Sound financial management has always been a pillar of law firms’ long-term business health. But, during the pandemic, it has literally become a means of survival.
Though the future state of COVID-19 is still uncertain, there are some clear learnings we can extrapolate with a look back at how successful firms managed their businesses during the most intense days of 2020. For perhaps the first time in many of their histories, firms were forced into new ways of doing business, including supporting a remote workforce, finding alternatives to in-person meetings, and adjusting to the needs of concerned clients.
Among the primary concerns for both law firms and their clients was, of course, money. With stay-at-home orders delivering crushing blows to clients across most industries, many of them began tightening their belts and cutting costs everywhere they could. These cuts frequently included legal spending, which had the potential to put law firms under similar financial pressure.
But recent research indicates that one segment of savvy law firms was able to thrive during the pandemic. The recently released 2021 Pandemic Performers report from the Thomson Reuters Institute shows the firms that saw better growth were the ones that exercised better “financial hygiene.”
According to the report, which identifies “Pandemic Performers” as firms that were in the top quartile of performance in revenue per lawyer (RPL) growth, financial hygiene encompasses several key financial indicators, including worked rate growth, strong billing realization against standard and agreed/worked rates, and less discounting through to billing.
Cloud-based technology was the financial hygiene driver for many firms
If there was one nearly undeniable truth for law firms across the globe during the pandemic, it was the need for remote connectivity to technology. In its analysis of the steps Pandemic Performers took to succeed during COVID-19, the report noted that some less successful firms were not as consistent in their legal tech investments.
It’s not difficult to imagine that the resistance to investing in cloud-based solutions could have contributed to the less successful firms’ struggles. On the other hand, the report noted that top-performing firms “had already been spending more per lawyer on technology prior to the pandemic and so were likely to have been more technologically prepared too.”
Other research suggests that legal professionals who worked in back-office roles frequently found that connecting to on-premises solutions via a virtual private network (VPN) connection for financial management, matter management, and related functions provided limited functionality and slower response times. For these users, a move to the cloud where they could have full functionality at full speed in a remote setting was a virtual no-brainer.
What does that look like in practice? Simply put, cloud-based solutions provided seamless access to the information users needed to do their jobs. No matter where they were working from, they could easily and securely access financial, client, and matter information.
And, whether they knew it or not at the time, that move to the cloud was a primary driver of their firms’ financial hygiene. From initial client intake to final billing, keeping all stakeholders up to date with accurate information was essential to handling matters profitably. Some of the most resilient firms invested in robust financial and practice management solutions.
Realizing the full benefit of a single practice management solution
With functionality that covers a firm’s payables management, time and billing management, and advanced financial solutions, these types of practice management systems were the cornerstones that stabilized many firms through the pandemic. They helped to streamline many routine tasks and processes in ways that improved productivity and profitability.
With a single solution that can centralize functions that typically reside in disparate systems for most firms, a cloud-based solution allows you to manage your firm’s business with confidence. While it’s difficult to know what lies ahead with COVID-19, one thing is certain: Successful firms are preparing for the future by investing in the cloud.
Thomson Reuters 3E Cloud provides law firms with the financial and practice management tools they need to manage their business seamlessly and securely, no matter where they are. Learn more about what 3E Cloud can do to help your firm. Request a demo today.