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Four Corner Posts of Law Practice Management

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Title: Four Corner Posts of Law Practice Management


1
Four Corner Posts of Law Practice Management
  • Dwain Fagerlund, J.D.
  • The Lawyers Consultant
  • June 12-13, 2008

2
Four Corner Posts of LPM
  • Finance
  • Technology
  • Management
  • Marketing

3
BIG Ideas Finance, Tech, Management, Marketing
  • WHO PAYS THE BILLS?
  • PLAN AHEAD
  • MAKE DECISIONS IN ADVANCE
  • DEVELOP SYSTEMS
  • SMALL, INCREMENTAL CHANGE
  • WRITE IT DOWN
  • FOCUS ON REVENUE
  • LOW HANGING FRUIT / LOOSE CHANGE
  • DELEGATE
  • COMMUNICATE

4
FINANCE AND TECHNOLOGY
  • Finance
  • Cash Flow
  • Pricing
  • Collection of Revenue
  • Alternative Billing
  • Realization
  • Leverage

5
FINANCE AND TECHNOLOGY
  • TECHNOLOGY
  • Personal Digital Assistant
  • Practice Management Software
  • Spreadsheets
  • Accounting Software
  • Electronic Document Management
  • Backup
  • Security

6
Scout Ahead
  • Whitewater metaphor
  • Scout ahead
  • Build dams
  • Reach for lifelines

7
Proactive v. Reactive Financial Management
  • Proactive
  • Weekly or Monthly review and analysis
  • Points out weaknesses before crisis
  • Allow adjustments before major problem
  • Promotes strategic action
  • Reactive
  • Management by crisis
  • Lost opportunities
  • Possible crash

8
Cash-Flow Budget Worksheet One Month
  • Budgeted Actual
  • Cash In-Flow
  • Fee Income _____ _____
  • Other Income _____ _____
  • Total Cash Available _____ _____
  • Cash Out-Flow
  • Payroll
  • Attorneys _____ _____
  • Paralegals _____ _____
  • Administrative _____ _____
  • Total Payroll Exp. _____ _____

9
Cash-Flow Budget Worksheet One Month
  • Budgeted Actual
  • Taxes and Benefits
  • Payroll Taxes _____ _____
  • Group Insurance _____ _____
  • Pension _____ _____
  • Other _____ _____
  • Total Taxes Benefits _____ _____

10
Cash-Flow Budget Worksheet One Month
  • Office Expenses Budgeted Actual
  • Telephone
  • Equipment Rental/Maint.
  • Rent
  • Utilities
  • Dues Subscriptions
  • Taxes
  • Insurance-Prof. Liability
  • Insurance - Other
  • Advertising
  • Library Expenses
  • Office Supplies
  • Prof. Expenses (CPA, etc.)
  • Bank Charges
  • Total Office Expenses _____ _____

11
Cash-Flow Budget Worksheet One Month
  • Budgeted Actual
  • Client Related Expenses
  • Client Development
  • Filing Fees
  • Court Reporters
  • Expert Witnesses
  • Travel
  • Other
  • Total Client Related Exp. _____
    _____
  • Total Cash Out-Flow _____ _____
  • Surplus or Shortage _____ _____

12
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13
Cash Flow Analysis
  • Peaks and Valleys
  • Seasonal revenue patterns
  • Unexpected expenses
  • Lump sum expenses
  • Quarterly
  • Annual

14
Financial Analysis
  • Data available to make projections may be
    uncertain
  • Nevertheless, promotes what if thinking
  • Explore possible scenarios
  • Best case
  • Worst case
  • Most likely case
  • Understand patterns How do a few days
    difference in AR affect cash balance?
  • Over time, level of certainty increases

15
Pricing
  • Inflation
  • Expertise
  • Market analysis
  • Revenue needs
  • Delegation
  • Goals

16
Secret to Collecting FeesClient Communication -
Rule 1.4
  • Fee Agreement
  • Billing policy
  • Scope of representation
  • Billing
  • Timely
  • Accounts Receivable
  • Aging
  • Well-written

