TLOMA Today

TLOMA would like to thank our 2023 Sponsors for supporting the TLOMA 2023 Conference & Trade Show.  

We look forward to welcoming you to Ottawa!

Fall is in the air this month as we gear up for our annual conference starting on October 11^th in Ottawa. Be sure to download the conference App using the instructions that TLOMA has sent out. The App is new this year for the conference and will be a great way to keep track of the events and speakers and to connect with fellow attendees. This year’s conference has 107 scheduled Delegates and 48 Exhibitors.

This past month the Board met in person to discuss the upcoming three-year Strategic Plan and determine priorities and tactics.

The Nominating Committee finalized the slate of candidates for the upcoming year and the details were shared with the members.

The upcoming SIG events this month are:

• October 11 – 14, 2023 - TLOMA 2023 Conference & Trade Show - Save the Date!
• October 17, 2023 – TLOMA FINANCE SIG - LSO Requirements and Identification Authentication Systems
• October 24, 2023 - TLOMA FACILITIES SIG – Stay tuned for details!
  
  

I look forward to welcoming everyone to the TLOMA 2023 Conference & Trade Show in Ottawa! See you there!

There’s no question that the pandemic has changed the way we work. That holds true for law firms and other businesses traditionally rooted in brick-and-mortar offices. For months, there has been a steady shift toward home offices and virtual courtrooms, so a solid computer network has become more critical than ever.

Enter virtual desktops. Take it from us - they’re a lot more secure, efficient, and reliable than they used to be. Today’s systems are designed to address concerns about speed, cyber security, and hardware and software compatibility, making them a perfect asset as your firm transitions to remote work.

What Are Virtual Desktops?

A virtual desktop is a digital workspace that can be accessed remotely from any computer or device. Instead of relying on the physical hardware and software installed on your local machine, a virtual desktop operates in “the cloud” – on a server in a data centre. When you log in, you essentially see and use a virtual representation of a computer desktop, just like you would on your physical computer.

Virtual desktops have come a long way since their inception. Initially, they were clunky and had limited functionality. However, advancements in technology have made them more efficient and user-friendly. They've evolved to be faster, more reliable, and easier to set up. Nowadays, virtual desktops offer a seamless experience that closely mimics working on a physical desktop, making them a practical choice for various industries, including law firms.

Benefits of Virtual Desktops for Law Firms

Virtual desktops provide an extra layer of security for law firms. Since data and applications are hosted on secure servers, there's less risk of data breaches from local devices. Encryption and access controls can be implemented more effectively, ensuring confidential client information remains protected.

Other benefits include:

• ●Improved Data Management: Virtual desktops centralize data storage and management. This makes it easier to organize case files, documents, and legal databases, reducing the chances of data loss or disorganization. Collaboration among team members also becomes more efficient, as everyone can access the same up-to-date information from anywhere.
• ●Hardware Flexibility: Virtual desktops eliminate the need for high-end local computers. You can access your virtual desktop from various devices, including laptops, tablets, or even smartphones.
• ●Seamless Software Integration: Virtual desktops can seamlessly integrate with your existing software stack, including case management systems, document collaboration tools, and communication platforms. There's no need to overhaul your software ecosystem! (Virtual desktops can actually extend the life of older software, saving the firm a lot of money.)

We’ve been told that key practice and document management software like DivorceMate, PCLaw, Clio, and the Dye and Durham suite of products all run impressively fast on our Cloud Office virtual desktop system compared to a traditional server. This means that for a relatively minor investment, your remote teams can get more done in less time.

Questions about Virtual Desktops for Remote Legal Teams?

Virtual desktops today offer law firms a secure, efficient, and flexible solution for remote work. They have evolved to meet the demands of modern legal practices, providing enhanced cyber security, improved data management, and accessibility from virtually anywhere, all while seamlessly integrating with existing software.

If you would like to learn about them or other IT advantages for law firms, head to our website for short informational videos.

