Survivor: Law firm Edition
What are your law firm survival strategies? For years I watched the TV show, Survivor. I have often said I would never go on an island with bugs and snakes and no food. Yet, here we are in the midst of a strange world of lockdown and no work, reduced or eliminated income. It feels like we are on the show Survivor at this point. Keeping our businesses alive with scarcity.
How do we survive this? Cash Flow, Budgeting, Forecasting.....these should be your instant law firm survival strategies. Doing what you can for your business to survive. Taking action now, will help your firm make it to the other side of this stay at home order, Covid19 and the reduced revenue.
As business owner, we need to make some difficult choices to "survive." We may need to be without our essentials, our perks, some of our expenses, salary or even worse -- our staff. We need to find ways to live with the scarcity of less revenue. Living this way can make you feel like you are living with a sense of fear. Fear of what's next. This fear comes from a lack of control.
As promised, this week is following up on last week's Remote Law Firm post. Last week was all about how to continue to work from home and work with the professionalism that our clients are accustomed to. This week we dive into what's next? What can we do to help our law firm clients make it through this economic downturn?
- 1Cash Flow: Run a cash flow report. Dive in and dissect it. What can be done to improve cash flow? Could you reduce your hourly rate to increase sales, ie offer a special rate? Implement subscription or fixed fee law services (I know!--Did I just say that?). For example, for corporate or estate work, offer to spread the total fees over the year. Pick up the client on an annual basis. Think outside the box. Keeping the docs up-to-date but landing the client not with a large upfront fee, but a fee that is more ongoing. Law firms are reluctant to let go of the billable hour but in the long run it will allow for your firm to have a more even cash flow.
- 2Trust Account Clean Up: Now is the perfect time to clean up the trust accounting. Are there small balances still left on file? Return the funds and close the matters. Go through every client file. It is fascinating to me that with each file we go through, we keep continually finding money that should be in the law firm's operating account. It just has not been billed out and/or transferred to the operating account. The trust accounts are a place that you want to dig in. Dig deep. Maybe there's time that should have been billed but that one task never happened. With the slowdown, there is extra time in your day. Now is the best time to go through the records and fine-tune the trust accounting. It is also a great time to look at the the workflow of how your trust accounting is entered and best practices in your office staff doing the work.
- 3Accounts Receivable: In addition to the above, look at accounts receivable You might not be billing as much right now, but do you have any open account receivable? Is there a way some of this could be collected? Are there any accounts receivable over 90 days? When times are good, we tend to do a "write down" of the accounts receivable. Workflows in QuickBooks Advanced can automate this process. There's also an app called invoice Sherpa. It may pay for itself if you start to collect on these older invoices. There's another company called Clients Arm, LLC that has more personalized service, a more gentle touch.
- 4Cutting Costs: I call this step, "trimming the fat." Analyze the expenses. Some expenses may go away just by the fact that your office is now closed. Unfortunately, you still have to pay your rent even though you're not using the office. Are there places that you can cut? Are there apps that you're paying for that you don't use or need--monthly subscriptions you can stop? If you have loan payments, can you contact the bank and ask for a deferment of these payments for the short run?
- 5Reduce Salaries: You may want to look at reducing the salaries across the board. Here's a link to an article that shows some of the larger firms that are doing just that. Instead of laying off, they are keeping everyone in a job, with a paycheck, only taking less salary.
“A typical reduction is in the range of 30%,” he said. “I will be surprised if at least 80% of the top 200 firms in the U.S. have not made such a move by April 15.”
Legal Consultant, Patrick McKenna
With these law firm survival strategies in place and taking charge with these five suggestions is a great start. We all want to come out of this stronger. It's so easy to spend when everything is rocking and rolling. We always learn and grow out of adversity.
Now is probably a time when you need your accountant the most. Adding advisory services like the ones outlined above can be helpful. A good suggestion is packaging them up with cash flow, budgeting, and forecasting. In the past, I've recommended that you start to look at your metrics monthly or quarterly. With the downturn, I'm encouraging my clients to look at this more frequently. Assess the damage and pivot. Make the necessary changes to get through what might be one month or two months or longer. Even when things go back to normal, it will be a new normal.
I hope these law firm survival strategies are helpful and guides you through this tough time we live in. If you need direct assistance, we're more than happy to help. Call us at 239-349-2004.
If you're an accountant or bookkeeper and would like more direct assistance, please join our Facebook group, QB Community Live! It's a place where we're helping one another. We believe #togetherweallsucceed and that simple sentence means more now than ever.
Stay safe, stay healthy, and find something to be grateful for each day.