Technology spend vs profitability creation
02 Dec 2020
There is a saying that goes – “penny wise, pound foolish”, intrinsically describing the act of being extremely careful about spending small amounts of money but not being careful when spending larger amounts of money.
And that is sort of backwards thinking…
But what does this have to do with technology spend in relation to profitability?
Well, technology seems to occupy a more significant position in the lives and businesses of law firms with each passing year. And 2020 is no exception. In fact, 2020 has made it quite clear that without having the right technology implemented within a firm, those unwilling to fully embrace technology will be left behind. And that is not a good thing.
The fact is, today’s law firms are becoming increasingly intertwined with other types of expertise besides legal. We have spoken about this need to be flexible and provide more than just legal advice, in our article Be flexible, man! Here we state that being flexible starts with your
“general outlook and attitude towards how you practice law but it also includes incorporating the proper technology into your practice”.
And this is the crux of the matter really. Because with more and more firms (particularly large and midsize ones), needing to connect with a larger spectrum of legal professionals (both inside and outside the firm), as well as looking at the business more holistically whereby they incorporate more departments of the business in order to better understand how their clients actually work – the lawyer of the future will not only need to provide legal advice but will also need to be a business adviser who is at ease with technology, focused on the “business end” of the business. And that will no longer be a nice to have – with clients having their fingers in many pies and most large corporates being flexible in the work they do, the businesses they invest in and the products they supply, their legal advisors will have to take on the same approach – be flexible. And this will be tough for the law firm who does not have the technology to support a flexible business approach.
But 2020 has been a really tough year – should I really spend?
With markets demanding more from their legal advisors, both in the form of innovation in their legal thinking, the additional services that go beyond “just legal advice” as well as the need to be more affordable – essentially offering more for less – law firms kind of find themselves between a rock and a hard place.
In order to innovate, law firms need to bring together both legal and business expertise, along with legal tech tools that bring those offerings to light more efficiently and cost-effectively. At the same time, law firms that continue to face pressures (especially during such a difficult year) to rein in expenses and strengthen the bottom line, will need to look to how to provide more for less.
And that is kind of like pulling a rabbit out of a hat.
In an ideal world, firms looking to increase profitability in the face of a recession would balance out their productivity loss by making smarter investments in technology, allowing employees to get more done in less time. But in their fervor to cut costs, some firms have brought technology spending to a grinding halt. The result? An almost impossible task for law firms to recover momentum when the economy starts to improve – how will they compete with the firms who have taken the proverbial technological bull by the horns?
You see, cutting technology budgets only delays expenditures. It does not eliminate it. And because of the nature of technology, those delays often result in higher costs in the long term – huge annual advancements in computers, phones, tablets, POS systems, cloud storage, data backup, legal practice software, and more create an ever-changing realm of IT possibilities and expenses. By not investing in technology now, saving your pennies will only result in you having to outlay your pounds at a later stage.
And that is rather short sighted.
Technology improvements can actually address pressures to innovate and create profitability
Modern law firms, particularly large and midsize ones, are looking for innovative ways to stay both competitive and profitable. All the more reason for the use of legal technology that connects with the ways that modern law firms are operating – legal tech not only assists with efficiency and limits the amount of errors that can happen when working under pressure, but it also eliminates labour intensive, repetitive tasks that take up a considerable amount of time, keeping support staff and lawyers alike away from true billable hours.
Legal tech will also allow the capturing of the actual billable time with the ever important practice management software. But let’s be honest, no one wakes up in the morning looking forward to keeping track of every minute of their entire day. It can be dreadful (and often demoralizing).
But timekeeping is just one of many jobs that can be made dramatically easier and more efficient with legal-specific practice management software. And, it is unfortunately essential in the normal day to day operations of any law firm.
Besides providing multiple ways to capture time (including on the go), software that reminds timekeepers of work performed, but not yet billed like the Work in Progress feature offered by AJS is extremely important. AJS’s WIP feature enables the capturing of billable time that hasn’t yet been recorded. If employees log phone calls or appointments on their calendars, or save an email to a matter (for instance), a note will be made of that billable time. From there, it’s a simple matter of a few clicks on the timekeeper’s part to record the time that would otherwise have been lost. Even at R1500 an hour (a very conservative estimate of a law firm’s average billed rate across all timekeepers), capturing just thirty minutes more a day can put an additional R15, 750 per month (on a generally accepted basis of 21 working days in a month) in your firm’s bank account. And that is not an amount of money to scoff at.
