We realize many of you are experiencing additional challenges nowadays, the closures of non-essential businesses -including yours- working from home, shelter in place, homeschooling, let’s be honest this list can go on and on.
Have you asked yourself how can we survive this? What are your law firm survival strategies? As business owner, we need to make difficult choices, like relinquishing some of our expenses, salary even our staff. Taking actions NOW will help your firm make it through this. We need to find ways to live with the scarcity of less revenue. We are diving into unknown waters and there is so much uncertainty of what is next, there is a sense of fear we can’t denied, and this is completely normal, this fear comes from a lack of control.
What can we do to help our law firm clients make it through this economic downturn providing the professionalism they are used to while adjusting to our new reality?
We have thought in five strategies you can work on to keep yourself proactive, in control and most important open to business.
Trust Account Clean Up:
Now is the perfect time to clean up the trust accounting. The trust accounts are a place that you want to dig in, return the funds and close the matters. Go through every client file. I guaranty you are going to find money that should be in the operating account that was probably never billed out, perhaps you never transferred that money. With the slowdown, there is extra time in your day and you should take advantage of it, take the time to look at the workflow of how your trust accounting is entered and best practices in your office staff doing the work.
Run a cash flow report, if you don’t understand it, ask your accountant for help and then ask yourself, what can I do to improve cash flow? Here are some ideas. Reduce your hourly rate, how about offering a special rate, Implement subscription or fixed fee law services, reduce the monthly payment plan amount. 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.
Even thought you might not be billing as much right now, look at your account receivable, do you have any overdue invoices? 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 off" of the accounts receivable. You will find several software out there, even third parties collecting companies, but now with some extra time you can pick up the phone, give them a call and reduce costs.
Have you talked already with your employees about their future? You may want to look at reducing the salaries across the board. Instead of laying off, offer them to stay in for less salary, it might not be forever but at least until the firm picks up to its “normal”.
Run a Profit and Loss Report, analyze the expenses. Now that the office is closed, what can you cut that is not necessary? Maybe some apps/subscriptions you pay on a monthly basic you can stop? If you have loan payments, contact the bank and ask for a deferment of these payments, most of financial institutes are offering some kind of relieve for individual and businesses, it doesn’t hurt to ask.
Now is probably the perfect time to team up with your accountant, I recommend you start looking at your metrics monthly or quarterly to 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.