Law firms face a unique set of challenges when it comes to bookkeeping. Not only must they maintain accurate financial records for themselves, but they must also manage their clients' trust accounts in compliance with Law Society regulations. Unfortunately, many law firms make common bookkeeping mistakes that can lead to financial trouble and even disciplinary action.

In this article, we will discuss 5 common bookkeeping mistakes law firms make and how to avoid them.

1.  Delayed Data Entry

Delayed data entry is a common oversight in law firms.  Without timely data entry, you may find yourself with inaccurate reporting of trust funds and may cause negative trust balances, for example, which is a serious violation. Delays can also result in overlooked disbursements or time entries, potentially leaving money on the table. Delays may also cause late invoicing which might inconvenience clients, leading to possible disputes or dissatisfaction. Lastly, procrastinating on entering financial data can lead to backlogs, financial statements and reports that do not accurately reflect the firm's current financial status, or a list of other errors due to rushed data entry.

Tips to avoid this mistake:

• To prevent issues, it's advisable to adopt real-time data entry. As often as you can, input data immediately after a transaction or client interaction. This approach stops data from piling up.
• Additionally, when forced to decide, prioritize client transactions, particularly because of the importance of trust accounts and client invoices.
• Lastly, establish a schedule for data entry. In a lot of firms, multiple users access accounting software using limited access points. Scheduling specific times for different data contributors helps avoid the congestion of multiple people trying to access the system simultaneously using the same credentials.

2.  Failing to Reconcile Trust Accounts on Time

Trust accounts hold funds that belong to clients, not the law firm. As such, the Law Society requires law firms to maintain accurate records of all trust transactions at all times. One method for ensuring this is by the implementation of their mandate to reconcile trust accounts by the 25th of each following month. For example, September’s trust reconciliation should be completed by October 25th.

Unfortunately, many law firms fail to do so, which can result in errors, overdrawn accounts, or other incompliant issues.

Tips to avoid this mistake:

• Law firms should schedule their trust reconciliations as early in the month as possible. This allows your bookkeeper ample time to complete the reconciliation before the deadline, keeping in mind that your bookkeeper will likely have multiple clients that all have the same deadline. 
• Once reconciled, utilize the rest of the month to promptly investigate and correct any discrepancies found. This is why the deadline for reconciliation is the 25th and not the end of the month – the remaining days of the month should be used for posting correcting entries.

3.  Misclassifying Expenses

Misclassifying expenses can lead to inaccurate financial statements, which can in turn lead to incorrect tax filings and other financial problems such as budgeting and forecasting errors. This mistake is often made when law firms fail to keep (or provide) detailed records of expenses or when they rely too heavily on software that might miscategorize entries.

Tips to avoid this mistake:

• Law firms should implement a system for categorizing expenses. A well-structured and logical category of expenses, referred to as the “Chart of Accounts,” should be established. (While this categorization system also includes assets, liabilities, equity, and revenue, this point focuses on the expenses category). Ideally, this structure should be developed with the consultation of an accountant.
• Accounting software, when used correctly, can be a great help, specifically ones that allow for memorized transactions so that the software automatically places expenses into the proper category. However, it's essential to ensure the initial allocation is done correctly and to not rely solely on automated categorizations without periodic review.

Not Reviewing Financial Reports

In the hustle and bustle of legal practice, a lot of lawyers inadvertently overlook the importance of examining their financial reports – routinely. Without reviewing financial reports, it's challenging to track progress, identify areas for improvement, make informed financial decisions, and ensure remittance obligations are properly being met.

Tips to avoid this mistake:

• Review your financial reports on a set schedule. Determine specific intervals, like monthly or quarterly, for report reviews. Sticking to a schedule helps ensure that it becomes a regular part of the firm's operations.
• Look for trends and patterns in your review and identify any areas where you can make necessary changes.
• It is also good to engage your bookkeeper, accountant, and key stakeholders in the review process. Different perspectives can offer invaluable varying insights and external financial experts or consultants can provide an unbiased view and insights that might be overlooked internally.