17
Fee Agreement
  • Define the scope of your services
  • Define the timing of your services
  • Define type of fee agreement
  • Provide examples of the services to be billed to
    the client
  • Explain the client's obligation for costs
  • Explain your billing practices

18
Aging of Accounts Receivable
  • Department of Commerce
  • Value of receivable decreases
  • 10 at 60 days
  • 20 at 120 days
  • Collection rates
  • 90 before 60 days
  • 20 after 120 days
  • 250 / hour 200 / hour at 120 days

19
Accelerate Collections
  • Accelerate collections of accounts receivables.
  • Allow credit cards
  • Watch for "paid in full" checks
  • Assign staff to monitor collections and
    communicate with clients
  • Weed out no-pay and slow-pay clients
  • Get paid up front

20
Monitor Payables
  • Reduce cost related to payables
  • Seek terms / concessions from vendors
  • Monitor for duplicate payments
  • Use check preparation software
  • Use due date tracking system to prevent late fees

21
Bills Tell a story
  • Scope of representation
  • Investigation
  • Research
  • Drafting
  • Proper delegation of tasks
  • Negotiation
  • Discovery
  • Motions
  • Trial
  • Every bill should demonstrate that you are
    ORGANIZED and PROFESSIONAL

22
Billing Client Focus
  • Document communication
  • Consult
  • Obtained approval / authorization
  • Notified / informed
  • Advised
  • Evaluated and recommended
  • Summarize for clarity update
  • Triggers memories of their involvement which
    fosters trust and credibility

23
Billing Action / Accomplishment
  • Use ACTION words
  • Prepared
  • Completed
  • Investigated
  • Researched
  • Interviewed
  • Responded

24
Billing Be specific
  • Include specific details to tell story
  • Who?
  • What?
  • When?
  • Where?
  • Why?

25
Billing
  • Record time all day, every day even
    non-billable
  • Bill at least monthly
  • Time bills to arrive before 1st of month
  • Bill immediately upon completion of project
  • Clients hate getting old bills
  • Obtain retainers and charge trust acct

26
Alternative Billing
  • Hourly / Contingent fee still the norm
  • Consumer mindset
  • Price / Flat fee / Firm estimate
  • Clients crave predictability
  • Encourages planning
  • Provides case plan for staff
  • Value / unit billing

27
Alternative Billing
  • Case budget ACTIVITY
  • Choose a case or transaction type
  • Outline 5 main activities
  • Guesstimate range of fees / costs
  • Consider planning backwards

28
Alternative Billing budget
  • Example (litigation)
  • Client engagement._____
  • Research / investigation _____
  • Draft Pleadings. _____
  • Motions / Briefs. _____
  • Trial. _____

29
Case Plan
  • Three columns
  • Checklist of tasks
  • Timeline
  • Budget
  • Less likely to procrastinate
  • Files lose value as they age
  • Effectively set targets and goals

30
Realization
  • Discounts
  • Write-downs
  • Write-offs
  • Unbilled time
  • Skews analysis using hours X rate
  • Promotes fogging, churning, rate transfer
  • Shoot for 90

31
Leverage
  • Delegate work to competent staff at lowest
    wage/salary WIN / WIN
  • Saves client money
  • Frees more senior staff to work on premium priced
    tasks
  • Frees up owners to manage and re-charge batteries

32
Leverage Break the Billable Hour Ceiling
  • Top earners manage a TEAM
  • Senior member is referenced in every
    communication assures client
  • Mandatory roundtable meetings - daily
  • Senior member talks to client weekly
  • Client can expect specific action weekly
  • Cherry pick matters hand off
  • Client perceives extraordinary service

33
Leverage Effective Delegation
  • Train, Train, Train
  • Supervise
  • Mentor
  • Staff
  • Tools
  • Listen and allow participation
  • Creates sense of ownership
  • Encourage ingenuity and sharing

34
Personal Digital Assistant (PDA)
  • Blackberry
  • Palm Pilot
  • Pocket PC (Windows)
  • Smart phones
  • iPhone
  • Treo
  • Nokia

