All Our Tips
Breakdown Your Accounts Receivable
In what condition are your accounts receivable?
While your total accounts receivable number from your accounting system tells you the total amount of money owed by your firm’s clients, your accounts receivable report should be aged 30, 60 and 90+ days to give you greater information of the state of your receivables.
The 2008 Juris Law Firm Economic Survey from LexisNexis (the last date for which we have such a survey – they are no longer being published – a great loss as these surveys were very detailed and informative) shows that ‘days fees outstanding’ for accounts receivable in 2008 were 83 for all firms on average and ranged from 72 to 100 depending in which quartile the firm ranked. Those are a lot of days!! The economic conditions have worsened from 2008 and we would imagine that this statistic has eroded further as a result…
So why do an accounts receivable breakdown? It is useful to look at trends over time. How has the over 90+ category changed? Has it gone up? Growth in your accounts receivable – and particularly in your over 90 days category – can indicate poor client selection, poor collection practices, too much billable time put into a file relative to its worth, or a combination of all three.
Regardless, growth in your over 90+ day category should be examined closely to see if there is a cash flow crisis coming down the road.
Furthermore, you should be taking action – now! – on the accounts that have just moved from the under 30 day (ie current) category to the 30 to 60 day category. Those are the accounts that stand the greatest chance of success. Time spent there may make the difference between an account that is collected and one that is written off…
Accordingly, when you are doing your monthly financial ‘dashboard’ report, be sure to breakdown your accounts receivable in order to determine the action that you should be taking on managing your finances – now.
Go to the Source
Today’s Tip: Go to the source
What I mean by go to the source is this:
If you have exhausted the traditional places to look for something (case law databases – both free and commercial; journal article sources; local libraries that you may borrow from; a general web search) and have not located a specific item that you need, go to the source.
Who authored the work?
- Phone the arbitrator
- Call the judge’s assistant
- Email the news reporter
People are amazingly helpful and willing to share what they have or what they know if you ask, infrequently and politely of course.
Special thanks to Arne Peltz of the Winnipeg law firm of Orle • Davidson • Giesbrecht • Bargen LLP for the advice this week on where to find one of his arbitration decisions from the late 90’s.
Who’s Looking at You in LinkedIn?
Social media tools allow people to look at your profile information. By tweaking privacy settings, you can limit what people see by type of information (e.g., contact info, friends list, education, etc.) and degree of connection (e.g., friends or direct connections only, friends and friends of friends, everyone, etc.).
LinkedIn offers an interesting twist: you can see how many people have looked at your profile, and in some cases, you can even see their names.
As a LinkedIn user you should appreciate other LinkedIn users can see that you have looked at their profile. In many cases it may not matter, but in some it might. If you are doing some competitive intelligence research on you competition or if you are an HR person or headhunter you probably don’t want people to know you are looking at their profiles.
To see how many people have viewed your profile, look in the Who’s Viewed Your Profile? box (3rd box down on the right side) of the home screen. It will say “Your profile has been viewed by # people in the past # days.” This line is a link. Click it you can see the names of up to 5 people that have looked at your profile over the last few days or the last week.
In some cases actual names will be listed, in some cases you can see a description of the person by industry and location (and if you click on that link you can see a list of 10 names that include the specific person), and in some cases it will just say “Anonymous LinkedIn User”. By changing LinkedIn privacy settings you can control whether people will see that you have looked at their profile. Full display of your name is the default setting.
Go to your LinkedIn setting page. In the Privacy Controls section (middle of the screen) there is a “Select what others see when you’ve viewed their profile” option. Click on it to see your three options:
- Your name and headline (Recommended)
- Anonymous profile characteristics such as industry and title
- You will be totally anonymous.
Note that the first option is the default and the “Recommended” suggestion is from LinkedIn (as they would like you to be more open about sharing your information). Pick the setting that makes sense for you and click on Save.
Note that if you have an upgraded LinkedIn account (you must pay extra for this), you can see a list of everyone that has looked at your profile (unless they have changed their Privacy Controls setting) and the names of people who turned up your name in search results.
Determine Your Hourly Cost Structure
Abraham Lincoln said that a lawyer’s time is his stock in trade, and it’s true. Although knowledge, creativity, and relationships are vital to the provision of quality legal services, the only way we’ve come up with so far to measure the cost to a firm to provide those services is to apply personnel and other costs across the number of hours of service provided. Thus, every managing partner, administrator and every firm should know how much it costs to provide an hour of legal services. Without this basic building block, you don’t know whether you’re making money or losing it.
If you have a fair fluency with Excel, it’s not too difficult to use linked spreadsheets to allow you to determine your hourly cost structure. Basically, you want to add up all direct and shared costs (including compensation) for each timekeeper, and divide the total by the timekeeper’s annual billable hour requirement. This will give you the cost for that timekeeper to provide an hour of legal services.
Your first spread sheet will show overhead cost other than staff salaries and timekeeper compensation. These costs can be broken down into two types – fixed cost (such as rent, equipment costs, and support staff salaries) and costs that change with the amount of work you do (such as supplies, consumables, overnight delivery, and overtime).
Your second spreadsheet will gather timekeepers’ support staff cost. Take all staff compensation (salaries, bonuses and benefits) and attribute them to each timekeeper. Whether you allocate individual support staff salaries directly to a particular fee-biller or simply lump all support salaries into general overhead will depend on staff assignment and usage in your firm and your approach to how you wish to break down costs.
Your final spreadsheet will show direct timekeeper revenue and compensation. The idea here is to have each timekeeper estimate his or her revenue over the budget year, taking into account different rates for different matters, delays in collection, write-down’s, write-office and contingencies.
