Year-end is a great time to evaluate the firm’s finances and make a plan to improve next year’s bottom line. Even if the year went well, there are always improvements to be made and areas that can be trimmed without impacting employees or the service they provide to clients.
Here are 7 steps you can take now to improve next year’s bottom line.
1. Evaluate your advertising dollars
Make a list of advertising expenses for the year and include everything from phone book advertising to ads in magazines, newspapers, and online sources such as Google. Next to each item, list the number of clients and/or business that was generated as a result.
If you’re unable to calculate advertising’s effect then it’s probably time to implement a tracking system. It’s as easy as keeping a log and asking clients and prospects to tell you how they heard about the firm.
Evaluate each expense with a critical eye. Often, an advertising decision is based on what’s been done historically, rather than what is most effective. Other times it’s based on what the attorneys collectively believe makes them look successful in the eyes of their peers. A large ad in the telephone book is a good example of this. At one time, a firm couldn’t survive without a yellow page ad, but today much of a firm’s business comes from online sources like the company website.
2. Acknowledge the power of referrals
How well do you reward and thank the people who send referrals that lead to business? Most firms don’t show referring clients the gratitude they deserve. In fact, many don’t acknowledge referrals at all. It’s a practice that’s not only bad business, but downright rude.
The best way to generate referrals is to be grateful for those you receive. It’s as simple as sending a thank you card, or even better, a box of chocolates or a bottle of wine.
3. Thank your clients
Your business depends on clients, so it’s important to thank them with a yearly letter signed by the attorney in charge of their business. In it, thank the client for their business and mention some of the successes they’ve experienced over the last year. If appropriate, mention additional legal services the firm provides.
4. Track and improve employee productivity
Tracking the way employees spend their day can improve productivity, generate cost savings, and ensure work is distributed fairly.
The job isn’t a difficult one. Simply ask staff to keep a written log of what they do every day for a three week period. Select a time of year when business is relatively constant and when few, if any staff, are on holidays. Avoid busy times like Christmas, tax season, and the summer (when staff are more likely to be on holidays).
Not all staff will respond well to the idea of tracking their time so it’s important to let them know the firm is not on a witch-hunt looking for slackers. Instead, stress that the firm’s goal is to identify redundancies and ensure no one employee is overburdened with work.
Knowing how employees are spending their time may help identify staff with extra time they could spend working on projects currently handled by temporary staff. It could even save you the cost of hiring an employee you realize isn’t necessary.
5. Create a procedures manual
Draw up a procedures manual and reduce costs associated with training new employees.
The manual should include basic information about the office such as the address, hours of operation, and a directory of attorneys’ and their practice areas. It should also include practical information like the code for the photocopier, how to set the office alarm, and who to call for technical help.
Include a list of staff positions and their job description. This will help new and temporary staff determine to whom they should direct calls or inquires.
6. Protect your income
The best way to improve collections and get paid sooner is to draft a consistent plan for dealing with delinquent clients.
Start by separating clients into three categories: those who pay immediately; those who always pay but are occasionally late; and those who pay very late.
Next establish retainer guidelines and apply them to businesses in each group. Here’s how it works:
Clients in good standing
Don’t fix what ain’t broke. If a client pays regularly and on time then there is no sense requesting a retainer or increasing an existing one. The act would serve no useful purpose and could jeopardize a healthy client-firm relationship.
Clients who are sporadically late
Regular clients who are occasionally late with payments should have a standard retainer in place; however, increasing that retainer in response to this exercise is ill-advised. Instead, monitor the situation and evaluate it at a later date.
Clients who are chronically late
The only way to deal with tardy payers is to require an evergreen retainer that is automatically renewed before the fund is exhausted or reaches an agreed upon minimum. Consider setting the retainer as high as 80% of the anticipated free and be clear that new work will only begin once the retainer returns to that point.
7. Mind the little things
Take care of the pennies and the dollars will take care of themselves. Follow this old, but wise, advice and you could uncover surprising savings.
The trick is to identify all those little expenses that, added together, can represent a significant portion of the budget. Things many people don’t even notice, such as plants, extravagant office supplies, and food purchased for meetings. Look at what the office actually needs “from a business standpoint,” and eliminate the questionable expenses. Chances are you’ll save more than a few pennies.
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