In today's rapidly changing legal landscape, it is more important than ever for law firms to actively monitor their financial stability and business viability.
There are several challenges to the legal industry that the recent economic instability has caused. The high inflation rates since 2022 have seen costs for law firms increase dramatically over the last few years. This has been coupled with low economic growth (culminating in a recession at the end of 2023) that will have slowed demand in the economy.
This has contributed to an increasing number of law firm insolvencies year on year, which has also had the knock on the PII market and increasing premiums year on year.
Fortunately, capacity appears to be re-emerging in the market, which should positively impact premiums. However, it's essential for insurers to avoid being burdened with covering run-off insurance for law firms unable to manage their financial affairs effectively. Thus, demonstrating your financial stability is crucial.
It’s undoubtedly a tough time for law firms, but despite this, there are opportunities as well as threats that have been created by these economic conditions, for example taking advantage of the unusually high interest rates to earn greater returns on held client money.
With the Solicitors Regulation Authority (SRA) Code of Conduct for Firms (2.4) having made it clear that law firms have a responsibility to ensure that they are financially stable and able to meet their obligations to clients and other stakeholders, it is clear that in 2024, financial planning for law firms needs to be taken seriously. The law firms that prosper are likely to be the ones that prioritise their finances and make smart, proactive decisions to safeguard cash flow for the long term.
However, for many firms, the question remains - How can this be easily done? With so many different factors to consider, it can be difficult to know where to start.
This is why Gemstone Legal exists. We are experts in law firm finance and we work to educate and empower law firms to help them achieve financially optimal positions.
In that spirit, we’ve created four bespoke resources that offer personalised results and can aid in evaluating financial and risk controls, refining strategic plans, and identifying key actions for ongoing law firm management. What's even better is they are absolutely free to use and offer results tailored to your law firm.
Let’s explore the four resources that we have available, and how you can use them to help your law firm optimise its financial stability and viability.
1 - Analyse the gap in your financial controls with our financial stability scorecard
As we’ve touched on already, the challenging economic environment for law firms is putting more and more pressure on business cash flow.
"Given the cautious stance of the PI market towards struggling law firms, it's prudent for law firms to demonstrate their robust financial management strategies. Not only can this bolster their PI insurance applications, but it also provides invaluable insights for guiding financial planning effectively."
To that end, we’ve created a financial stability scorecard that is designed to uncover key areas where your law firm could improve how it manages its finances. It only takes 5 minutes to complete and could have a big impact on the stability of your business.
2 - Maximise the returns on client monies with our CM Interest Scorecard
Earning money from held client money is not a new concept, but with the interest rates at a 16 year high of 5.25%, the opportunity is currently larger than it has been for decades.
Advising on how to maximise the interest return on client money in a way that is fair to both clients and law firms is one of the core areas of our business. We’ve written about this topic at length, and helped many law firms optimise their client money strategy and earn thousands each year in virtually passive income.
Our Client Money Interest Scorecard takes only 2 minutes to complete, and will help to uncover how your firm could generate additional income. You’ll be presented with twelve multiple choice questions, and won’t be asked to provide any sensitive financial information.
You will receive immediate results and an opportunity to discuss how much extra you could be earning.
3 - Make your money work for you with our Deposit Marketplace
Many legal practices control significant levels of office money, yet earn little or no interest from their banks.
The administrative burden of opening accounts with new providers tends to discourage firms from accessing greater returns and de-risking their cash management practices.
There is a real opportunity here for law firms to maximise the income made on their deposits, it just needs to be simpler to manage from the law firm’s perspective.
To provide a solution here, we have partnered with award winning cash management platform Akoni Hub to help our clients seamlessly and effectively manage their firm’s office accounts.
Ensure that your law firm gets the best deal by strategically moving money between banks without the hassle of having to complete multiple account opening forms.
4 - Understand your firm’s financial performance with our financial benchmarking scorecard
For law firms to properly focus on, and take advantage of, a proactive finance strategy, it is crucial that they are able to accurately measure and track their financial performance.
Clear financial benchmarking is not just about making things clear for yourselves, it is crucial when it comes to persuading lenders, investors, insurers and other stakeholders to work with your law firm.
That’s why we created the financial benchmarking scorecard. It’s an effective tool to help you measure your firm's business performance across a range of metrics.
Once complete, we offer a free consultation to go through your results and discuss the ways that you can improve your law firm’s financial stability and viability.
We have also just updated our financial benchmarking scorecard (April 2024), so that results are timely, accurate and actionable.
To learn about your firm's financial performance, complete our free scorecard today.
Summary: 4 Quick ways to supercharge your firm’s financial performance.
In today’s challenging economic conditions, the 4 free tools highlighted in this article provide a quick and effective first step towards financial optimisation and proactivity for your law firm.
If you require further assistance, book a call with us today. We would be more than happy to discuss the results of any of our scorecards, advise on your financial strategy, and answer any questions you may have.
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