A lawyer must understand the financial side of the business if he or she is interested in becoming a firm partner, advised Austin Anderson, an Ann Arbor, Mich. lawyer and marketing consultant, during a free ABA Career Counsel podcast, "Learning the Financial Side of the Business."
Lawyers have a vested interest in how the firm is doing, so an aspiring partner should review annual and monthly billing statements. Also, be sure to monitor work in progress, continued Anderson, especially the work that you assign to others. Monitoring helps to ensure that the work gets done, adding to the firm’s bottom line.
Understanding the firm’s finances begins with becoming aware of your financial contributions. Anderson suggests lawyers analyze their realization rates and create billable hour goals. A lawyer’s realization rate should never be less than 90 percent, he said. Client selection is key to minimizing uncollectible bills. Assess the ability of prospective clients to pay; discuss with potential business clients what and how you will bill; and bill in a timely fashion.
Since expenditures reduce profits, knowing those expenses is important by signaling that you are financially responsible. Learn the elements that make up the firm’s budget, urged Anderson, even the details, such as the cost of filing documents and the expenses related to retaining experts. Review such budgets at least quarterly; monthly is even better, said Anderson.
Log on to the Career Counsel Web site for more pointers on advancing your career.
