If you’re like us you’re probably asking yourself: how is it already mid-December? For a year that was filled with unprecedented challenges, it seemed at times like the year moved both incredibly fast and also at a snail’s pace. 2020 has been a strange year indeed, and it seems the passing of time this calendar year was no exception.
So, you procrastinated. November was a blur and now you find yourself with a long to do list to finish before the end of the year. Not to worry, you’re in good company. Even though there are only 8 working days left this year, there is still time to utilize time management best practices and some efficiency hacks. We’ve broken down some of our favorite ideas that can help you feel super productive by December 31st and set you up for unprecedented success in the new year.
Now Is The Time: Get Your Time Entered ASAP
This may sound like common knowledge, but if you have post-its piling up and ambiguous notes you emailed yourself with time entries for December, get those entered into your time and billing system as soon as possible. Even if you’re caught up as of the end of November, there is no time like the present to start tracking your time contemporaneously for the rest of the month.
Want to set up even better habits for next year? Studies show that lawyers that enter their time monthly lose up to 55% to 70% of their time while those that enter their time weekly lose only 25% – 30% of their billable hours. There is no denying that the best practice to make sure you’re capturing your time as efficiently as possible is to track time contemporaneously, or at least enter it into your cloud-based system daily. It may seem like a difficult habit to set in the new year, but anything less is downright wasteful.
Get Clarity On All Outstanding AR & Collect, Now
Even if you’ve got a handle on your outstanding bills for December, what about the rest of 2020? It’s crucial to run a report on all outstanding accounts receivable earned over 2020 thus far so you leave nothing on the table to write-off. Once you’ve got a report on all outstanding AR you should plan to tackle uncollected bills methodically and systematically.
Before you start making collection calls, make sure that you gave your clients adequate payment options when you sent the initial invoice. Try resending all outstanding invoices with an electronic payment option with a “Pay Now” button directly in the email and invoice itself and offer clients a payment plan to pay down their invoice over time.
Make sure to customize the corresponding email to let clients know that you need to collect on the invoice in full before the end of the year to avoid negative tax consequences for your firm. Doing so sends clients a friendly reminder that they have a balance due and also gives them the flexibility of credit card and eCheck options for convenient and fast payment.
You should plan to resend outstanding invoices with an online payment option as soon as possible to attempt to receive payment in full without offering proactive discount. Doing so now ensures you still have an opportunity to send the client a final payment request the last week of the year with a discount for payment in full to avoid end of year write offs.
Utilize EOY Accounting Best Practices & Client Ledger Reconciliation
As an attorney, client trust accounting best practices are paramount. At the end of the year you should reconcile all trust account balances to make sure that your trust funds balance properly compared to your bank statements.
Depending on the rule of your state bar, you may be required to reconcile trust funds monthly, but doing so annually should be considered an absolute must regardless of the rules of your specific state. Take an extremely close look at your trust account balances and your firm’s ledger to ensure there are no discrepancies each and every year.
Maintaining a healthy trust ledger is important for a variety of reasons, but it can also help you make sure you’ve been paid for all outstanding work that can be billed against existing client trust balances. Run a report of all existing trust funds and compare against outstanding accounts receivables. If you’ve completed work for a client that has an existing trust balance you can invoice yourself and transfer the funds from your trust to your operating account to collect before year end.
Year In Review: How Profitable Was Your Firm?
Let’s not forget: law firms are businesses. One of the most important things you can do at the end of the year is measure your firm’s profitability. It sounds simple, but for many law firms it’s an intimidating idea. It actually breaks downs quite simply: measure your hard and soft costs against the amount you earned on average across your client list. In short, you want to measure your total costs versus your total revenue.
First, track and analyze your firm’s hard expenses, such as marketing. The more granular you can get the better. Can you measure what you spent to obtain clients in a specific practice area versus the amount you collected for that specific practice area? Doing so may help you identify valuable patterns like practice areas that may be performing better than others or particular billers that have a higher collection rate than others.
Next you should analyze your soft costs and overhead expenses. Are there areas where you can cut costs? One of the most underlooked areas is what your firm is paying in total software costs. Monthly SaaS fees for multiple pieces of software can add up. Choosing an all-in-one practice management solution could streamline your tools and lower your costs significantly.
Once you’ve got the data you need, you should assess whether your rates are adequate to cover your costs or if you should consider a rate increase. You may feel guilty or anxious at the thought of contacting clients if you decide to raise your rates, but doing so every few years is necessary to keep up with inflation and make sure that your firm continues to grow profitability.
Show Gratitude: Clients, Referral Sources, Vendors
There is no time like the present to let your most valued partners know how much you appreciate them, and doing so can go a long way. In today’s competitive landscape it’s important to remind clients that you’re grateful for their business and look forward to continued success in the new year.
If your firm relies on referrals or specific marketing channels or vendors for new or repeat business, let them know you care. It may be as easy as sending a heartfelt email or picking up the phone to check in. Even without a budget in place, something as simply as a handwritten note is enough. If you have a budget to allocate it’s always a great idea to send clients or partners personalized firm swag. If you didn’t give yourself enough time to get some company swag made and delivered, don’t worry. Show your gratitude by sending a bottle of wine or a basket of treats. Think of the cost as a 2021 marketing expense.
Planning Ahead: New Hire Roadmap & Marketing Planning
Last but not least, it’s time to plan for growth. If you’ve already looked at your firm’s profitability and found practice areas or referral partner patterns, the rest is easy.
Make a marketing plan to double down on channels and referral sources that are working and look for new marketing opportunities. It may be time to upgrade your firm’s digital presence with a new website or join a new referral group or chapter of your local bar.
You should also make a plan to handle the increased scale when your marketing efforts come to fruition: what is your next critical hire? Do you want to optimize for a specific profile of billable attorney or maybe you should bring on a new partner to open up opportunities in a profitable practice area. 2021 has endless possibilities and you should plan accordingly.
Bringing It All Together
As we close the books on another year (literally and figuratively) it’s all about taking stock of where you’re at, making up for any deficits as quickly as possible, looking for quick wins to close out strong, and setting yourself up for the successful year ahead. By following these seven tips, you can close out your year better than ever and help your firm get set up for healthy habits and increased profitability in the new year.
