Your law firm can not be focused on innovation and growth without actively reviewing the economics of your business. It's vital that you understand where you're making money, and where you are not, and that is what legal business intelligence tools do.
Business Intelligence (BI) can be defined as: the applications, infrastructure, tools, and best practices that enables access to information to improve and optimize both decisions and performance. In the legal industry the definition remains the same, but one could additionally define it: to help enable law firms a way to better manage their performance, while improving their bottom line.
In simple terms:
- BI enables firms to perform better at strategic decision making.
- BI provides insight to information firms may not have discovered.
- BI helps law firms surface previously missed trends in the data.
Clients want focus and value from their law firm. If you want to be competitive in a competitive market, turn to your BI for answers to these top questions:
How are law firms using legal business intelligence to help better understand their economics and make them more profitable? They are saving drastic amounts of time and freeing up finance resources to do more complex tasks. Most finance departments at law firms would agree that they get many requests for information and reports. BI helps to meet these requests by vastly simplifying the ability for anyone within the firm to access and analyze data. Before BI tools like BigSquare, those requests had to go through the finance department because a technical resource would be needed to pull data. Sometimes those requests would take days, or even weeks. BI tools designed around the needs of a law firm can dramatically improve efficiency and shorten the time of those requests down to hours or even minutes.
We have outlined our recommendations for evaluating modern BI platforms so you can choose the right one for your law firm.
How do billable hours stand? Are they increasing or decreasing? A firms billing needs are unlike any other industry. Most law firms make their money by billing their clients by the hour so whether or not an attorney is profitable to the firm, comes down to billable hours. It’s not an overly complex equation – the more hours an attorney bills, the more revenue for the firm. Keeping track of billable hours indicates which attorneys are contributing to the growth of the firm and which ones are not.
What is the realization for billing and collections? The billing and collections of every law firm is another fundamental process that contributes to their financial success. One way to measure success in this area is to review the balance of unbilled time in the firm. The longer it takes to send out client billing, the slower the flow of cash.
How profitable is a case? How much will it cost to prepare the case? Keep in mind that while having a $3 million case in the works may sound good, but it’s not if you’re spending $5 million in expenses. Keeping track of which cases are unprofitable and why, prevents attorneys from repeating the same mistake and costing the firm more than they are making.
Staffing and Personnel Ratios. The largest single overhead expense for law firms relates to personnel. A law firm should strive to keep the support staff and attorneys ratio at a reasonable rate while producing quality work. By monitoring and adjusting this ratio, you can help boost the firm’s profitability.
At the end of the day, understanding your law firm economics is vital to interpreting the health of the firm. Firms that understand their economics are better poised to address pricing issues, work more efficiently, adapt to evolving client demands and succeed in today’s highly competitive and evolving legal market.
To learn how Business Intelligence can help your law firms get a better understanding of your economics, download our free Viewpoint Document The Keys to Successful BI for Law Firms!
BigSquare is the leading provider of Business Intelligence for law firms and professional service organizations. We focus exclusively on law firm reporting, law firm BI, law firm profitability and law firm analytics.