credit control and WIP to catch any problems early.

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Sectors and exposure limits

Monitor your combined WIP and debtor exposure to clients in sectors that are particularly struggling in this present economic environment, retail and hospitality and leisure.  Don’t abandon those sectors, they may well need your excellent legal advice on many areas, but just make sure fees are levied and paid regularly.

Set limits for exception reporting where combined WIP and debtors on individual clients is too high.  This can be crucial for good and efficient oversight from your Accounts team – most systems will allow these to be automatically generated.  Regularly communicate with your clients to keep them fully informed of all matters and aspects of their cases and assignments, and get agreement to any additional fees before they are incurred.

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Risk management and collaboration

Ensure you are on top of both of these areas that can ensure your risk is reduced, claims are less frequent, and clients are served by the best person for the job.  Do all staff understand your client take-on processes and any policies associated where you should decline appointments?  Additionally, a smooth and encouraged internal collaboration will lead to clients feeling part of the firm rather than attached to only one person and a flight risk.  The natural results from this will help during Professional Indemnity renewals and often lead to improved revenue and your best clients becoming advocates.

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Monitor your expenditure

Keep close control on expenditure and consider where savings could be made.  Carefully consider any capital expenditure that is not vital.  Expense profiles of many firms have changed greatly in the last 9 months, travel and face to face marketing spend has much reduced, and firms should be considering whether they get appropriate value for money / return on investment from these going forward.  That is not a “stop marketing” comment, that’s a make sure whatever methods you adopt and perhaps have adapted to, are focused and lead generative.  It may be your practice has proven to be particularly strong and profitable in certain areas over recent months; if this is likely to continue focus marketing resource of these strengths perhaps?

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It has always been vital to invest in and understand your most important asset; your staff, but this has become more challenging with remote working.  Succession is a key issue in many firms, and you should not ignore how difficult it has been for your trainees and key talent to work remotely.  We all have different work-life challenges, and this is a very valued asset in a manager’s skill set to manage remotely and keep those keen, key talent engaged and valued whilst learning and developing.

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Remote working

So, we have found out that remote working is not for skivers!!  What it has done is make many firms very aware of what exactly they are paying per square foot for staff that are rarely in the office.  Yes, there will be a return to the office, but do you really need that full expense hitting your profits each year?  Certainly something to consider when the next lease is up for discussion.

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Whether this is internally or externally, this has become even more important where face-to-face is not so easy.  Encouraging the use of virtual platforms has helped although Zoom fatigue especially with larger groups is evident.  Staff want to hear from management, and clients want to hear from the relationship team.  Staff want to be informed, as well informed as they can be anyway, and the clients want to be provided with sector specific and tailored advice.  Both are challenging in their own way but if your team and your clients do not feel you are getting it right then you are exposed to both groups who make you money.

Posted in Blog, Legal Services