De-mystifying Internal Administration for Solos and Small Firms

Large law firms usually have in-house administrators ensuring their systems operate as they should. Small firms and solo practitioners, on the other hand, often lack this luxury and consequently are not as efficiently organized as their larger counterparts. The need for administrative support within small firms becomes apparent when one realizes that most attorneys dread administrative tasks. They rightly determine that the best use of their time is through the performance of billable client services.

Vicious Cycles

Since administration erodes billable time, attorneys delegate administrative duties to their often-overworked secretaries, who in turn add it to their own to-do lists. These duties are then postponed until “free time” is available, resulting in outdated, unreliable, and possibly meaningless work-in-process, accounts receivable, cash and general ledger balances. Factor in the use of unrelated software applications, and the office could be in a state of workable disorganization. The direct costs associated with this disorganization ' lost time, inefficient billings or collections, and additional administrative personnel needed to perform redundant tasks – can easily accumulate into tens of thousands of dollars per year. A quick calculation of one lost billable hour per week (at an average billable rate of $150/hr), alone yields over $7500 of lost income per year.

Firm administration generally addresses the routine and timely operation of the firm in areas such as recording and billing client work in process, applying client receipts against outstanding invoices, processing client costs and accounts payable, follow-up and collection of delinquent account receivables, maintaining and coordinating current versions of operating systems and application software, and backing up and securely storing copies of the firms data. Administration properly performed, regardless of the size of the firm, results in the efficient conversion of services rendered to cash received, accurate cash, accounts receivable, and work-in-process balances, and meaningful management reporting.

Breaking the Cycle

Within the small firm, the most important aspect of law firm administration is the correct use of law practice management software as well as an understanding of what type of administrative tasks you want to perform versus which ones you may consider outsourcing to a qualified third party. Ideally, you should use a seamlessly integrated application, allowing a transaction to be entered once then posted throughout as needed.

Let's take a look at a simple, real world example of inefficient administration: The attorney or secretary manually records a calendar transaction. Once the calendared transaction is completed, the attorney records this transaction on a paper time sheet. It may be missing required information, such as the client or matter code, which is then passed along to the secretary for completion. Thereafter, the completed transactions are batched together and entered into a computerized billing system. After processing, the attorney needs to review the entered transaction to ensure that it was posted to the correct client and matter without spelling errors. In this example, the same time transaction was processed five times ' the recording of the initial calendar transaction, re-recording the completed calendared transaction by the attorney on a manual time sheet, completion and review of this time by the secretary, processing by the billing clerk, and lastly the final review by the attorney.

The correct use of software applied toward the processing of this transaction would involve the following: The attorney or the secretary enters the original calendar transaction into the system. Once the calendared transaction's services are rendered, the attorney simply acknowledges the completion and the transaction is then automatically transferred to the clients work-in-process account for future invoicing. The attorney has eliminated multiple individuals processing the same transaction and streamlined the review process by maintaining control over the assignment of the appropriate client and matter codes as well as for the spelling of the individuals' names.

The same holds true within other areas, such as the processing of client receipts. Attorneys must complete the process as it is occurs, rather than perform piecemeal functions over time. To correctly process receipts, they must be completely posted through the system before being sent to the bank. As the deposit ticket is being prepared, the receipts should be applied against the outstanding invoices and recorded within the general ledger. Use of an integrated system will eliminate redundant tasks and transposition errors often associated with multiple standalone systems.

Disbursement checks must be handled similarly. Manual checks should never be prepared since they are often not recorded. Use of an integrated system will automatically print the check, post client costs to the clients work-in-process account, decrease the firm's cash balance, record the expense in the general ledger, and add the check to the bank reconciliation program.

Correct use of the firm's existing law practice management application itself can easily save the attorney several hours of non-billable administrative time per week by directly decreasing the attorney's non-billable time or eliminating tasks delegated to administrative staff.

The Internet

Internet processing allows small firms to perform administrative tasks from anywhere, at any time, without installing additional communication software or requiring your office computer to remain operational when you're not on the premises. The attorney can maintain his or her calendar and perform administrative tasks while in the office, but are no longer tied to that specific computer. If it's more convenient, you have complete access and can perform all desired tasks from home or on the road.

