Use Reporting and Analytics For Better Law Firm Collections
Reviewing stacks of financial reports for pertinent information is rarely a pleasurable experience. Knowing exactly what you should be focusing on to start driving your firm’s payments and collections, however, can save you lots of time and effort. And following a precise trail of data closely over time can help you stay on top of your firm’s top and bottom-line revenues.
According to the most recent Georgetown Law Survey, collections realization rates are continuing to fall steadily in law firms. They’re currently averaging a low of around 83%. So, what should you stay focused on to help boost collection and revenue performance? To start with, increase the visibility of your firm’s collections-related data. Then, learn to identify any red flags that may be hidden in that information.
A good practice management platform will help give you the financial reports you need with just a few clicks. Begin by benchmarking your firm’s current status. Knowing where you are before identifying issues and fine-tuning your focus will help you measure improvement over time. To start on the path to better financial awareness that will result in improved collections, here are three items you should be tracking closely each month:
Allocation: Which Timekeepers are Bringing in the Payments
Whose clients are paying their bills promptly? How much are they bringing in each month? Which timekeepers are lagging in the collections department. If you aren’t taking a moment to survey the landscape here, you are missing out on which timekeepers and clients are really driving your payment collections. Focus on identifying and rewarding your most productive employees.
Billing Realization Rate
You can’t generate payments if you’re not capturing your time & billing properly. Your billing realization rate is the percentage of time worked that actually got billed to a client. This is very useful for tracking discounts and write-offs that might not need to have happened, or how good your timekeeping habits are. Knowing what you are actually billing each week or each month vs. what you should be can help identify red flags quickly. You should aim for 100% on this.
Collections Realization Rate
Your collections realization rate is the percentage of revenue you actually collect vs. the revenue you generate. See: Law Firm Analytics Reports: Collections. Analyzing this rate can help point out, for example, whether you’re utilizing deposits and retainers effectively, billing and invoicing in a timely manner or whether you need to start selecting better clients in the future. If your firm is not at 90% or above on this figure, consider taking a deeper dive into your revenue generating practices.
Starting your journey with an enhanced awareness of these three practices will help you begin to identify additional opportunities to improve your profitability. The key is to benchmark where you are right now and to use the information to spot gaps and performance issues at your firm.