5.  Using Trust Funds as Operating Funds

Another mistake, albeit not as common, is misusing trust funds as operating funds. This can happen when a law firm fails to keep accurate records of trust transactions, usually resulting from poor reconciliation practices or failing to keep trust funds segregated from operating funds. Trust funds should never be used as business operating funds. In other words, only once the funds convert from being client-specific to belonging to the firm can they be used for non-client-related expenses or withdrawals.

Tips to avoid this mistake:

Law firms should always keep trust funds separate from operating funds. This means opening a separate bank account for trust funds and ensuring that all trust transactions are properly recorded and reconciled, in accordance with the Law Society.

Once the client's services have been completed and the respective invoice has been rendered to the client, only then can trust funds be transferred to the firm’s operating account and therefore can satisfy operating expenses.

Conclusion

This list is by no means exhaustive. However, by avoiding these mistakes, your firm will be in a better position to maintain accurate financial records, maintain compliance, and protect clients' trust funds.

The main takeaways for avoiding these common errors include:

• Create and follow a routine.
• Avoid procrastination.
• Understand and comply with Law Society regulations.
  
  

Do you have any additional points to add to this list? Leave your input in the comments! And, if you feel unsure about your firm's bookkeeping, it might be time to consult with a bookkeeping company that understands the legal industry and can ensure your processes are in compliance and optimized for your firm's success.

For most law firms, Fall signals a kickoff for the rest of the business year.

Some law firms have instituted a four-day-in-the-office, return-to-work schedule and will deal with the repercussions while others will remain fully flexible and remote-friendly. Hard charging capitalists will say, “We’ve been in the office every day since it’s been possible to do so and some of us never left.”

While the working world has changed and will continue to evolve with ferocious speed and consequences – Artificial Intelligence, I’m looking at you – the fourth quarter in law firms remains much the same as it always has: madness and maddening.

Madness due to a dearth of business acumen and training, and maddening because of a lack of financial rigour around billing and collection.

Smarten Up

Incredulity was my first reaction while reading Big Law in September Will Raise Volume on Billing and Collections Push. This article explores how law firms’ ability to bill and collect before year end impacts revenues and profitability, and that management often has to ask for pledges, provide presentations, and go door-to-door to motivate lawyers to do it. My second reaction was dismay that, in this day and age, law firm management continues to engage in wheedling, cajoling, and carrot-and-stick persuasion tactics.

For the love of all that’s holy, what century are we in? Why does this practice persist? Is it a factor of the damnable “we’ve always done it this way” mentality? Do lawyers not understand that legal service is a business?

If the definition of insanity is doing the same thing repeatedly and expecting different results, then the all-consuming billing and collection push that happens within many law firms during the fourth quarter is a prime example of lunacy.

Fourth Quarter Madness

It’s said that in football, games are won or lost in the fourth quarter. And that in business, the fourth quarter can make or break your year.

But neither statement is true when strong game plans and business principles are in place, and individuals, teams, and management are dedicated to success and held responsible for outcomes.

Accrued losses in football are not tolerated and usually met with being benched, traded, or fired. Comparatively, accrued losses in law firms are often met with precious little in the way of repercussions that can range from a dismissive shrug to a talking-to.

However, an upshot of the traditional fourth quarter frenzy of billing like crazy while trying to collect monies owing before year end can create needless pressure that results in stress for lawyers and clients, and can damage lawyer-client-law firm relationships.

Run Like a Business

This is why business training and management coaching must be instituted in law firms so that they are better able to – guess what? – run like a business all year long rather than ratchet up stress levels and potentially risk teetering into failure at or after year end.

Part of the problem is that being a lawyer doesn’t always equate to being business smart or management savvy.

Years ago, I was aghast when overhearing a senior business lawyer at a national law firm ask, “What does ‘variance’ mean?”

