find the latest legal job
Corporate Counsel and Company Secretary
Category: Generalists - In House | Location: Newcastle, Maitland & Hunter NSW
· Highly-respected, innovative and entrepreneurial Not-for-Profit · Competency based Board
View details
Chief Counsel and Company Secretary
Category: Generalists - In House | Location: Newcastle, Maitland & Hunter NSW
· Dynamic, high growth organisation · ASX listed market leader
View details
In-house Projects Lawyer | Renewables / Solar | 2-5 Years PQE
Category: Generalists - In House | Location: All Australia
· Help design the future · NASDAQ Listed
View details
Insurance Lawyer (3-5 PAE)
Category: Insurance and Superannuation Law | Location: Brisbane CBD & Inner Suburbs Brisbane QLD
· Dynamic organisation ·
View details
Legal Counsel
Category: Corporate and Commercial Law | Location: North Sydney NSW 2060
· 18 month fixed term contract · 3-5 years PQE with TMT exposure
View details
The 'power of one' rule: Tips for ensuring the financial success of your firm

The 'power of one' rule: Tips for ensuring the financial success of your firm

Correctly examining profits will do more for the financial success of a law firm than clocking up billable hours, writes Angela Priestley. A sensible law firm would always examine its numbers in…

Correctly examining profits will do more for the financial success of a law firm than clocking up billable hours, writes Angela Priestley.

A sensible law firm would always examine its numbers in order to make strategic decisions for driving profit. But, according to accountant Andrew Chen, examining such numbers is only useful if decision-makers can ask the right questions and view their figures in the correct way.

"Firms are taking for granted what they're looking at. Often, they're making strategic decisions when the information that's in front of them may not actually help them make the correct decision," says Chen.

He believes problems frequently emerge when firms rely on the production of monthly reports by accounting staff who give little consideration to how such information is reported.

"That means that the guys making the decisions on how to increase profits - whether it's to make redundancies, cut overheads or do a marketing campaign - don't have the right intelligence in front of them," he says.

Chen advocates that firms view practice groups as businesses and examine the nuts and bolts that drive each group's financial performance. Clocking up billable hours should not be the only strategy for driving profit. Instead, he urges firms to apply the "power of one" rule; that is, determining where a change of one per cent can best benefit the firm.

"For example, if you change your charge-out rates by one per cent, then you're going to have a bigger impact on your bottom line than changing one per cent of, say, staffing costs," he says.

In 15 years of servicing the legal profession, Chen says he has seen lawyers make significant progress in the financial management of their practices - especially through the advent of technology that can offer better analysis of profits - but he adds that old habits die hard.

"Often people who have gone from firm to firm take the same lessons learned and just apply them again and again. Sometimes, these rules of thumb of the legal profession are just repackaged," he says. "But you'd be surprised: all that people were focused on ten years ago was revenue. Now they can measure and attribute profitability to different things."

Andrew Chen is speaking at the LexisNexis Practice Management Conference, 24-25 May, in Sydney.

Like this story? Read more:

QLS condemns actions of disgraced lawyer as ‘stain on the profession’

NSW proposes big justice reforms to target risk of reoffending

The legal budget breakdown 2017

The 'power of one' rule: Tips for ensuring the financial success of your firm
lawyersweekly logo
Promoted content
Recommended by Spike Native Network
more from lawyers weekly
LCA president Fiona McLeod SC
Aug 17 2017
Where social fault lines meet the justice gap in Aus
After just returning from a tour of the Northern Territory, LCA president Fiona McLeod SC speaks wit...
Marriage equality flag
Aug 17 2017
ALHR backs High Court challenge to marriage equality postal vote
Australian Lawyers for Human Rights (ALHR) has voiced its support for a constitutional challenge to ...
Give advice
Aug 17 2017
A-G issues advice on judiciary’s public presence
Commonwealth Attorney-General George Brandis QC has offered his advice on the public presence of jud...
APPOINTMENTS
Allens managing partner Richard Spurio, image courtesy Allens' website
Jun 21 2017
Promo season at Allens
A group of lawyers at Allens have received promotions across its PNG and Australian offices. ...
May 11 2017
Partner exits for in-house role
A Victorian lawyer has left the partnership of a national firm to start a new gig with state governm...
Esteban Gomez
May 11 2017
National firm recruits ‘major asset’
A national law firm has announced it has appointed a new corporate partner who brings over 15 years'...
opinion
Nicole Rich
May 16 2017
Access to justice for young transgender Australians
Reform is looming for the process that young transgender Australians and their families must current...
Geoff Roberson
May 11 2017
The lighter side of the law: when law and comedy collide
On the face of it, there doesn’t seem to be much that is amusing about the law, writes Geoff Rober...
Help
May 10 2017
Advocate’s immunity – without fear or without favour but not both
On 29 March 2017, the High Court handed down its decision in David Kendirjian v Eugene Lepore & ...