Now that the year is in full swing, and the 2020 optical jokes are for the most part finished, it’s time to really consider how you want your practice to look like this year. I encourage my clients to use the beginning of the year as an opportunity to assess their practice and implement a timeline for changes. Once you get into the routine of completing a yearly review, you have memorialized your changes as your practice continues to transform and evolve. I complete this process with my consulting clients as well as in my personal life, especially with finances.
For law clients, I call this process REMAP — Receivables, Expenses, Marketing, Audits, People — and if you set aside some time to think about these functions, you may re-map your path to financial success.
Almost without exception, my legal clients suffer as a result of a significant number of uncollected accounts on a monthly basis. When the procedures are not in place to manage client accounts each month, practices stand to lose tens of thousands of dollars each year. As one of the more complex and time consuming tasks, and because high hourly rates can cover for lost revenue, solo and small firm owners are often complacent about collections and receivables. Those of us hard-wired from a business perspective shutter at the thought of the loss of control and therefore, the loss of revenue. I don’t like leaving money on the table, so accounts receivable management has always been a priority and favorite to fix for clients.
It has been my experience that lawyers have a threshold of acceptance for receivables far above what managers and consultants like to see, or would allow if they were solely in charge. The procedures to minimize your monthly need to collect from clients centers around a team approach. With my clients, I need the entire team to buy in so that the systems will not fail. Be honest as you evaluate your receivables; you are only hurting your own bank account if you don’t face your shortcomings. You end up working harder for less money, which also doesn’t make long-term financial sense.
Another of my personal favorite tasks within practice management is reducing expenses. Solos and small firms often do not spend enough time on “bottom line” issue. Along with increasing revenues, decreasing expenses is the other way to put more money in your pocket. Over the course of my career helping professional practices, the vast majority of my clients spent little to no time negotiating expenses on a yearly basis. This is unfortunate; just a little time reviewing and bidding out services can make a dramatic difference in your bottom line.
The two expenses taking the lion’s share of total monthly expenses for solo and small firms are rent and people, to include payroll and benefits. While you may get one chance every 1-5 years to negotiate your lease, bidding out your healthcare and benefits should be done annually. The one way to mitigate ongoing increases in coverage is to find a trusted broker who will work with you to bid out your healthcare coverage. This requires the ability to evaluate bids not only from cost, but from a coverage perspective, especially if you have employees with specific issues. The broker should sit down with you to review and analyze potential bids. Devoting time to this task could save you significant money each year which goes right back into your pocket.
The internet has certainly changed the way practices view marketing, and for good cause. Recent studies have shown that upwards of 90% of consumers use Google to search for a lawyer. Additionally, where word of mouth was always the best referral source, now 88% of consumers say they trust online reviews for recommendations. Happy clients can certainly still be a great referral source, but if you aren’t putting your best foot forward on the web, you are missing the boat for attracting clients.
Rebranding your logo or practice used to be cost prohibitive. Today, it is not only affordable, but recommended. Making sure your website is user friendly must be a priority for solo and small practices that want to compete for clients with polished sites from the larger firms. Changing your logo, adding a tagline, updating your website and posting blogs are some of the ways to make yourself competitive in the technology rich environment of 2020. Almost 67% of consumers search for legal help on their phone. Have you checked to see if your site is mobile friendly?
Nobody wants to talk about the ugly truth; estimates are that up to 50% of professional practices have been, or currently are, the victims of embezzlement. Despite the importance of unscheduled internal audits, the Association of Certified Fraud Examiners indicates that only 20% of businesses perform unscheduled audits. For doctors and lawyers, especially solo and small firms, that number is significantly lower. In larger firms, there are several layers of controls; in solo and small firms, those measures typically don’t exist.
I have personally seen fraud/embezzlement in over a dozen practices. For as much as we want to believe the “It won’t happen to me” philosophy, your preparation and diligence, combined with controls and random audits, is the only way to prevent you from becoming a victim. I ask my lawyer clients if they would go to court unprepared, and of course the answer is always no. Similarly, you can’t review your business if you don’t have the knowledge of seeing “clean” financial records. Your accountant is not going to audit your books for fraud; it just isn’t part of the monthly close or tax process. Making sure you aren’t a victim is up to you, before it happens.
Finally, reviewing staff on a yearly basis should be part of your REMAP strategy. This includes performance reviews, if you haven’t done them annually, salary and benefit reviews, utilization reviews (staffing numbers/tasks) and needs for the coming year. Managing people can be one of the more time-consuming tasks, when you include payroll and policies and procedures. We all know that people make or break our business, so devoting time to addressing your human resource needs will only improve your chances of financial success. You don’t have to have a large staff or even more than one to be assessing this information on a yearly basis.
According to the Maricopa County Bar Association, more than 50 percent of complaints referred to the State Bar of Arizona are categorized in areas that often involve office management practices and procedures. Devoting efforts to improving the business aspects of managing your practice through REMAP will get you on your way to reducing complaints and improving the bottom line.