How to Keep Your Law Firm Doors “Open”
By: Dean Dorton | April 14, 2020
Question? Contact Us
Business Valuation | COVID-19 | COVID-19 Industries | Cybersecurity | Litigation Support | Litigation Support - Family Law | Technology
Very few companies are immune to the collateral economic impacts of the COVID-19 pandemic but law firms are unique in their ability to face challenges and rise to the occasion. Law firms can be significantly impacted by court closures among other things, but continuing to take disciplined and practical steps in the days, weeks, and months ahead will help put you and your management team in a better position to emerge from this with your firm intact and with a secure future ahead.
Based on our work with law firms for more than 35 years, we have some survival strategies that leaders of law firms can use to help navigate this unprecedented time:
Manage Your Cash Closely
We all know that cash is what keeps the lights on. Think strategically about how to improve your firm’s cash position, while reducing unnecessary outflows:
- Tightly manage collections/AR:
- Schedule a weekly “check in” call with your attorneys
- Delegate and document who will be contacting clients for collection
- Call clients to secure commitment on when they will pay and confirm by email. Follow up with them weekly if necessary
- Consider offering a discount (10-20%) for those who pay within 15-30 days
- Send out bills as close to the end of the month as possible. On large matters, review prebills mid-month so changes and updates are completed.
- Shorten your billing cycle. Identify clients who can be billed mid-month.
- Monitor cash receipts daily
- Review trust accounts for money that should be transferred
- Apply all unapplied cash
- Secure external financing
- Draw down on your existing line(s) of credit if possible
- Inquire with your bank about increasing your line(s)
- If you have existing covenants that you fear defaulting on, discuss them openly with your banker (before you risk breaching them)
- Consider alternative sources of financing and assess whether you qualify for an SBA PPP or EIDL loan – many law firms qualify. If you have not considered the SBA loans, it may be worth it to apply; Do this quickly, as funds are capped.
- Once you receive your funds, make sure you set up everything correctly before you start spending as you want maximize the influx but also meet your bank’s forgiveness requirements (for PPP loans). Have questions about this? We are happy to analyze and assist for your specific law firm’s structure.
- Review compensation firm-wide, if necessary
- Reduce or suspend partner draws
- Implement temporary salary decreases or deferrals (partners, associates, staff)
- Modify work schedules/compensation for non-exempt employees (e.g., 80% pay/4-day workweek, 60% pay/3-day workweek, etc.)
- Consider furloughs as an alternative to layoffs – there is an insurance benefit to the employee to being furloughed vs. being laidoff. If an employee is furloughed, they continue to have health benefit at their unfurloughed cost. So, if they normally pay $100 per pay period, they continue to have that benefit. The nuance is how the employer gets reimbursed.
- Reevaluate pension plan matching and employer contributions and consider funding them quarterly or annually (vs. each pay period)
- Review all vendor contracts and firmwide operating expenses
- Audit all expenditures and classify as essential vs. non-essential
- Eliminate all non-essential expenses; be honest about what you can live without
- Renegotiate fees and payment terms on essential services where possible (e.g. review parking to see if it can be suspended while your firm works from home)
We recommend monitoring your cash flow daily. If you need assistance in doing so or if you need other short-term accounting and financial help, we have the tools and team that can help you.
Tightly Manage Your Workflow
It’s time to utilize and allocate your human capital resources wisely and use technology and outsourcing to your advantage.
- Review all current clients/matters
- Make sure people are working only on those who will pay — stop working on clients that aren’t paying and alert clients accordingly
- Implement retainer agreements where you can
- Establish a mandatory daily timesheet submission policy for all timekeepers
- Monitor to see where there is excess capacity and shift work to those individuals
- Make sure everyone is working/billing as much as possible and that it is realizable time
- Evaluate your firm’s practice areas and shift resources to those that might pick up in the current environment and away from those that might drop off
- Monitor contingency case work (and costs) closely and/or move those clients to hourly or fixed fee pricing if possible
Re-evaluate and Re-budget
2020 is looking a lot different than you might have expected just a few short weeks ago. Right now, your focus will be on surviving the next 4-6 months, so projections and monitoring will be key.
- Develop management reports that let you focus on the most critical issues
- Create a detailed weekly 10-12 week rolling cash flow budget
- Monitor cash, A/R and billable hours daily
- Run multiple budget scenarios and monitor them weekly/monthly
Communicate – There is No Such Thing as Over-communicating Right Now
You, your team and your clients have all been adapting to a tremendous amount of personal and professional change as a result of the COVID-19 pandemic impacts. Since most people are working remotely (many for the first time) and meeting face to face is currently not an option, finding other ways to stay well-connected is critical. Dean Dorton Technology has years of experience serving as a managed service provider for law firms throughout the Southeast region and can provide any remote resource you need including remote implementation of free trials of best-in-class secure cloud-based technology:
- Video conferencing
- Teleworker VPN solutions
- Cybersecurity for working remotely
- Cloud based accounting systems
- Team collaboration tools
- Cloud solutions
Schedule daily or weekly team calls (via video, ideally) to check in with your people. Having a routine touch point will help them keep connected to each other, your clients and the firm itself. Eat lunch or breakfast together or hold a virtual happy hour. Ask your people for input into the format and schedule that works best for them.
Update your team on firm-wide developments. Be as transparent as you can. Hold video town hall meetings. Let team members raise questions and concerns while you keep them engaged with the firm’s essential mission of providing value to your clients.
Without a doubt, this is a uniquely challenging time and we don’t have a crystal ball to know when it will end. That is unsettling for us as humans on a fundamental level, but the better we are all able to adapt, the better position we will collectively be in when we come out on the other side.
Get the Help You Need Now; Shape Your Future
We understand you cannot do it all. It simply is impossible. Dean Dorton has the team and expertise to help you. We have short term solutions to get you through the next 4-6 weeks, but also long-term planning and management strategies to help you shape your future the future of your firm to be the absolute best law firm you can be:
- Cash flow analysis (we highly recommend monitoring your cash flow daily)
- Assessment for which of the applicable CARES Act loans is best for your firm
- Outsourced accounting and financial management (back office to outsourced CFO)
- Optimize, analyze, and track PPP Loan money for maximum forgiveness and compliance
- Remote technology tools
- Budgeting and management processes
Do not hesitate to reach out, even with the simplest of questions. We will get through this and be better for it, together.
For more information on how the Coronavirus is impacting businesses across multiple industries, visit our COVID-19 resource page:
Have a question? Click here to contact this representative.
New Year, New Outlook – Preparing for 2023
A Simple Antivirus Solution is Not Enough to Keep Your Data Safe
GLBA Student Financial Aid Safeguards 2022/2023 Update
Web Applications and Vulnerabilities: What to Look Out For
Global Consolidation/Multi-Currency Revaluation Processing
A Recent Uptick in Callback Phishing Attacks is a Timely Cyber Security Reminder