Finance and Profitability

Profitability results from the successful interaction of some key activities and imperatives

Many experienced professional firm administrators would argue that profitability should not be the principal objective of firms but rather that profitability should result naturally from other key aspects of law firm management being done right. There may be something in this approach but it is important that sound financial management be seen as a strategic issue for the organisation and not simply another administrative support function. This will ensure that it gets the right focus and support, but critically, that systems which are implemented will be adhered to. Yet again, it is not just about systems and processes but attitudes and behaviours around them that matter.

The issues that firms address in this area include:

• Clarity around the key financial drivers for the firm and for each division.
• Training and behaviours around the activities which contribute to success or failure under each of the financial drivers.
• Clarity around the many variables which positively and negatively impact those financial drivers.
• Clear reporting systems which, on a daily basis, and on a page, clearly show what is going on at the individual, team, division and firm level.
• Optimum capital structures for a firm.

Size and production does not always translate into profitability; there are many factors on both the income and expenditure side of organisations which directly impact profitability and they are often inter-related. Operational issues invariably have a significant positive or negative impact and the implications of this to the organisation must be understood.

"In this competitive age it is no longer enough to follow the traditional path of establishing budgets and measuring performance against these each month. Leaders and senior management need to know at any time of any day how each individual, team and division is performing. Each of those fee earners also need to be fully educated and constantly aware of both the positive and negative implications of their and their team members' behaviours and performance. This applies in regard to each and every one of the many key financial performance indicators and variables which are relevant to running a successful professional services business today. A strong sense of responsibility and accountability is a sine qua non in this area of an organisation's performance." 
Sean Larkan, Chairman, Authentikos

Back to Top