Know your data: How to grow your law firm

Gale Kirsopp of 4700Group works mainly with mid-size law firms, helping them improve their workflow with financial management reporting. Gale understands that if your financial data is properly organized, you’re sitting on information that, if leveraged, could make your law firm more profitable. There is a motivation for doing this work. Profitability leads to growth, improved lifestyle, and stability. It also leads to peace of mind, better sleep, and more time with people you love.

If you hired someone like Gale, she would first analyze your data and recommend back-office workflow improvements for better efficiency. But, here’s the thing: You have to be able to extract that data, then you need someone like Gale to understand the tools to organize the data it so you can mine it for clues to the health of your firm.

QuickBooks® Online Advanced and LeanLaw Pro are two tools in Gale’s toolbox. LeanLaw customizes QuickBooks for law firms, meaning that the data collected by QuickBooks can be sorted out in LeanLaw to identify workflow issues and guide firms into better management of resources. LeanLaw also fills in some data gaps that QuickBooks doesn’t collect. Together, these tools are a powerhouse for mining law firm data.

A simple example

Gale prefers to look at leading indicators rather than lagging ones. An example of a lagging indicator is a Profit & Loss (P&L) report. It shows what already happened, so it’s hard to determine why the data turned out the way it did. With a leading indicator such as a Days to Pay report, you’ll see how long it generally takes to collect payment – most likely with real-time data (clients who have yet to pay you). Did you know that for many law firms, it takes 72 days for clients to pay? Gale’s job is to determine what factors contribute to that report. She wants to help show you how you can change those factors so that you are affecting results.

Gale uncovers what is contributing to the problem and identifies how to change those lagging indicators with specific activities. In other words, she helps you alter your workflows so that they boost your business rather than drag it down.

Gale first looks at all components to determine whether the client is going to pay:

• All communication with clients – for example, a letter of engagement relative to payment terms.
• Retainers/flat fees/payment structure.
• Credit check on new clients.

According to Gale, accounts receivable is an extension of credit: Whether you’re aware of it, you are loaning your clients money and outright giving it to them, if the client ends up not paying you.

When you change your workflows based on data, you are able to improve, for example, your Days to Pay data. Once you uncover the issue at its source, you have the knowledge to change. You don’t want to chase your clients for money. When communication is clear up front, and retainers, expedited invoicing, and electronic payments are put in place, there is much less of a chase.

Digging for that data to show you where you need to change is at the heart of what Gale does.

Tools to uncover the data

This is where QuickBooks Online Advanced and LeanLaw Pro come into Gale’s workflow.

LeanLaw extends the functionality of QuickBooks Online Advanced for mid-size law firms through its very tight, two-way, continuous sync. Other software just pushes summary information. The detail of what LeanLaw can extract from QuickBooks is what Gale can use to generate a variety of reports.

Why QuickBooks Online Advanced?

Platform functionality. The vast majority of businesses that use QuickBooks enjoy a fraction of its robust capabilities. For example, they may not have their banks connected; doing that in QuickBooks streamlines many processes and adds to the data collection.

Payroll and Payments through the Intuit® Payment Network not only save time, but also gives you more detailed data to use for reporting.

Apps. With apps such as LeanLaw that integrate so completely with QuickBooks, your accounting pro will be confident with having just one set of books.

Gale extols the uniqueness of LeanLaw as giving as much data as possible to those who use QuickBooks. The sync makes it possible for lawyers to stay in the user-friendly interface of LeanLaw, while accounting pros can do their magic in QuickBooks. And, everyone is looking at the same data.

Some apps fear that if you give too much information in QuickBooks, users won’t go to the app, but LeanLaw knows that mid-size law firms appreciate the user roles created by QuickBooks + LeanLaw. It keeps people where they need to be.

The beauty of backup. QuickBooks Online Advanced has continuous automated backup: you can restore from a certain date and time. Very handy, according to Gale, when someone on the inside makes a mistake that needs to be cleaned up.

Backup is also critical for any future audits. The tools allow for narrow extraction of data based on date ranges. As a result, you can extract a specific period and not deliver any data the party isn’t privy to see.

“Start at the origin,” says Gale. “If it’s not set up right, their reports are not going to reflect accurate information. We work with them so that the final product is what they want and need.”

Data. QuickBooks Online Advanced combined with LeanLaw Pro offers significant reporting options.

Having flexibility in data capture specific to your firm’s requirements changes everything. Using Custom Form Fields in QuickBooks, you can tag items and then run specific reports, either in LeanLaw or QuickBooks. You can tag data regarding location, practice area, or a partner. Once you have the data, the reports can be generated and be delivered via email in an entirely automated way.

Gale can set up automated reports that get sent to you weekly, monthly or even daily, all through QuickBooks Online Advanced and LeanLaw.

Integration with Office or GSuite. Gale takes her reports and exports them into a Google Sheet or an Excel spreadsheet. Having the ability to do both from QuickBooks Online Advanced is an added perk – younger firms are using GSuite much more than Office 365.

A solid foundation

Getting set up in your financial software so that you can understand indicators that reveal the health of your law firm is the foundation for a successful business. Software alone won’t get you there, buy if you’re looking for stability, growth, and peace of mind with regard to your law practice, having the proper software to reveal the health of your law firm, along with a trusted advisor, pays dividends.