Career Paths for Law Firm Accounting-Financial Professionals

In part one of this two-part series [see the June 2005 A&FP edition], we discussed the pathways available for law firm administrative staff with finance and accounting competence to evolve into consulting roles within the legal services industry. Part two focuses on avenues available for individuals with strong skills in these functional areas to advance within their own or other firms.

Administrators often move to the legal field from an accounting or human resources background; typically they are hired to address a firm's defined needs within those functional areas. Some administrators advance within their specialty, but a few advance to a generalist role as the firm's senior legal administrator or day-to-day business affairs manager. In moving to a generalist role, individuals from the financial reporting side of the house have a distinct advantage: they already comprehend the firm's critical financial affairs, often more deeply than many of the attorneys within the ownership ranks.

Numerous component skills will contribute to your advancement, but many of them share a common theme: helping lawyers work “smarter, not harder.”

Enhanced Opportunities for
Law Firm Administrators

In structuring their management teams, law firms are increasingly shifting to a more traditional business model. This trend creates opportunities for individuals to advance to Chief Financial Officer and Chief Operating Officer positions, with responsibilities similar to those of CFOs and COOs in other industries.

Moving along a career path that qualifies you to ascend to a CFO role can be a precursor to assuming a COO role, which has broad-based responsibility for the day-to-day management of the enterprise. In a law firm, the COO is essentially equivalent to an Executive Director or other similar titles traditionally used for the firm's chief legal administrator. Regardless of the title, this position works in conjunction with the managing partner (who serves as the firm's CEO) and the firm's executive committee or board of directors.

Inventory Your Skills

To advance their careers, law firm employees with bookkeeping-accounting training and experience should start by assessing their skill sets in finance and general management concepts.

One readily available source of guidance for this self assessment is the Core Competency study by the Association of Legal Administrators, reported on at www.alanet.org/education/analysis.html. Conducted in 1995 and updated in July 2000, this study ranked the importance of 102 functional and interpersonal traits for success in legal administrative positions, in firms of all sizes. One illuminating chart shows how Managing Partners ranked a subset of 55 traits.

Accounting and Financial Skills

In our extensive work with law firms seeking administrative talent, we find that most firms especially value individuals who can enhance the financial side of the firm. Most attorneys are too busy, and in many instances lack the training, to stay on top of the firm's financial affairs on a day-to-day, week-to-week basis. This creates a great opportunity for individuals who can step forward to monitor and interpret the financial trends that drive the profitability of the enterprise ' and then recommend timely focused responses to those trends.

The best single trait for developing this competence is having a thirst for working knowledge of all aspects of the firm's financial management. This entails being keenly aware of what the firm's financial statements and management reports convey, and seeking extensive involvement in the firm's financial decisions.

Of particular relevance, therefore, is the ALA survey's ranking of financial management skill areas deemed important for success in law firm financial management. For details of the skill descriptions and the average numerical ratings of respondents, see the survey report on the ALA survey site; but here is a ranked summary of the most important skill areas:

• Develop and monitor budgets;
• Analyze financial condition;
• Analyze short- and long-term financial position;
• Project and monitor cash flow requirements;
• Implement and maintain internal financial controls;
• Analyze profitability;
• Monitor billable and non-billable hours;
• Manage billing and collection processes;
• Prepare financial statements and management reports;
• Manage assets;
• Develop and maintain compensation systems;
• Establish and maintain banking relationships;
• Coordinate relationships with outside accountants;
• Maintain controls over escrow/trust funds;
• Develop and maintain partner/ shareholder accounting; and
• Implement and maintain client intake procedures.

(Reprinted with permission from 'The Association of Legal Administra-tors Competency-Based Education Job/Needs Analysis,' viewable on the Web at www.alanet.org/education/analysis.html and published by the Association of Legal Administrators, Lincolnshire, IL. All rights reserved.)

Technical Skills

Financially knowledgeable individuals who have additionally mastered the application of technology have a further competitive advantage. That's so because much of the financial success of a professional service firm is tied to its ability to properly leverage technological resources. Even small and mid-sized firms now have affordable access to cutting-edge technology, enabling them to compete with larger firms. Technology is therefore a critical part of your personal knowledge base.

Technology is both a front- and back-office issue. A law firm can reap great financial advantages by properly equipping its practitioners and those who support them with access to the most current and appropriate hardware and software tools. Financially successful firms are also finding it increasingly important to support their back offices with state-of-the-art integrated accounting systems and tools to leverage the knowledge base of the firm and its practitioners.

(Editor's Note: The upcoming August/September 2005 special edition of A&FP has as its theme the leveraging of law firm accounting-financial data by Business Intelligence systems.)