35
Do I need a PDA?
  • Need constant access to contact info
  • Need portable or multiple calendars
  • Need portable access to data
  • Need reminders
  • Frequently away from office
  • Need to check email frequently
  • Willing to spend time to learn to use

36
Personal Digital Assistant (PDA) Functions
  • Store contact information (names, addresses,
    phone numbers, e-mail addresses)
  • Make to-do lists
  • Take notes
  • Track appointments (date book, calendar)
  • Remind you of appointments (clock, alarm
    functions)
  • Perform calculations
  • Cell phone
  • Email

37
Personal Digital Assistant (PDA) Functions
  • Internet browser
  • GPS navigation
  • Digital camera / video
  • Digital dictation
  • Spreadsheet
  • Word processor
  • Synchronize w/ PC
  • Time and Billing
  • Games

38
Practice Management (PM) Software
  • Organizes your office
  • Saves time
  • Looking for files or information
  • Drafting documents
  • Determining case status
  • Prevents malpractice / ethics viol.
  • Enhances communication
  • Staff
  • Clients
  • Financial management

39
What is PM software?
  • At your finger-tips
  • Detailed case information for each client matter
  • Calendaring, docketing, reminders
  • Conflict checks
  • Case notes logged as you work
  • Email
  • Document management
  • Time and Billing
  • Accounting
  • Document assembly
  • It has really become practice management
    software

40
Common Brands
  • Time Matters (Lexis-Nexis)
  • Amicus Attorney (Gavel Gown)
  • Practice Master (Tabs3)
  • ProLaw Ready

41
Practice Management Software
  • Integrate with Quickbooks, Timeslips and other
    third-party applications
  • Track the flow of communications within an office
  • Phone messages and email are routed, organized
    and stored
  • Checks for conflicts of interest
  • Records important notes on each call

42
Practice Management Software
  • Start of each day, review
  • Deadlines
  • Limitations
  • Communications
  • To-do list

43
Practice Management Software
  • Open New File
  • Phone message call from potential client
  • Conflict check
  • Check calendar
  • Return call
  • Document call
  • Follow up correspondence

44
Practice Management Software
  • Respond to client email
  • File document in matter
  • Check matter status
  • Reply to email
  • Docket time

45
Makes Cents
  • Save 15 minutes per day looking for files or
    information
  • 61.5 hours / year
  • 200 / hour
  • 12,500

46
Prevent malpractice
  • Top five claim areas (LawPro survey 1989-2003)
  • Failure to follow client instructions (23)
  • Procrastination (15)
  • Conflict of interest (9)
  • Failure to Calendar (8)
  • Poor communication w/ client (7)
  • Preventable using PM Software

47
Practice Management Software
  • Nerve Center
  • Database
  • Provides structure
  • Easy retrieval
  • Directs work flow
  • Promotes timeliness and completeness
  • Encourages communication
  • Captures time

48
Spreadsheets for LawyersPencil to Paper
  • Electronic ledger, calculator
  • Organize and manage information
  • Promotes what if analysis
  • Changes easy
  • Calculations automatic
  • Mini-database sort data
  • Create graphs

49
Spreadsheets for Lawyers
  • Templates pre-set for specific purposes
  • Amortization schedule
  • Value of Structure Settlement
  • Cash Flow Statement
  • Allocation of Contingent Fee
  • Estate Inventory and Accounting

50
Accounting Software
  • Quickbooks, Peachtree, Microsoft Dynamics (Great
    Plains)
  • Payroll and taxes
  • Accounts payable (check writing)
  • Accounts receivable
  • Bank accounts
  • Process credit cards
  • Time-keeping
  • Invoices
  • Budgets
  • Reports

51
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52
Electronic Document Management
  • PDF (Adobe Acrobat)
  • Scan all incoming
  • High speed
  • Not OCR
  • Fully searchable
  • Organize with document management software
  • Maintain paper backup
  • Reduces metadata risk

53
Automated Document Assembly
  • Forms used in more than one matter
  • Database of info enter once
  • Info coded to field
  • Standard forms
  • Custom forms
  • Wizard
  • Use standard word processors

