Brooklyn Bar Association highlights detailed business practices, supportive firm culture as keys to firm success

LEAP’s Bill Sansone, a CPA and law firm consultant, argued that though law firms’ core assets are people and talent, they ultimately need to follow the basic accounting and management principles that businesses share. The presentation covered the mutual benefit that business practices have with maintaining top-notch legal skills and personnel.

The presentation tackled a number of good business practices such as budget planning, performance tracking, compliance and risk management, data usage, marketing strategy, and leadership.

Sansone said cash flow is one primary area small law firms should work on to attain success. Cash flow, the total amount of money entering and leaving the law firm’s bank, matters more than revenue, he argued.

Since the common practice in law firms is to bill later and wait for clients to pay, lawyers need to have a disciplined practice about tracking when money will actually arrive.

“If you talk to any small law firm, the number one thing is cash flow, right? That’s really what they’re all struggling with. What I tell most really small firms, they have to look at their billing cycle and their cash flow cycle.  Because that really affects their profitability from day one, right?” Sansone said. “You really have to make sure you’re getting your time in, you’re getting your bills done, and what the collection effort looks like?”

Financial metrics for law firms to use

Two key metrics to track are utilization —how much of an attorney’s available time is spent on billable work — and realization — how much of that billed work is actually charged to the client and collected.

Law firms depend on business practices to turn lawyers’ time and expertise into revenue. If a firm does not track how work is billed and collected, it can still lose money. Sansone said that this principle applies across all firms solo, small, or large—and that they should use basic business practices such as budgets, performance tracking, clear procedures, marketing, and succession planning.

Sansone outlined the importance of using budgets and forecasts, which set expected income and expenses for the year and update those expectations when the firm gains or loses clients, hires staff, or faces new costs.

He also suggested billing consistently and collecting quickly. Clear engagement letters, regular billing schedules, detailed invoices, and prompt follow-up on unpaid bills improve cash flow.

Maintaining a supportive workplace

But he also stressed the business impacts of a supportive workplace. 

“People are the primary assets of any law firm, making talent management an essential business function rather than a human resource task,” Sanson said. “Effective talent management begins with clear role definitions and expectations at every level of the firm — whether you’re an admin person all the way up to attorney, partner, managing partner. People perform best when they understand how their success is measured.”

High turnover hurts client relationships, increases hiring costs and burdens the remaining staff, Sansone said.

A workplace culture where staff is supported is also an important business practice. Mentoring, onboarding practices, consistent recognition and a respectful workplace help retain good employees and build a stronger firm culture, he said.

A healthy culture means people work together, support one another, and understand the firm’s values. A toxic culture leads to burnout, departures, and weaker performance.

“It’s important that it comes from the leadership, right?” Sansone said. “Mainly the managing partner here sets the tone for all that.”