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Getting a Small Law Firm Back on Track

The Challenge
The firm was losing its best staff and remaining staff output was not good enough.
Implementing a focused process for completing work, billing and collecting
All creditors paid, room to take on more clients and the firm's reputation improved.

This client is a high street firm, which had the old three-legged stool mix of Conveyancing, Legal Aid and General Private Client work, with an element of Commercial Property. We were asked to help following a difficult period of more than two years. One of the founding partners had retired and the replacement had not brought the same degree of control and direction to the activities of the firm. Some of the departments, particularly the Legal Aid departments, had become very, very busy but had not been managed.

Developing a Successful Partnership

The matter starts had been considerable, but not all matters were being progressed satisfactorily to completion - and the LSC had inadvertently overpaid the firm and wanted its money back. Which was not available. At the time we became involved, the firm was not profitable, not generating cash, was losing good people and, in some areas, was not maintaining its reputation.

We did our usual initial analysis, but in this case extended it and interviewed around 30% of the people in the firm. Our ABC:1-2-3 analysis identified over 50 action points which we grouped into ten headings, including financial management; management of the partnership; people issues; IT and negotiations with creditors.

Our ratio analysis identified that the most important underlying issue was one of people performance. Too many people producing not enough output.

The obvious thing to do would be to cut back on staff and institute immediate cost savings. However, what we had identified was that previous cutbacks had caused much of the problem. The lack of profitability had led to a lack of salary reviews and non-replacement of good people who left. So we did the exact opposite of the obvious.

Focusing on Cash Flow

We put in place a very, very focused programme of file completion, billing and collection which not only generated the cash to satisfy the lenders but also meant that the remaining good staff were able to be paid more and those staff who were not up to scratch were able to be replaced with better, albeit in some cases more expensive, staff.

What we did was to turn a vicious cycle of decline into a virtuous cycle of recovery. One of the key elements in this was getting the individual partners to agree to take responsibility for specific aspects of the recovery programme. This included one of the partners, although with no direct accountancy training, taking responsibility with our help for strong, hands-on management of the firm's finances.

Within a relatively short period of time, all the creditors had been paid in full, the firm's overdraft was well within manageable levels; its reputation has been recovered and in some areas is continuing to grow and take on significant new clients.

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