Avoiding the Nightmares of Firm Growth

Firm growth is a sign of success.  Adding attorneys, gaining more clients, and expanding into new areas of law are great for your practice.  The last things owners are probably concerned about during growth periods are administrative issues that a likely to arise 10 or more years down the road. 

But laying a good foundation now will avoid a house of horrors in the future.  Establishing solid business systems is a challenge for new and evolving firms.  As a special Halloween treat, I offer some helpful nightmare-avoidance tips garnered from 18 years of law firm management experience.

Nightmare #1:  A basement full of skeletons

Most experienced attorneys have skeletons in their closets, basements, attics, and even cars.  I’m talking old files.  Boxes and boxes of them.  Establishing and following a file retention policy will help avoid the nightmare of being buried alive in all that paperwork your firm produces.  The policy should establish a procedure for closing files, documenting their location, and identifying files for destruction. 

Nightmare #2:  An inventory of ghosts

Inventory “ghosts” come in two forms:  1) unbilled time (WIP) that’s never going to be billed, and 2) aged accounts receivable (AR) that’s not likely to be collected.  If WIP and AR are not handled appropriately, you will have assets on your books that aren’t real.  Don’t let uncontrolled inventory ghosts haunt your ability to correctly evaluate your firm’s financial position.  Following a strict inventory management policy can act as your “ghost buster” by establishing a systematic method of dealing with aged WIP and AR.

Nightmare #3:  Cobwebs in your IOLTA account

Over time, “cobwebs” tend to develop in IOLTA accounts.  These webs are made up of funds left behind by “spiders” such as uncleared checks, unclaimed escrow funds, and unused retainers.  If you do not have a system established for regularly cleaning out your IOLTA account, then you may be walking into gobs of cobwebs at some point.  Establish and follow a policy that includes monthly reconciliations and annual unclaimed funds audits.  A procedure for attorneys to review client trust balances with each billing cycle can also exterminate the spiders from your IOLTA account. 

Firms that establish and follow policies like these will create a smooth path for administrative efficiency, reduced overhead, and financial success.  For assistance in establishing practice management policies for your firm, contact T2 Management Solutions at 814-572-2294.