Monthly measurement of budget against actual, determining variance, and financial forecasting are basic business practices not taught in law schools that prefer to focus on the practice rather than the business of law. And even though business training is provided in other industries, it is not instituted within most law firms or within the legal industry at large.

Why not?

It is very concerning when lawyers lack education in commerce, especially since many of them deal with corporate matters for clients without having a solid grounding – never mind proven experience – in basic business practices and principles.

September Equals Business Strategy

In addition to billing like your life depends on it and politely haranguing clients to pay up before year end, September also signals budget season that can begin as early as August and slog through various death-by-a-thousand-cuts approval stages until the end of November or even mid-December.

Budgets seem to be where most law firms start the annual planning process. This is shortsighted and just plain wrong.

Business strategy is the correct starting point.

Business strategy and/or review needs to happen every year because – if we’ve learned anything since the global pandemic shutdown in March 2020 – the world can change in an instant and what was true 12 months ago may not be true now, or in the future.

This is why any business strategy done two to five years ago is null and void.

The world – and legal service – is changing so fast that strategy on which your business is based must be true to what is happening now and may happen in a span of 12 to 18 months, not two to five years.

Since early September, I have been working on business strategy with a number of law firm clients using methods predicated on successes that are applicable to the legal service sector.

Strategy Development

Prior to entering the legal industry, I spent 17 years in the corporate environment working with and successfully turning around private and publicly listed companies. Three qualifications were essential: 1) Visionary market insight; 2) Astute business acumen; and 3) The ability to chip the beaver off a Canadian nickel.

As a result, my macro strategy development structure goes like this:

Corporate growth objectives with a fixed strategy and measurable profit goals are job one.

Once corporate growth objectives are in place, the annual business strategy is built as a support structure. This means setting business strategies that are reinforced by smart as well as stretch tactics set on strict monthly and quarterly timelines.

Budgets are built to support the business strategy. Outcomes are measured monthly via variance reporting because knowing where ever nickel is spent or will be is critical to financial forecasting and execution of deliverables.

Accountability for success of the structure and enforcement of results are an expectation. Tight diligence to the process and its steps enables reaching and often exceeding growth objectives.

While every law firm’s situation is unique with objectives, strategies and tactics that require customization, this is the outline of my proven strategy development method.

It’s tough, gritty and exacting. I’ve used it forever because it works every time.

Profitability is Paramount

Business is about profit margins and return on capital investment that enables further and future growth. It is not a fixation on top line revenue, nor is there such as thing as neutral. If profits remain flat, you are falling behind. Without swift course correction, your business will slide and then spiral downward.

This happened to a number of law firms during the pandemic. Now, due to concerns such as stalled deals, uncollected fees, and write-downs, it’s fair to expect that there will be law firms that fall into financial distress. This will manifest in restructuring and mergers at best, and failures at worst.

This is why training lawyers on strong business and financial practices, instituting regular billing cycles and rigorous financial hygiene, and providing crystal-clear directives with accountabilities for success along with repercussions for failure enables better business for law firms, clients, and the legal service market as a whole.

The Bottom Line

With evolutionary changes to how, why, and where we work, now is when law firms worldwide have a golden opportunity to reinvent themselves and their business practices in order to position for better long term solvency and cumulative growth.

So, my bottom line and best advice: Legal service is a business. Smarten up and run it that way.

In Part 1 we outlined why Information governance (IG) is becoming increasingly important to law firms, both to mitigate risk and help with the achievement of business objectives. In this concluding part, Chris Giles looks sector-wide and Chris Hockey uses his experience of implementing IG in a mid-sized US firm to suggest a practical template for implementing IG – from policy and steering committee to procedures and enforcement.

What does best practice information governance (IG) look like in law firms?  It should probably include setting clear objectives, defining roles and responsibilities, and establishing standards and policies that govern how data is captured, stored, processed, shared and protected within the firm. It will likely include data quality management as well as a focus on compliance.