54
Backup
  • Tape
  • External hard drive
  • Flash drive
  • Online backup
  • Redundant
  • Off-site / every day
  • Test
  • Surge / Power outage

55
Security
  • Confidentiality Rule 1.6
  • Encryption
  • Metadata
  • Wireless
  • Theft
  • Staff policies

56
Effective Utilization of Technology
  • Train, Train, Train
  • Cross-train
  • Tech support
  • Maintenance and upgrade plan
  • Continuing education
  • Listen and allow participation
  • Creates sense of ownership
  • Encourage ingenuity and sharing

57
BIG Ideas Finance, Tech, Management, Marketing
  • WHO PAYS THE BILLS?
  • PLAN AHEAD
  • MAKE DECISIONS IN ADVANCE
  • DEVELOP SYSTEMS
  • SMALL, INCREMENTAL CHANGE
  • WRITE IT DOWN
  • FOCUS ON REVENUE
  • LOW HANGING FRUIT / LOOSE CHANGE
  • DELEGATE
  • COMMUNICATE

58
Four Corner Posts of Law Practice Management
  • Dwain Fagerlund, J.D.
  • The Lawyers Consultant www.lawyersconsultant.com
  • (218) 281- 4000

2008 SBAND Annual Meeting Grand Forks, ND June
12-13, 2008
59
Four Corner Posts of LPM
  • Finance
  • Technology
  • Management
  • Marketing

60
BIG Ideas Finance, Tech, Management, Marketing
  • WHO PAYS THE BILLS?
  • PLAN AHEAD
  • MAKE DECISIONS IN ADVANCE
  • DEVELOP SYSTEMS
  • SMALL, INCREMENTAL CHANGE
  • WRITE IT DOWN
  • FOCUS ON REVENUE
  • LOW HANGING FRUIT / LOOSE CHANGE
  • DELEGATE
  • COMMUNICATE

61
Four Corner Posts of LPM Management and Marketing
  • MANAGEMENT
  • Attorney owners
  • Attorney employees
  • Paralegals / Legal Assistants
  • Office Manager
  • Clerical
  • Bookkeeping
  • Law clerks / Contract attorneys
  • Runners / Tech support

62
Four Corner Posts of LPMMANAGEMENT
  • Establish Expectations
  • Delegate for Leverage
  • Collaborate to Motivate
  • Develop Systems

63
Four Corner Posts of LPM MARKETING
  • Existing clients / Potential clients
  • Trust and Credibility
  • Free lunch
  • Relationship plan and system
  • Contact info
  • Schedule

64
MANAGEMENT
  • Establish Expectations
  • Strategic Planning
  • Firm Values / Identity
  • Vision
  • Goals
  • Timeline

65
MANAGEMENTEstablish Firm Values
  • ACTIVITY (have fun with it)
  • Each table is a law firm on a strategic planning
    retreat
  • Develop consensus of your top 3 values that
    define your firms identity
  • Appoint a spokesperson to share results

66
MANAGEMENT
  • Establish Expectations
  • Supervision / Mentoring
  • Hawthorne Effect
  • When attention is given to the performance of
    an employee, the employee's performance
    increases.  Simply put, measurement improves
    performance.
  • - www.morepartnerincome.net  

67
MANAGEMENT
  • What do people want?
  • Clear goals
  • Prompt feedback
  • Appreciation and praise
  • Constructive criticism
  • Respect
  • Involvement in decision-making
  • Held accountable for results
  • Variety in work assignments
  • Kept in the loop
  • -Maister, Managing the Professional Service
    Firm (1993)

68
MANAGEMENT
  • THREE key goals of people at work
  • Equity To be respected and to be treated fairly
    in areas such as pay, benefits, and job security.
  • Achievement To be proud of one's job,
    accomplishments, and employer.
  • Camaraderie To have good, productive
    relationships with fellow employees.
  • - Sirota, Mischkind, and Meltzer Why Your
    Employees Are Losing Motivation
  • Harvard Management Update (April 2006)

