Success Story: Law Firm Improves Revenue and Cash Flow

David, the sole practitioner of a legal firm, found that his revenue had stagnated and he was consistently facing cash flow problems.  He was jolted into action by a frank conversation with his accountant.  The accountant asked him how many hours he worked in his firm each year.  David estimated approximately 2,000.  The accountant then asked him to divide his profit by the hours worked and showed David that he could likely earn more per hour by working for someone else.

“You’d be better off shutting the doors and finding a job with someone else,” the accountant said, with a view to provoking his client to take some action to change the performance of his business.  It worked.  With all of the hassle of running his own firm, dealing with employees, and now the current revenue and cash flow problems, David was inspired to act. With a deep breath, David asked his accountant if he had any ideas to help him turn his business around.  Together, they set about implementing the following changes:

1. Major clean-out of work in progress (WIP).  For a variety of reasons work that had not yet been billed to clients. They went through the WIP line by line and found that there was a large amount of unrecoverable time that had to be written off but also a significant amount that could be billed.  This provided David with a much clearer picture of what work was truly in progress.  The new focus is on closing jobs and reducing the number of open jobs.  As a result, faster job turnaround has been achieved.
2. The accountant observed that there was paper everywhere and suggested that this may be causing inefficiencies.  They researched and invested in somescanning and time management software and with training from their accountant’s team have moved to a predominantly paperless office environment.  David estimates this has freed up another 10 hours a week for him personally and even more for his team.
3. They implemented a receivables system, including emails, phone scripts, letters and pre-determined follow up periods for all clients.  This combined with item #1 above reduced revenue tied up in WIP and receivables by 70% and freed up a huge amount of cash flow.

David’s cash flow problems are now a thing of the past and with the extra time freed up, he and his team have been able to bring on new clients and sell additional projects to existing clients. The three changes listed above resulted in a 30% increase in revenue, much of which dropped to the bottom line, with the business’ profit tripling!

These problems are common in all business types, not just law firms.   If you think your business might be experiencing some of the same issues, give us a call.  We can sit down with you, do a review and recommend  a plan to  increase your sales, profit and cash flow.

Give Bressler & Company a call today at 559-924-1225 to get the process started.  You will be happy that you did.