We act and have acted for numerous legal practices over the years and it’s amazing how many issues our clients have in common. A legal practice is a business just like any other and as such, it needs to keep a watching brief on a number of business issues from profitability to succession planning.
In these times, it’s not enough to be a great lawyer; it’s critical to run your business as a thriving, going concern. In fact, honing it down, we find ourselves frequently advising clients in five main areas.
Here are our top five points that all legal practices should habitually have at the forefront of their operating agenda.
1. Minimising tax
We’ve not yet come across an organisation or individual who would want to pay more tax than necessary. In order to minimise your tax liabilities, it’s vital to explore all available avenues such as a change of year end, pension contributions and your corporate structure. The tax savings that can be generated by fairly minimal reorganisation frequently surprises clients.
2. Succession planning
Does your firm comprise partners of different age groups? Are the older partners working to ensure the successful continuation of the practice after they retire? Is the firm incubating people of eventual partnership calibre and is it incentivising the best people to become partners? Are these potential partners being brought into the partnership culture early enough to foster their partnership ambitions and are the older partners ready, willing and able to start handing over their existing client relationships
to the ‘new blood’?
3. Lock up management
Is your firm managing debtors and work in progress in a way that converts into cash as fast as possible? There are a number of tools and controls that can be put in place to help with that. For example, is your reporting on the analysis of debtors and work
in progress adequate for your purposes - or could it be improved? Are partners incentivised to keep those under control? Do you send your clients regular statements and/or do you pick up the phone to them to encourage them to settle their bills sooner rather than later? Having your lock up under control will help to minimise the firm’s borrowings and free up cash for additional drawings.
4. Departmental performance
How are individual departments within the firm performing and what is their contribution to the firm? Remember that high income doesn’t necessarily equal high profits and it’s important to focus resources in the right areas. Incentivising partners and staff through making them accountable can pay enormous dividends.
5. Corporate structure
All professional firms should be exploring the way that corporate structures can work for them. Should you be structured as a traditional partnership or be moving toward converting to a limited liability partnership or a limited company? In certain instances, your structure can have a direct impact on the tax that you pay.
Above all, to absolutely squeeze the last drop of profit out of your fee income, it’s crucial to review, review and then keep reviewing how you run and manage your business.
If you’d like to know more about how we can help you and your practice, please call or email Lee Facey on 020 7490 7766 or firstname.lastname@example.org to arrange a free initial meeting.
This material is published for the information of clients. It provides only an overview of the regulations in force at the date of publication, and no action should be taken without consulting the detailed legislation or seeking professional advice. Therefore no responsibility for loss occasioned by any person acting or refraining from action as a result of the material can be accepted by the authors or the firm.