69
MANAGEMENT
  • Go ahead, make my day.
  • - Eastwood School of Communication
  • Wrong Method Pyramid model
  • 1st contact brief, vague and soft-spoken
  • 2nd contact more time, more detail, and
    clearly audible description of task and
    consequences of failure
  • 3rd contact prolonged rant, humiliating
    indictment, can be heard in next
    building

70
MANAGEMENT
  • How would Clint handle it?
  • Counter-intuitive, practical and respectful
  • Right Method Inverted Pyramid
  • 1st Contact adequate time to explain in detail
    and answer questions in clear audible tone
  • 2nd Contact shorter discussion with
    consequences in calm, yet firm voice
  • 3rd Contact very brief explanation of
    discipline to be implemented in almost a
    whisper

71
MANAGEMENT
  • Express praise and recognition in public
  • Discuss controversy and discipline in private
  • Never shame an employee in presence of peers

72
MANAGEMENTDelegate for Leverage
  • Work Less and Make More Money
  • Task assignment is the key to effective
    management.
  • Leverage assign to timekeeper competent to
    handle task who is compensated at lowest rate.
  • Saves client money and frees higher compensated
    timekeeper to bill at premium rates.

73
MANAGEMENTDelegate for Leverage
  • Provides subordinate timekeeper opportunity to
    develop skills
  • Coordinated effort enhances creativity and
    provides checks and balances
  • A good paralegal will make you a more productive
    attorney and bill out hours in addition to your
    own as well
  • Work done faster is perceived as work done better

74
MANAGEMENTDelegate for Leverage
  • Frees owner attorney to implement strategy to
    improve firm
  • Frees owner to engage in client development to
    bring in more interesting and profitable work
  • Frees owner to take vacation to re-charge
    batteries

75
MANAGEMENTDelegate for Leverage
  • Calculate total cost to firm to employ
    subordinate timekeeper
  • Add profit margin when billing client
  • Provide timekeeper adequate instructions and
    review work product for quality control

76
MANAGEMENTDelegate for Leverage
  • RULE 5.1 Responsibilities Of Partners, Managers,
    And Supervisory Lawyers
  • RULE 5.3 Responsibilities Regarding Nonlawyer
    Assistants

77
MANAGEMENTDelegate for Leverage
  • When contemplating hire of new timekeeper
  • Make sure that you have at least 1700 hours of
    quality work for yourself
  • Raise your rates
  • Implement marketing plan
  • Worried about payroll?
  • Hire a law clerk or contract attorney

78
MANAGEMENTDelegate for Leverage
  • Expense items to consider for new hire
  • Salary
  • Benefits (esp. health insurance)
  • Malpractice coverage
  • Additional office space / furniture / equipment
  • Additional support staff
  • Workers comp
  • Tax
  • Use spreadsheet to put pencil to paper and
    project change to cash flow

79
MANAGEMENTDelegate for Leverage
  • If hiring an associate with the intent of making
    a partner
  • Start working on a partner/shareholders
    compensation agreement
  • Consider establishing a succession plan for
    retirement
  • Research buy-sell agreement or other mechanism to
    provide compensation for interest in firm at
    retirement

80
ManagementCollaborate to Motivate
  • The Toyota / kaizen experience
  • Encourage employees to
  • Innovate
  • Share techniques
  • Focus on customer service
  • Propose new policies, procedures and systems
  • Notify you of problems before become crisis
  • Take time to sincerely listen to staff ideas

81
ManagementCollaborate to Motivate
  • Reward Performance
  • Staff
  • Associates
  • Partners / Shareholders
  • Ideas?