Understanding your hourly cost structure has enormous implications for examining the financial status of your firm and for determining your top-profitability lawyers (as opposed to top revenue generators… which may or may not be the same!). More about that in a later tip!
Waiting for a Case to Be Published?
Today’s tip is for the watcher. Quite often a court proceeding of interest will be reported in the media as the case is heard. Decisions, especially in civil cases, usually come down at some future time. There are a couple of ways to virtually ‘watch’ for decisions of interest.
- Try a Google News alert – if the case was media worthy when it was being hear, there may be a media report of the decision which a Google alert will send to your email inbox.
- Create a CanLII RSS feed for a search of the decision – even if a party name search results in no hits, you can still create an RSS feed that will send the result to your reader when the decision appears in the database
Anyone have another new case watch method to share?
How to Dial Word-Based Phone Numbers on a BlackBerry
Crackberry.com has posted a useful tip that solves a problem that many BlackBerry users have had: how to dial all those phone numbers with words in them?? (e.g. 1-888-ROGERS1). The keypad letters don’t seem to correspond with the old rotary number/letter system.
There were always workarounds, from looking elsewhere on a webpage for the actual number to looking at an older phone and writing down the numbers yourself. But it seems all this time there was an easier way: just hold down the ‘alt’ key while dialing the letters (but not the numbers), and the BlackBerry will substitute the proper number.
A frustrating problem (for some of us, anyway) solved!
Figure Your EHR (Effective Hourly Rate)
Part of coming to grips with the financial management side of your practice is learning to read the numbers. One of the more important ones to understand is the concept of “Effective Hourly Rate”.
You determine the effective hourly rate of any file in the firm by taking the amount received in connection with the matter and dividing it by the hours actually spent on the file. Let us assume that a bill for 100 hours was sent, and that the lawyer’s billable rate was $200 per hour. Let’s also assume that the entire bill was paid in full. The amount billed was 100 hours x $200 = $20,000. To determine the effective hourly rate, we need to know not just the number of hours billed, but the actual number of hours worked on the file.
No, we’re not talking about padding the bill, but the normal write-ups and write-downs that occur during the preparation of a bill for legal services. If the lawyer actually put 200 hours of work into the matter, then the EHR was actually only $100 per hour ($20,000 ÷ 200 hours = $100 per hour), not the lawyer’s billing rate of $200 per hour.
Determining EHR illustrates why it’s especially important for you, as a managing partner or administrator, to get accurate records of all of the hours worked in connection with a particular matter – regardless of the way the firm bills. Your standard lawyer billing rate may be $200 per hour, but if you have recorded all your time expended on contingent or flat fee matters, you will be able to determine how much you actually earned per hour through the representation. And if your lawyers are able to put in 50 hours on that same hypothetical matter for which you were paid $20,000, then your EHR would be $400 per hour ($20,000 ÷ 50 = $400 per hour).
Pretty good, indeed! Furthermore, determining your EHR has important considerations as you move to alternative billing.
Searching for Private Company Info
My colleague Jennifer Merchant, Library Assistant for Field Law in the Calgary office gets credit for this tip. It is really more the beginning of a memo of research results, rather than a tip, but I thought you might find it useful. Jennifer was looking for some background information on a private company. Here is the beginning of her result:
You asked for background information on [insert private company name here]. I used the following resources in my search:
- Google (general)
- Google News
- Canadian Business and Current Affairs Complete (business/news database)
- Canadian Newsstand (news database)
- Canadian Periodicals (news database)
- Canadian Reference Centre (news database)
Using the sources above with a search for a private company name as a phrase yields plenty of results. This is true even when the company itself has no website.
LifeHacker’s Always Up-to-Date Guide to Managing Your Facebook Privacy
Keeping up with the changes to Facebook Privacy settings is a never-ending task. The large number of settings makes it very confusing. The LifeHacker blog comes to the rescue with The Always Up-to-Date Guide to Managing Your Facebook Privacy.
This comprehensive guide runs through the basic privacy settings that determine what you share, next it looks at deeper settings you’ll want to tweak, and it finishes with a few third-party tools that will help keep your Facebook information private.
LifeHacker says they will update this page when there are changes in the future. Bookmark this page, make it a favorite and tell your friends about it (remember they can share your information too). This is an amazing must read resource for all Facebook users and you will want to come back again.
Building Blocks of Time
Building Blocks of Time
This is a post from Andrew Rogers LL.B. CEO of www.foolkit.com.au.
How do you make sure that some time is set aside for those important tasks that are not urgent?
If you write a list of tasks for the day you should always start with the more urgent matters at the top and put the less important lower down.
Every task at the top of the list is going to take you longer than expected. And you’ll keep on slotting in other tasks at the top as the day progresses and never make it to the lower tasks.
All of which is fine if your only focus is about today. But what about tomorrow? Don’t you want things to be better tomorrow? Don’t you think that some time spent improving your systems, mentoring staff, planning, marketing … might not pay bigger dividends in the future?
My suggestion is to put that first list to one side for now. Instead, decide what proportion of the week you want to set aside for each category of tasks. Then set aside a block of time that reflects this. A one hour block in a 50 hour week is only 2% of your time. Surely you can achieve at least a 2% improvement by investing this time.
Create five or six blocks per day maximum to keep it simple. If you need to see a client first thing in the morning and that robs half an hour from the first time block, then take a half hour of the client time block to finish working on the first block. You might have a regular block that on Monday you use for mentoring staff; Tuesday it is for planning etc.
The old way, you wouldn’t run into these tasks until you finally made it that far down the list – probably in a few months time. My way, you run into them much sooner than that and they become part of your regular practice and get the priority they deserve.
