Law firm financial management software is bought to produce reports, and the reports it produces by default are rarely the ones a partner is asked for. A partners' meeting asks four things: what is unbilled, what share of what we billed we actually collected, which matters made money, and is the client account right. Each of those is arithmetic on data the firm already has, and each is a number most small firms cannot state on the day it is wanted. This page sets out the four, with the calculation behind each, so you can ask a vendor to show you the four rather than watch a dashboard tour.
Work in progress, in days and in money
Unbilled recorded time, priced. On the worked example -- 6 fee earners, $280 an hour, 5.2 recorded hours a day -- each working day of unbilled work is $8,736, so 38 days of it is $331,968. Days is the number that tells you whether it is getting worse; money is the number that gets the meeting's attention.
Realisation, which is one number and not three
The share of recorded value you collect, after write-offs and after non-payment. At 86.5% on the same example, $183,456 recorded becomes $158,689 collected: a gap of $24,767 a month and $297,199 a year. Reporting write-offs and collections separately lets each be explained away; reporting the product of them does not.
Matter profitability, at the matter and not the client
A profitable client with two unprofitable matters is a fact worth knowing before you take the third. This needs recorded time against the matter and the fee actually collected on it, which is why the matter has to be the unit throughout.
The client account, reconciled three ways
Bank, client ledger and the sum of individual matter balances all agreeing. Two of the three agreeing is the state a problem is usually discovered in, and a system that cannot produce the third on demand is one you will reconcile by hand.
Questions people ask about law firm financial management software
Is this the same as accounting software?
No. This is the firm's operating reporting; the general ledger is a separate thing and usually stays. A close tool for the firm's own books is a different subject again and belongs with month-end close software.
How often should a partner see these?
Monthly for realisation and matter profitability, weekly for work in progress, and the client account reconciliation as often as your regulator requires -- which is the one item on this list where the answer is not yours to choose.
What if the firm does not record time?
Then work in progress and realisation cannot be measured, and the first thing to buy is not reporting software. Fixed-fee firms still need the recorded hours to know whether the fixed fee was right.