Legal insight: Don’t waste a crisis!
In our latest series of tips for legal practices, PM+M’s legal specialist Helen Clayton outlines some key things for firms to consider to ensure you’ve made the most of the COVID-19 lockdown and the challenges you have overcome.
Whilst we are far from ‘normal’ and I doubt very much that we will return to a life as was in professional services, now is a great time to reflect. What have we learned so far?
As the country went into lockdown in the latter half of March, some 3 months ago, how did you respond? Would you have done anything differently with the benefit of hindsight and were there any stumbling blocks to achieve any of the desired outcomes?
Initially, you might think this is just about IT, infrastructure and operational. Whilst this is important, there are wider considerations around people, team cohesion, leadership and culture.
People
How did people adjust to change? Did you note anyone unexpectedly show leadership skills and react quickly and positively to adaptations?
Team cohesion
How have teams interacted? Have they actually done so? Does everybody have a sense of belonging? Employee engagement coming out of lockdown will be testament to how successful this has been.
Leadership
Has the leadership team demonstrated true leadership? Have strengths been played to? What is the feedback on communication methods, styles and timeliness?
Culture
How have you ensured your firm’s culture has stood its ground and strengthened as people have been working (and not working) on a remote basis?
This is an ideal time to reflect and ensure you’re in a great shape to move forward.
Don’t waste a crisis.
It is a fact that every professional service firm can improve its management of working capital. Whether this is down to process, education or both will vary between firms.
Cash is at the forefront of survival.
Typically, a law firm has significant investment tied up in uncollected debt from clients and in work-in-progress. The longer it takes to raise a bill, the less likely the full recovery of the amounts in WIP and disbursements.
In these unforeseen circumstances, there will also likely be a delay before cash reserves start to dry up.
The following actions are therefore critical:
– Forecast – rolling forecasts with built-in assumptions and what if scenarios, which are updated regularly for actuals and known levels of activity
– Work with clients that will pay quickly
– Encourage fee earners to seek payments on account upfront
– Ditch the clients that don’t pay – don’t be a busy fool!
– Chase the low hanging fruit for debt collection
– Incorporate working capital management targets into performance measurement
– Negotiate fixed costs to streamline cash outflow
– Utilise government initiatives where appropriate but bear in mind how they will impact cash flow later down the line – this is not free money in most circumstances
Did I mention forecasting?
Last tip – plan ahead and make time for the PI renewal this year – don’t say I didn’t warn you!
Coming out of this pandemic as a strong law firm will place you ahead of competitors, enable investment decisions to be taken and put you in a great position for recruitment and retention of quality people.
Don’t waste a crisis.
Accountant’s Report
Given the impact on law firms to be able to work in a more usual manner with accountants being able to visit their office, the SRA has advised that it is adopting a pragmatic and proportionate approach to a delay in the preparation of the Accountant’s Report (AR1).
The SRA has also confirmed that if the Reporting Accountant requires additional time to report, it is unlikely that the it would take any subsequent disciplinary action.
Further, any such delay would not be constituted as a serious breach. However, the reasons for the delay including any actions taken to mitigate a delay should be documented. As ever, documentation is key.
Impact of remote working
Where cashier and finance teams are working remotely, infrastructure and security will be paramount to ensure that the working environments are suitable and compliant.
This is not just about SRA Accounts Rules and a firm’s specific policies. It is also about compliance with GDPR and ensuring cyber risks are minimised.
Going back to basics:
– How is client paperwork being kept confidential whilst held outside of the office?
– Should banking login and access rights be reviewed?
– Are laptops being locked away at night? (and not in cars!)
– What security have you got for rogue emails?
– Has training been recently provided around cyber security?
– Have you reviewed new client take-on procedures and updated anti-money laundering training and procedures?
Training and education are both critical, especially now whilst we are working remotely, to prevent the firm from non-compliance.
Don’t waste a crisis.
I see that data analytics will increasingly be a tool within law firms. It will provide useful information for active decision-making to strengthen a firm’s standing – financially, its brand, its market share; the list could go on.
For analytics to be useful, the initial data needs to be credible and within an IT infrastructure that supports data extraction. In addition, someone that can interpret and understand the data and turn it into a sensible format, probably in layman terms, will be important.
In the current situation, many firms will need to be considering future structure, client base, market focus whether geography or where profit and cash is made, property requirements, how to retain the best people – again, the list goes on.
To do this, real-time and accurate information is critical. Reliance on assumptions and hearsay will not lead to educated decision-making nor the leadership that is expected by employees.
Analytics could be used across the business; let’s take finance to begin with:
– Working capital management
– Profit and cash generated by department, office, fee-earner, client
– Improving efficiency
– Driving change in fee earner performance
– Doing work at the right levels
It’s not just in finance though. Really understanding what drives the success of a law firm – the who, the how, the why – it’s knowing the answers to these questions that will ensure survival.
Take the opportunity now to understand what has changed in your firm since lockdown. Use data, transformed into information, to aid strategic discussions about the future.
Don’t waste a crisis.
Leadership through lockdown has never been so important. When I say leadership, I really mean communication.
We are not all the same. Some people communicate well through written format, some orally and some with a mixture of the two. Facial expressions are also a communication method!
Communication therefore needs to ensure it meets everyone’s need.
Leadership is not always about getting it right or being right. It’s about taking the ownership for decisions, standing by them, being united and consultative. It’s about listening, discussing and listening again.
I suspect many leaders have found the current pandemic a challenge. It was unexpected, decisions needed to be taken quickly but certainly not lightly. These decisions needed to be communicated.
I wonder where firms have seen leaders emerge within teams – taking ownership, being at the forefront of their team despite not having obviously done so before. These unexpected situations bring out hidden talents which firms should be considering how to develop and retain these people.
As firms experience cash flow and profitability pressures, as seen in previous recessions, recruitment is cut, people development scaled back, promotions rare and people leave. They become disengaged and look for where the grass might be greener. However, as we saw then, as firms find their feet, it is difficult to attract the right calibre of people to take the firm forward and to develop as part of succession plans.
Two-way communication must to be number one on every agenda.
Don’t lose your great people. They will be very expensive to replace.
Don’t waste a crisis.