Communication and Managerial Skills

The ALA competency survey also showed that strong oral and written communication skills, together with a mastery of interpersonal skills, are critical to career advancement. To be an effective communicator, you must have credibility and be able to influence others by presenting facts, formulating arguments and offering alternatives. Importantly, you must have a presentation style that works within your firm's culture. Shortcom-ings in any of the preceding areas can impede career growth just as effectively as a lack of financial or technical knowledge.

Other qualities that managing partners typically look for (or should look for) in finance professionals include:

• Strategic thinking;
• Analytical ability;
• Leadership;
• Objectivity; and
• Creativity.

Numerous educational resources are available for improving financial management competence. Most local community colleges offer adult education courses in accounting and financial management. The ALA offers an annual Financial Management Conference, which is an excellent source of material and cutting-edge information. Educational conferences specifically targeted to CFOs and Controllers are offered by Glasser LegalWorks and Northstar Conferences.

The Certified Legal Manager (CLMSM) credential, bestowed by the Association of Legal Administrators, requires candidates to pass a rigorous examination that includes financial management concepts and principles. The CLM is emerging as a well-recognized designation for individuals seeking advancement within the legal services arena. For details on the CLM credential or the ALA Financial Management Conference, check the ALA Web site (http://www.alanet.org/).

Possessing an MBA or similar business degree, or experience as a Certified Public Accountant, can also enhance an individual's standing for careers in this area. For further discussion of educational opportunities, see our May 2004 A&FP article titled “Advanced Professional Education for Law Firm Managers.”

Concluding Thoughts

In summary, the following outline can serve as a checklist for individuals to do a quick self-assessment of their experience and level of competence in the skill areas required to advance within a firm:

Controllership

• Financial reporting.
• Cash flow management.
• General accounting.
• Internal controls.

Financial Planning and Analysis

• Budgeting.
• Multiple levels of profitability analysis.
• Financial planning and forecasting.

Technology

• Cost/benefit analysis.
• Workflow analysis.
• Process improvement; operational efficiencies.
• Managing financial systems.

Communication

• Presentation methods and styles.
• Oral and written communication skills.
• Credibility and persuasiveness.

Other

• General management experience.
• Knowing business and practice areas.
• Local, national and global awareness.

Since law firms are complex and challenging business enterprises, well-run firms recognize the need for talented professionals to help their firms run smoothly and efficiently. A career in law firm management can therefore be very rewarding. Perhaps some day the profession will further recognize the contributions of professional administrators by opening the doors to ownership.

In part one of this two-part series [see the June 2005 A&FP edition], we discussed the pathways available for law firm administrative staff with finance and accounting competence to evolve into consulting roles within the legal services industry. Part two focuses on avenues available for individuals with strong skills in these functional areas to advance within their own or other firms.

Administrators often move to the legal field from an accounting or human resources background; typically they are hired to address a firm's defined needs within those functional areas. Some administrators advance within their specialty, but a few advance to a generalist role as the firm's senior legal administrator or day-to-day business affairs manager. In moving to a generalist role, individuals from the financial reporting side of the house have a distinct advantage: they already comprehend the firm's critical financial affairs, often more deeply than many of the attorneys within the ownership ranks.

Numerous component skills will contribute to your advancement, but many of them share a common theme: helping lawyers work “smarter, not harder.”

Enhanced Opportunities for
Law Firm Administrators

In structuring their management teams, law firms are increasingly shifting to a more traditional business model. This trend creates opportunities for individuals to advance to Chief Financial Officer and Chief Operating Officer positions, with responsibilities similar to those of CFOs and COOs in other industries.

Moving along a career path that qualifies you to ascend to a CFO role can be a precursor to assuming a COO role, which has broad-based responsibility for the day-to-day management of the enterprise. In a law firm, the COO is essentially equivalent to an Executive Director or other similar titles traditionally used for the firm's chief legal administrator. Regardless of the title, this position works in conjunction with the managing partner (who serves as the firm's CEO) and the firm's executive committee or board of directors.

Inventory Your Skills

To advance their careers, law firm employees with bookkeeping-accounting training and experience should start by assessing their skill sets in finance and general management concepts.

One readily available source of guidance for this self assessment is the Core Competency study by the Association of Legal Administrators, reported on at www.alanet.org/education/analysis.html. Conducted in 1995 and updated in July 2000, this study ranked the importance of 102 functional and interpersonal traits for success in legal administrative positions, in firms of all sizes. One illuminating chart shows how Managing Partners ranked a subset of 55 traits.

Accounting and Financial Skills

In our extensive work with law firms seeking administrative talent, we find that most firms especially value individuals who can enhance the financial side of the firm. Most attorneys are too busy, and in many instances lack the training, to stay on top of the firm's financial affairs on a day-to-day, week-to-week basis. This creates a great opportunity for individuals who can step forward to monitor and interpret the financial trends that drive the profitability of the enterprise ' and then recommend timely focused responses to those trends.