In practice, for Chris Hockey at his prior firm, the twin mechanisms he used to get IG off the ground in the firm were the creation of an overarching IG policy and the formation of a steering committee. The information governance policy establishes the fundamental high-level principles of IG at the firm, sets responsibilities and reporting guidelines for committee members and other personnel, and provides a framework for IG across the firm. It also references the key components of IG for a firm, including matter lifecycle management, information security and incident management.  

Thereafter, the successful IG strategy was underpinned by the firm’s Privacy and Security Committee which served as its IG steering committee. It had 12 members, including the COO and the General Counsel plus rotating representatives of all the firm’s different practice groups who also reflect different levels and locations. The composition of the steering committee is very important. As Chris Hockey explains: “If we can get the representative attorneys on the committee behind our ideas and efforts and really explain the challenges to them, it’s much easier for change to happen because they will take it to their peers.”

Making change happen

Firms will do well to nurture a data-aware culture across the firm wherein data’s role and importance is understood, and people take ownership and care about data.

Meanwhile the performance of processes and procedures needs to be enforced and monitored. To a large extent this is down to resources: people can monitor compliance, plus systems can be introduced that help drive compliance. For instance, Hockey’s former firm introduced Microsoft OneDrive which steered everyone to save matter material where it can be found, rather than create their own folders. Chris Hockey also prioritized the bigger issues. For instance, a big pain point used to be that departing attorneys hadn’t always filed all their emails. Then a new control was put in place making sure all emails were filed before anyone leaves. 

It’s also the case that if data is captured well in upstream systems (e.g. business intake), it should remain accurate and complete as it journeys through subsequent systems (e.g. iManage and time and billing systems), so it’s worth putting an effort into ensuring that initial data capture is high quality. To that end, Chris Hockey put a lot of focus on what he calls “upstream thinking”, working with the new business intake team on the controls that could be put in place. For example, they looked at implementing drop down options menus to replace certain free text boxes in online forms. This takes some elements of choice out of form filling and increases accuracy.

Not one and done

Finally, IG implementation doesn’t happen overnight and there will always be the need to revisit policies, processes, procedures and controls to check on performance and update them to reflect the firm’s changing priorities and alterations in the external environment, including in technology and regulation.

Chris Giles believes that it’s a tougher journey for smaller firms, who don’t necessarily have the capacity or resources in-house to tackle all the elements of IG. “I think smaller firms will look to the big firms for a sort of template and thought leadership and to help them understand some of the challenges” he says.

Chris Hockey agrees, noting that his former firm was relatively mature in IG practice. “I think larger law firms have been doing this for a longer time, and they have the resource behind it,” he says, “but for everyone else these conversations are going to be very dependent on the size of firm and on who is bringing up IG between the firm management saying ‘we need it’ and the CIO. If it’s the latter, it sometimes takes a bit of a sales pitch to convince the lawyers to get on board.”

After that it’s about instituting policy and procedures and building cooperation and synergy between all parts of the firm to ensure that IG is inclusive, comprehensive and consistent throughout. This is what develops a more efficient, effective and resilient law firm.

To find out more watch our ILTA Masterclass where Chris Hockey, outlined the community approach he’s taken in the past, while Chris Giles of Legal RM supplied a sector-wide perspective. Click here to watch on demand.

Steer clear of these pitfalls if you want to ensure your profitability.

The legal industry has a profitability problem. Thomson Reuters reports that in 2022, average profit-per-lawyer fell by 6.7% across all law firms. While some firms saw less of a decrease than others, reduced profits are still reduced profits. As this trend continues, it’s important for law firms to audit their operations and ensure they can remain profitable.

So where is your firm losing money? Here are just a few of the money mistakes that could be impacting your profitability.