Web Advantages

• Technical Support: Utilization of an Internet application offloads all technical concerns to an application service provider (ASP) who maintains the application. Enhancements and updates are automatically available upon signing on without any installation or conversion effort needed by the firm.
• Data Security: Locally maintained applications require the back up of your system regularly and the storage of these backups securely off site. Internet processing allows the delegation of that responsibility to an ASP who uses state-of-the-art automated off-site backup.
• Virtual Administration (VA): You can authorize, through the Internet, the regular review your account by a trained professional who provides the services of an in-house administrator at a fraction of the cost. Typical virtual administration functions include:
• • Reconciliation of Bank Accounts: After checking your statements for reasonability, send them to your virtual administrator for reconciliation.
  • Review of Accounts Receivable (A/R) and Work-In-Process (WIP): The VA will review outstanding WIP balances to make sure that rates are correctly assigned and WIP is being billed in a timely manner. A/R balances are also checked and electronic reminder statements may be generated for delinquent clients.
  • Review of General Ledger (GL): The VA will make sure your general ledger is balanced and seems reasonable. For example, your asset and expense accounts should have positive balances whereas the other offsetting accounts should have credit (negative) balances. Other errors may include mispostings, such as automobile expenses being posted to an insurance account. The VA can address and correct these types of errors on a regular monthly basis maintaining an accurate general ledger. At year-end, they can post the required adjusting entries and close out the prior year's activity.
  • Budget vs. Actual Performance: This planning feature represents a little used but important aspect of law firm management. It allows you to develop performance expectations that can then be compared to actual performance.

The efficient performance of firm administration often determines the profitability and productivity of your practice. When performed correctly, firm administration requires very little time ' allowing the lawyer to redirect the resources of the firm to billable client services, professional development, or the development of new business. When properly implemented, it's possible for a small firm to recapture 5-10 hours of previously non-billable time per week, potentially translating into tens of thousands of dollars per year. Taking advantage of Internet processing capabilities offers great advantages to the attorney that were unavailable just a couple of years ago.

Large law firms usually have in-house administrators ensuring their systems operate as they should. Small firms and solo practitioners, on the other hand, often lack this luxury and consequently are not as efficiently organized as their larger counterparts. The need for administrative support within small firms becomes apparent when one realizes that most attorneys dread administrative tasks. They rightly determine that the best use of their time is through the performance of billable client services.

Vicious Cycles

Since administration erodes billable time, attorneys delegate administrative duties to their often-overworked secretaries, who in turn add it to their own to-do lists. These duties are then postponed until “free time” is available, resulting in outdated, unreliable, and possibly meaningless work-in-process, accounts receivable, cash and general ledger balances. Factor in the use of unrelated software applications, and the office could be in a state of workable disorganization. The direct costs associated with this disorganization ' lost time, inefficient billings or collections, and additional administrative personnel needed to perform redundant tasks – can easily accumulate into tens of thousands of dollars per year. A quick calculation of one lost billable hour per week (at an average billable rate of $150/hr), alone yields over $7500 of lost income per year.

Firm administration generally addresses the routine and timely operation of the firm in areas such as recording and billing client work in process, applying client receipts against outstanding invoices, processing client costs and accounts payable, follow-up and collection of delinquent account receivables, maintaining and coordinating current versions of operating systems and application software, and backing up and securely storing copies of the firms data. Administration properly performed, regardless of the size of the firm, results in the efficient conversion of services rendered to cash received, accurate cash, accounts receivable, and work-in-process balances, and meaningful management reporting.

Breaking the Cycle

Within the small firm, the most important aspect of law firm administration is the correct use of law practice management software as well as an understanding of what type of administrative tasks you want to perform versus which ones you may consider outsourcing to a qualified third party. Ideally, you should use a seamlessly integrated application, allowing a transaction to be entered once then posted throughout as needed.