The best single trait for developing this competence is having a thirst for working knowledge of all aspects of the firm's financial management. This entails being keenly aware of what the firm's financial statements and management reports convey, and seeking extensive involvement in the firm's financial decisions.

Of particular relevance, therefore, is the ALA survey's ranking of financial management skill areas deemed important for success in law firm financial management. For details of the skill descriptions and the average numerical ratings of respondents, see the survey report on the ALA survey site; but here is a ranked summary of the most important skill areas:

• Develop and monitor budgets;
• Analyze financial condition;
• Analyze short- and long-term financial position;
• Project and monitor cash flow requirements;
• Implement and maintain internal financial controls;
• Analyze profitability;
• Monitor billable and non-billable hours;
• Manage billing and collection processes;
• Prepare financial statements and management reports;
• Manage assets;
• Develop and maintain compensation systems;
• Establish and maintain banking relationships;
• Coordinate relationships with outside accountants;
• Maintain controls over escrow/trust funds;
• Develop and maintain partner/ shareholder accounting; and
• Implement and maintain client intake procedures.

(Reprinted with permission from 'The Association of Legal Administra-tors Competency-Based Education Job/Needs Analysis,' viewable on the Web at www.alanet.org/education/analysis.html and published by the Association of Legal Administrators, Lincolnshire, IL. All rights reserved.)

Technical Skills

Financially knowledgeable individuals who have additionally mastered the application of technology have a further competitive advantage. That's so because much of the financial success of a professional service firm is tied to its ability to properly leverage technological resources. Even small and mid-sized firms now have affordable access to cutting-edge technology, enabling them to compete with larger firms. Technology is therefore a critical part of your personal knowledge base.

Technology is both a front- and back-office issue. A law firm can reap great financial advantages by properly equipping its practitioners and those who support them with access to the most current and appropriate hardware and software tools. Financially successful firms are also finding it increasingly important to support their back offices with state-of-the-art integrated accounting systems and tools to leverage the knowledge base of the firm and its practitioners.

(Editor's Note: The upcoming August/September 2005 special edition of A&FP has as its theme the leveraging of law firm accounting-financial data by Business Intelligence systems.)

Communication and Managerial Skills

The ALA competency survey also showed that strong oral and written communication skills, together with a mastery of interpersonal skills, are critical to career advancement. To be an effective communicator, you must have credibility and be able to influence others by presenting facts, formulating arguments and offering alternatives. Importantly, you must have a presentation style that works within your firm's culture. Shortcom-ings in any of the preceding areas can impede career growth just as effectively as a lack of financial or technical knowledge.

Other qualities that managing partners typically look for (or should look for) in finance professionals include:

• Strategic thinking;
• Analytical ability;
• Leadership;
• Objectivity; and
• Creativity.

Numerous educational resources are available for improving financial management competence. Most local community colleges offer adult education courses in accounting and financial management. The ALA offers an annual Financial Management Conference, which is an excellent source of material and cutting-edge information. Educational conferences specifically targeted to CFOs and Controllers are offered by Glasser LegalWorks and Northstar Conferences.

The Certified Legal Manager (CLMSM) credential, bestowed by the Association of Legal Administrators, requires candidates to pass a rigorous examination that includes financial management concepts and principles. The CLM is emerging as a well-recognized designation for individuals seeking advancement within the legal services arena. For details on the CLM credential or the ALA Financial Management Conference, check the ALA Web site (http://www.alanet.org/).

Possessing an MBA or similar business degree, or experience as a Certified Public Accountant, can also enhance an individual's standing for careers in this area. For further discussion of educational opportunities, see our May 2004 A&FP article titled “Advanced Professional Education for Law Firm Managers.”

Concluding Thoughts

In summary, the following outline can serve as a checklist for individuals to do a quick self-assessment of their experience and level of competence in the skill areas required to advance within a firm:

Controllership

• Financial reporting.
• Cash flow management.
• General accounting.
• Internal controls.

Financial Planning and Analysis

• Budgeting.
• Multiple levels of profitability analysis.
• Financial planning and forecasting.

Technology

• Cost/benefit analysis.
• Workflow analysis.
• Process improvement; operational efficiencies.
• Managing financial systems.

Communication

• Presentation methods and styles.
• Oral and written communication skills.
• Credibility and persuasiveness.

Other

• General management experience.
• Knowing business and practice areas.
• Local, national and global awareness.

Since law firms are complex and challenging business enterprises, well-run firms recognize the need for talented professionals to help their firms run smoothly and efficiently. A career in law firm management can therefore be very rewarding. Perhaps some day the profession will further recognize the contributions of professional administrators by opening the doors to ownership.