Camille Stell is Vice President of Risk & Practice Management for Lawyers Mutual Liability Insurance Co. of NC. Continue this conversation by contacting Camille at camille@lawyersmutualnc.com or
For most lawyers in private practice the practice of law is both a profession and a business. You may not have a CFO down the hall or a full accounting department tracking your metrics. But your firm’s financial health depends on making informed, intentional business decisions.
The good news? You don’t need a finance degree to run a financially healthy law firm. You need data, discipline, and clearly defined processes.
Let’s walk through practical strategies you can implement in the New Year for better financial results in December.
Start with a Plan: Make Data-Driven Decisions
Every firm – no matter the size – should have a strategic business plan that includes financial goals. Those goals should not live only in your head. They should be written down, shared, and measurable.
In solo practice, that may simply mean:
- A clear annual revenue target
- A monthly billing goal
- A collections benchmark
- A plan for originating new matters
In small firms, each person should have a “number”. For attorneys and paralegals, that might be billable hours. For managing partners, it may include originations and collections. Administrative staff often control operational efficiency such as intake, billing cycles, and payment follow-up.
What gets measured gets managed.
Key Performance Indicators (KPIs)
KPIs are business metrics that help you evaluate your firm’s performance. They should be measurable, specific, and aligned with your goals.
Examples include:
Productivity
- