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Merriam-Webster's interpretation of 'savvy' is 'practical know-how'. To have practical know-how in financial management is a crucial component of responsible leadership. In today's competitive environment being a responsible leader in a law firm takes even more than practical know-how in financial management. The profession, and how the delivery of legal services is managed, is changing rapidly. One of the biggest changes I have observed over the last five to ten years is the shift from a lawyer-centered law office to a client-centered law office. With all the technology tools available to the attorney and his/her staff any shift or major change within the practice can be accommodated more easily than ever. One thing that has not changed however, is the need for financial stability in any law office in order to serve the client without having to worry about keeping the doors open from one day to the next. That is where practical know-how in financial management comes in. A leader in today's law practice must be able to combine the old familiar financial strategies with the need to succeed in a client-centered practice.

Let us look at what was then and what is now.

1. Does the old formula of hours worked / dollars billed / dollars collected still work?

In years past when budget time came around, the needed revenue was divided by lawyers in the firm, then by the individual lawyers' billing rate - to come up with the number of hours at the standard billing rate needing to be collected in order to bring in the required revenue. It was understood that a) not everything that was billed would be collected, b) not every hour that was worked could be billed. Thus came the creation of varying versions of this formula:
lawyers could be billed out at X billing rate, therefore they needed to work Y number of hours in order to bill Z number of dollars. Collection was another matter.The resulting focus was on hours and dollars, with service sometimes being compromised.

In today's practice the client comes first. Due to media exposure, the client is more knowledgeable, the client is more sophisticated, the client is more demanding, and there are more attorneys than ever for the client to choose from. The attorney responsible for leading his/her practice or firm into the future must realize that the clients' needs must be first and foremost before the firm's financial well-being. But - as pointed out earlier - financial stability is a must for the firm to continue to serve its clients.

Where lies the balance?

Pushing the attorneys to work more hours and increasing the hourly rates may not be the way to do it anymore.

The responsible leader will evaluate the practice with the client in mind. In order to reach a certain level of revenue, he/she will listen to the client's needs, and strive to meet those needs. The clients want to know that they are being listened to, that they are being cared about.

So, to combine this needed element of nurturing the client relationship with the sometimes seemingly cold and calculating methods of financial management necessitates a change in mind set. The leader in today's law practice may do well in looking at the structure of the practice overall to achieve a win/win outcome for both the firm and the client.

1. Looking at the client service team approach. Establish client service teams whereby the attorney, the paralegal, the secretary and whoever else performs work for the client become a team. Everyone on the team understands the objectives of the case, and is familiar with the client's needs. It will help them take ownership in their work, their tasks, as a contributing member to the firm's responsibility of service to the client. This is different from the approach of years past, when support staff was hired to work for the attorney. Their tasks were individual assignments with no connection to the overall objectives - much like an assembly line. Remember, the focus was on hours worked and dollars billed. With the client service team approach you not only raise the interest level of each team member in becoming more productive, you also gain a new perspective from the client's point of view: the client is not just hiring the attorney, but an entire team behind him / her, all working in the best interest of the client. It is a major change in the way legal services are delivered, and can be a win/win situation from the client's standpoint as well as from the firm's financial management standpoint.

2. Have you evaluated your billing format lately? Just the format of the bill for legal services has undergone some tremendous changes in the last few years. It is no longer sufficient to send a one-liner: For Legal Services Rendered $1,000. The client wants more. But what does the client want? Suggestion: ASK! Remember, a client-centered law practice is driven by the clients' needs. You may have a standard format for your bills, i.e. date of service, description of service, who performed the service and the dollar amount. Show it to the client and see if it meets with his/her needs. Some corporate clients may want you to bill in a task-based format, insurance companies may need to see every detail of the work performed, an individual client may have less rigid requirements, but whatever the client needs to see on the bill, needs to be complied with by the law office in order to get the bill paid! Take the initiative to communicate with the client about your billing practices and your responsibility as a financial manager will become much easier.

3. Are the write-offs of accounts receivable too high? If they are, it does not matter how many hours were worked or how many dollars were billed, the effective billing rate ($ collected divided by hours billed) will suffer tremendously. In years past, this would have resulted in more pressure to work and bill more hours. Today, the responsible leader will look at the reasons for having to write off any accounts receivable. In many cases such an analysis will show that a lack of communication between the attorney and client, as well as between the attorney and the rest of the team members resulted in an unpaid account. It is not sufficient to let the client know up front what the cost of the representation will be, the client needs to be kept informed on an ongoing basis if the projected cost changes. In other cases, the client may have just run out of money. From a financial management standpoint, was that a foreseeable fact? Are the intake procedures including a screening process to detect such possibilities? If so, the firm made an informed decision to accept the case - then write off the account. For practical know-how in financial management it is important to have systems in place to allow the firm to keep a healthy balance between uncollectible accounts and an economically beneficial workload. Review your intake procedures, evaluate your billing procedures, and take corrective action when needed.

4. Do you perform an overall 'reasonableness' test on bills before they are mailed out? The final step before mailing out your bills should be to compare the description of services with the amount billed, and ask yourself - did this client receive value for the amount he/she is being billed? Put yourself in your client's shoes and ask 'would I pay this for what I received'?

These are some of the questions a responsible leader with financial management savvy asks of himself and of his firm in order to balance the need for client satisfaction and the firm's financial stability.