Hiring Too Fast – Or Too Slow

Every growing law firm needs fresh blood in order to complete client work in a timely fashion and ensure the firm’s administrative needs are met. And with the legal industry facing a global talent shortage, it’s tempting to want to either snap up every new hire you can find, or throw your hands in the air and stop looking for new employees altogether.

But both overly-aggressive and overly-passive hiring strategies come with pitfalls. When you hire too fast and too early, your new hires won’t have access to the information and infrastructure they need in order to succeed. That means you’ll have to spend extra money on remedial training and new equipment. Even if you would’ve had to spend that money anyway, forcing an expense before it’s needed can throw a wrench into your budget. Before hiring a new attorney, paralegal, or support staff member, you’ll want to ensure you have the capacity to train them and a steady stream of work to send them.

Hiring too slow, however, also presents problems. If you wait too long to hire new staff members, your firm will reach its capacity for taking on new work – meaning you won’t be able to keep up with demand for your services. Your existing team members will burn themselves out as they try to stretch their capacity for work, which will result in less output and fewer billable hours completed.

Keeping your firm as profitable as possible means developing a system for knowing exactly when to hire. This could be as simple as hiring when each attorney is working on a certain number of client files, or it could be more intuitive. Try coming up with a hiring rubric to determine the conditions that would necessitate a new hire.

Having an Excessive Entertainment Budget

The legal industry is a high-stakes and high-pressure place to work, and like all high-pressure jobs, your team members deserve to be able to blow off some steam. Moreover, it’s become industry standard to wine-and-dine premium clients as a marketing and client retention tactic. That means every law firm needs to budget for both staff and client entertainment.

However, it’s easy for the “work hard, play hard” lifestyle to err into excesses, both on the work front and on the play front. If your firm is overspending on client and staff entertainment – buying dinners out every day, springing for premium hockey tickets and expensive bottles of wine on the regular – you’re cutting into your profit margin and pulling money away from core areas of the business that you could be using to spur growth.

Take some time to audit your entertainment budget. How much of a return are you generating on your investment? What’s your average annual income per client, and how does that compare to your annual entertainment expenses on a per-client basis? If the wine-and-dine strategy is pulling too much revenue away from your core business areas, it could be time to take off the entertainer’s hat and put on an accountant’s visor.

Focusing on Billable Hours Instead of Billable Value

Law firms have been billing hourly for decades. But hourly billing presents several problems for law firms. First and foremost, hourly billing incentivizes overwork and leads to burnout. When your firm bills hourly, it places pressure on your attorneys and paralegals to work longer hours than is healthy. And when your team burns out, that means they take more sick days, they make more mistakes, and they become disenchanted with your firm.

Hourly billing also penalizes efficiency; the faster and more efficient your team is, the less money you make.

That’s why focusing on billable value – and transitioning to flat-fee billing (or other alternative fee arrangements) – is good for your firm. Flat fee arrangements can help to create an economy of scale by productizing your services. Plus, it ties your value to your skill and expertise instead of your time.

Alternative-fee pricing also enables your firm to take advantage of time-saving technology to make more money in less time. Speaking of technology…

Failing to Invest in New Technology

This is perhaps the most substantial money mistake a law firm could make. Emerging technologies are making it possible for law firms to save time, cut costs, and boost revenue by automating many of the tasks that were previously performed by a person. Whether it’s a document automation and entity management platform, a digital bookkeeping app, a practice management suite, or something else entirely, there’s no shortage of technologies that can help your firm save time on non-billable work and instead focus on client matters.

By failing to invest in this new technology, your firm runs the risk of inefficiency. Slow and inefficient manual processes cost your firm money that doesn’t need to be spent – money that could be put to use growing your firm.

Ensuring a healthy profit margin is every law office manager’s responsibility. Whether it’s auditing the budget, ensuring responsible hiring practices, creating alternative fee arrangements, or investing in time-saving new technologies, there’s no shortage of things you can do to improve your firm’s profitability and look great in front of upper management.

Learn more at https://appara.ai.