High Five: The Basic Financial Reports Your Law Firm Needs

A lot of law firm owners I know don’t look at any sort of financial reports at all, when it comes to their business – which is straight up madness.  Frankly, if you don’t look at any other reports, you should be looking at your financial reports.  The good news is that there are some basic ones, that are usually available by default in either your case management software and/or your accounting software.  Now, this is not intended to be an exhaustive list of the financial reports you need for your law firm – but, if you’re not looking at at least these five, for starters: you’re essentially flying blind. 

 

Accounts Receivable – This report identifies how much total money is owed to your law firm by clients; this figure can be broken down on a per client basis. 

 

Aged Accounts Receivable – This report identifies accounts receivable within time-based buckets, eg – moneys owed for 30, 60 and 90 days, or more.  This is important information to have on hand, in part because the longer money is owed to you, the less likely you are to recover it. 

 

Realization Rate – This report identifies how much billable time you write off from a final invoice, whether you’re eliminating time entries entirely, or just reducing them.  This is the second phase of leakage for law firm revenue. 



Collection Rate – This report identifies the percentage of billed/invoiced time that is actually collected.  For most law firms, that utilize hourly billing, this number sits right around 70%.  With value billing or evergreen retainers, however, that average can skyrocket.  This is the final phase of leakage for law firm revenue. 

 

Utilization Rate – This report identifies the portion of the day during which a biller bills.  If someone bills 4 hours in an 8-hour workday, their utilization rate is 50%; the higher than number gets, the more efficient the biller is, and the more money the firm makes.  This may be the most important metric in law firm management, full stop; but, it does require time tracking for administrative tasks.  This is the initial phase of leakage for law firm revenue. 

 

If you’re not already reviewing these metrics, doing so will open up a world of business intelligence for you. 

 

. . . 

 

If you want to talk more about how numbers can help your law firm, reach out today! 

Through a unique partnership between the bar association and Jared Correia's Red Cave Law Firm Consulting, National Creditors' Bar Association members have access to experienced law practice management consultants at a special discount rate.

To get started, visit Red Cave's NCBA landing page, and start running your law practice like a business.

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