82
ManagementCollaborate to Motivate
  • Partner Compensation
  • Lockstep / Seniority
  • Eat-what-you-kill
  • Compensation committee
  • Blended formula

83
ManagementCollaborate to Motivate
  • Partner Compensation Ideas
  • Combination of
  • Basic salary (subsistence)
  • Stipend for management tasks
  • Royalty for rainmaking (w/ end date)
  • Plus

84
ManagementCollaborate to Motivate
  • Partner Compensation Ideas
  • Surplus split based upon
  • total revenue production
  • Performance of Practice Group

85
ManagementCollaborate to Motivate
  • Rewarding attorney/owner for performance of
    practice group under her supervision rewards her
    for investing time in the proper training and
    supervision of her group members
  • Discourages hoarding of files

86
MANAGEMENTSystems
  • Development of systems promotes
  • Efficiency
  • Quality
  • Checks / balances
  • Guidance to firm members

87
ManagementSystems
  • Kaizen slow continuous improvement
  • Policy and Procedures
  • This is how we do things here.
  • Many firms rely on unwritten traditions held by
    most experienced members

88
ManagementSystems
  • ACTIVITY
  • Draft a one paragraph policy on utilization of
  • 1. personal email,
  • 2. internet browser, or
  • 3. solitaire
  • on firm computers

89
MANAGEMENT Practice and Procedure Manual
  • Build it a piece at a time
  • 3-Ring binder
  • Computer directory
  • Prepare a draft anyone
  • Circulate among team
  • Allow comments creates ownership

90
MANAGEMENTPolicy and Procedure Manual
  • Work in progress always evolving
  • Adopt final draft
  • Clearly I.D. decision maker
  • Date
  • Acknowledge receipt
  • Security

91
MANAGEMENTPolicy and Procedure Manual
  • The Policies and Procedures developed by the firm
    constitute decisions made in advance.
  • Emphasize that Policies and Procedures can always
    be improved upon.

92
MANAGEMENTPolicy and Procedure Manual
  • Time and effort spent by staff on developing
    policies and procedures may be considered
    training especially ethics.
  • Investment of effort in developing manual
    provides staff a sense of ownership of the final
    product.
  • Disclaimer Not an employment contract.
    Attorney owners should reserve right to revoke or
    modify at any time.

93
Four Corner Posts of LPM MARKETING
  • Existing Clients
  • Repeat business
  • Referrals
  • Word-of-Mouth
  • Nurture business relationships

94
Four Corner Posts of LPM MARKETING
  • Potential Clients
  • Develop Trust and Credibility
  • Why word-of-mouth is so important
  • Establish an identity and reputation
  • Demonstrate skill and professionalism
  • Become an expert

95
MARKETINGTrust and Credibility
  • ACTIVITY Cocktail Party
  • To schmooze or not to schmooze
  • Divide each table into pairs
  • One person draft 30-second elevator pitch
  • Other person draft list of 5 questions to elicit
    information

96
MARKETINGOffer Value
  • Give free advice newsletter, column, blog
  • Volunteer seminars, classes, pro bono
  • Keep clients informed new developments in their
    area of law

97
MARKETINGCommunications System
  • Clients
  • Schedule regular contacts
  • Phone calls
  • Letters
  • Emails
  • Interviews
  • Lunches
  • Outings
  • Develop forms, timelines

98
MARKETINGCommunications System
  • Potential Clients
  • Develop schedule and plan to
  • Attend events
  • Follow up letter
  • Lunch
  • Free value item
  • Learn language of their industry
  • Volunteer to speak to their trade group
  • Utilize staff to assist in scheduling / follow up

99
BIG Ideas Finance, Tech, Management, Marketing
  • WHO PAYS THE BILLS?
  • PLAN AHEAD
  • MAKE DECISIONS IN ADVANCE
  • DEVELOP SYSTEMS
  • SMALL, INCREMENTAL CHANGE
  • WRITE IT DOWN
  • FOCUS ON REVENUE
  • LOW HANGING FRUIT / LOOSE CHANGE
  • DELEGATE
  • COMMUNICATE

100
Four Corner Posts of LPMResources
  • PowerPoint slides
  • Marketing for Lawyers
  • will be posted on the Lawyers Consultant
    website next week.
  • www.lawyersconsultant.com
  • Questions? Call (218) 281-4000

101
Four Corner Posts of Law Practice Management
  • Dwain Fagerlund, J.D.
  • The Lawyers Consultant www.lawyersconsultant.com
  • (218) 281- 4000

2008 SBAND Annual Meeting Grand Forks, ND June
12-13, 2008
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