And that’s just the increase in revenue from one timekeeper, so the savings keep multiplying by the number of billable employees you have. What’s more, timekeeping is just one of the many ways the right practice management software can rev up the profitability machine – isn’t that exciting? The software in essence (and even for the additional 30 minutes per day) actually pays for itself.
And the converse will also be true – by not capturing the 30 mins of time spent on a matter, you lose that R15 750 (at a minimum) per month. What a shame that would be.
So, what type of legal tech can help with profitability?
- Time and expense tracking – it’s impossible to understand efficiency, margins, and other important metrics without measuring the effort (i.e. the time) that goes into your various matters and their respective phases and tasks. This is why it’s essential to have easy ways for your employees to log their time. Look for software with an intuitive time entry process. Cloud and mobile time entry is also key. It allows for flexibility. If your software also has methods for automatic time tracking, even better. Expenses play their role too. Naturally, without tracking expenses, you won’t have any idea of the hard costs associated with your matters and their respective phases and tasks;
- Task/Case management – when you assign employees to specific tasks or matters, you can easily see what’s done, what’s underway, and what needs to be started. When you match tasks up with time and expense entries, you get much more specific insight into how your matters are doing and what issues need to be addressed;
- Streamlined workflows – the software you use should have strong workflows for submittals and approvals and assist in eliminating repetitive and labour intensive tasks, freeing up time for work that can be billed for;
- Accurate allocation and forecasting – allocation and forecasting tools offer insight into your employees workload and availability. Allocation enables you to assign tasks and expenses to different employees with a defined time duration. With a good allocation feature, you’ll get a single source schedule of all the work in your firm that needs to be done;
- Real-time analytics – getting information you can use to increase profits is the entire point and it’s much more helpful to have it while your matters are underway instead of just after the fact. You should look for a solution that offers up-to-the-minute reports on every aspect of your business as well as dashboards that instantly show you key performance indicators. It’s much easier to steer your matters in the right direction if you just need to glance at a screen to know your earned value or utilization.
But the above features are not all encompassing. They are only some of the important specifics required when it comes to the technology that makes legal teach a no-brainer. They fit into a broader landscape of a solution that should provide trust and business accounting, Work in Progress solutions electronic invoices, document automation, matter diary, email integration and FICA management (to name but a few features). And this should all be offered in one platform.
While this sounds like a whole lot to ask for, when you find the right software provider, like AJS, life will be simpler. You’ll get the insights you need to increase productivity and profits without getting a migraine from all of the manual paperwork and cross checking.
Let’s put spending into perspective
We started off by saying “penny wise, pound foolish” and the perfect way to illustrate this basic principal is with a cappuccino. The average cost of a cappuccino is around R35 per cup in most main metros. Many of us find this little expenditure vital to our daily wellbeing. Rightly so – a little indulgence filled with caffeine often gives one the va-va-voom they need to begin their day.
But for R25 per month per user for AJS Express Legal Accounting and Practice Management software and R35 per month per user for AJS Enterprise Accounting, (both of which are approximately the same price as your morning indulgence), one needs to balance their caffeine boost with an actual boost to their overall practice (which will promote overall efficiency and profitability). And that certainly puts expenditure (even small expenditure) into perspective.
One needs to be able to look at their budget and each line item and analyse which monthly cost is simply an expense (and is necessary for day-to-day operations like photocopies) and which one will actually benefit their company in the long run. Which expense is all about the flash of wealth to camouflage success and which expense will lead your company to real measurable success, which is not camouflaged.
If you ask us, it is an easy analysis and one which should lead you to the obvious conclusion – investing in legal tech and support software will benefit your firm going forward. The initial capital outlay and resulting monthly expenditure will pay for itself down the line.
Don’t be short sighted. Scrimping and saving in an effort to reign in expenses during a global recession is prudent when it comes to the small items – like the cappuccino (which really is an indulgence). But doing the same exercise with your legal software (which is an operational necessity) will only aggravate circumstances and prevent you from achieving success and profitability in the long run.
Pick your cost – get your caffeine kick at home.
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