Let's take a look at a simple, real world example of inefficient administration: The attorney or secretary manually records a calendar transaction. Once the calendared transaction is completed, the attorney records this transaction on a paper time sheet. It may be missing required information, such as the client or matter code, which is then passed along to the secretary for completion. Thereafter, the completed transactions are batched together and entered into a computerized billing system. After processing, the attorney needs to review the entered transaction to ensure that it was posted to the correct client and matter without spelling errors. In this example, the same time transaction was processed five times ' the recording of the initial calendar transaction, re-recording the completed calendared transaction by the attorney on a manual time sheet, completion and review of this time by the secretary, processing by the billing clerk, and lastly the final review by the attorney.

The correct use of software applied toward the processing of this transaction would involve the following: The attorney or the secretary enters the original calendar transaction into the system. Once the calendared transaction's services are rendered, the attorney simply acknowledges the completion and the transaction is then automatically transferred to the clients work-in-process account for future invoicing. The attorney has eliminated multiple individuals processing the same transaction and streamlined the review process by maintaining control over the assignment of the appropriate client and matter codes as well as for the spelling of the individuals' names.

The same holds true within other areas, such as the processing of client receipts. Attorneys must complete the process as it is occurs, rather than perform piecemeal functions over time. To correctly process receipts, they must be completely posted through the system before being sent to the bank. As the deposit ticket is being prepared, the receipts should be applied against the outstanding invoices and recorded within the general ledger. Use of an integrated system will eliminate redundant tasks and transposition errors often associated with multiple standalone systems.

Disbursement checks must be handled similarly. Manual checks should never be prepared since they are often not recorded. Use of an integrated system will automatically print the check, post client costs to the clients work-in-process account, decrease the firm's cash balance, record the expense in the general ledger, and add the check to the bank reconciliation program.

Correct use of the firm's existing law practice management application itself can easily save the attorney several hours of non-billable administrative time per week by directly decreasing the attorney's non-billable time or eliminating tasks delegated to administrative staff.

The Internet

Internet processing allows small firms to perform administrative tasks from anywhere, at any time, without installing additional communication software or requiring your office computer to remain operational when you're not on the premises. The attorney can maintain his or her calendar and perform administrative tasks while in the office, but are no longer tied to that specific computer. If it's more convenient, you have complete access and can perform all desired tasks from home or on the road.

Web Advantages

• Technical Support: Utilization of an Internet application offloads all technical concerns to an application service provider (ASP) who maintains the application. Enhancements and updates are automatically available upon signing on without any installation or conversion effort needed by the firm.
• Data Security: Locally maintained applications require the back up of your system regularly and the storage of these backups securely off site. Internet processing allows the delegation of that responsibility to an ASP who uses state-of-the-art automated off-site backup.
• Virtual Administration (VA): You can authorize, through the Internet, the regular review your account by a trained professional who provides the services of an in-house administrator at a fraction of the cost. Typical virtual administration functions include:
• • Reconciliation of Bank Accounts: After checking your statements for reasonability, send them to your virtual administrator for reconciliation.
  • Review of Accounts Receivable (A/R) and Work-In-Process (WIP): The VA will review outstanding WIP balances to make sure that rates are correctly assigned and WIP is being billed in a timely manner. A/R balances are also checked and electronic reminder statements may be generated for delinquent clients.
  • Review of General Ledger (GL): The VA will make sure your general ledger is balanced and seems reasonable. For example, your asset and expense accounts should have positive balances whereas the other offsetting accounts should have credit (negative) balances. Other errors may include mispostings, such as automobile expenses being posted to an insurance account. The VA can address and correct these types of errors on a regular monthly basis maintaining an accurate general ledger. At year-end, they can post the required adjusting entries and close out the prior year's activity.
  • Budget vs. Actual Performance: This planning feature represents a little used but important aspect of law firm management. It allows you to develop performance expectations that can then be compared to actual performance.

The efficient performance of firm administration often determines the profitability and productivity of your practice. When performed correctly, firm administration requires very little time ' allowing the lawyer to redirect the resources of the firm to billable client services, professional development, or the development of new business. When properly implemented, it's possible for a small firm to recapture 5-10 hours of previously non-billable time per week, potentially translating into tens of thousands of dollars per year. Taking advantage of Internet processing capabilities offers great advantages to the attorney that were unavailable just a couple of years ago.