The Domino Effect: Why Good Client Service Starts With Good Money Management

In 1748 Benjamin Franklin wrote an essay that contained the phrase "Time is Money". 274 years later his words are still true. No matter the nature of the business, money is needed for an organization in any industry to prosper. In the end, money is a common link between clients and law firms across practice areas in the legal industry. The time invested in the file will hopefully result in a successful settlement for your client and ultimately revenue for the practice. However, modern economic circumstances have meant clients are less willing (or sometimes able) to part with their money. 

The result? Law firms who are able to manage their accounting properly and communicate with their clients about their financials effectively are seen to be providing a higher level of service. If clients feel they are getting higher value out of a law firm’s time, that inevitably leads to more money for a practice. A positive cash-flow feedback system can be created by law firms by improving their clients’ service experience, but that starts with how they manage their accounting.  

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A good reputation attracts more clients.

The first and most crucial step for law firms in the journey to improve their client service (and as a result, their cash flow) is compliance. Each state in the USA, and each province within Canada has a governing body that regulates the legal profession within their jurisdiction. For example, in my home province of Ontario, Canada, specific requirements and standards that must be adhered to are set within the Rules of Conduct for Lawyers and Paralegals; and the Law Society of Ontario (LSO) has specific rules of conduct that lawyers and paralegals must follow when dealing with financial transactions, maintenance and record keeping.

Being in good standing with your governing bodies improves reputation for your business before a client even steps through the door. It can help clients feel at ease to know your firm has employees who are dedicated to ensuring that professional and ethical obligations are being met, and that there is someone specialized in handling the practice’s accounting needs, especially with processes related to managing client matters. Beyond benefits for the client, having a dedicated legal accountant can improve the firm's overall business, as they can aid in making business decisions that will benefit stakeholders, such as internal, external, and government users.

Large firms are more inclined to have an accounting department with bookkeepers or trained staff to do the work required. However, smaller firms can benefit from having external bookkeepers and accountants who attend to the firm's accounting needs on an arranged schedule, with the day-to-day tasks performed by legal support staff. The tasks can vary from posting disbursements, writing cheques, and creating client accounts and statements for internal and external stakeholders.

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Right now, spending money is scary.

In a recent conversation with a colleague and professor of business, she expressed;

"Many people have limited disposable income already, and when faced with a legal expense that exceeds their spending capacity, the fear of money is amplified by the fear of the legal process and not understating the legal accounting involved in the firm”.

The correlation between the fear of money and the fear of not understanding the process behind the scenes relating to the costs involved in a legal matter can create tension between a client and the legal team. Therefore, having a legal representative taking the time to ensure that a client understands how the legal accounting system relates to their matter is essential to provide clients with a foundation of understanding to not have the added worry about money throughout the life cycle of their case. 

People are afraid of money and how it is handled; due to this, they are often put into a position where when they receive an invoice that they cannot afford, let alone understand, it causes additional stress and is augmented to the extreme. People in general need and want to understand the cost of a legal proceeding in hopes of eliminating unnecessary conflict over a bill; having a legal accounting system that provides statements and invoices that the average everyday person understands is beneficial to the firm and the individuals retaining the firm. 

The importance of knowledge regarding legal accounting, what it entails, and the requirement of a licensee is essential to ensuring the organization's financials are handled correctly and efficiently. While the foundation of work completed with a legal firm is law, some degree of money management is also conducted daily. Legal professionals want to do the legal tasks, not necessarily the "money" work. As a result, having staff, bookkeepers, and accounts, along with good legal accounting software, will bring peace of mind to the firm and clients. With the varying stakeholders of a firm requiring different degrees of data, it is imperative to have a system that allows you to meet the needs of everyone associated with the business. 

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The bottom line:

Law and math go together. To work successfully in the legal field, it is beneficial for all support staff and licensees to have a basic knowledge and understanding of legal accounting; the procedures involved; and the role it plays in the context of your clients' cases.  If you are able to manage your firm’s own money effectively, your clients will be able to trust that you will be reliable with their hard-earned money as well. In the end, if math is not your forte, the best way to start improving your client service is to have top-quality legal accounting software that makes the daunting task of math and legal accounting somewhat enjoyable. 

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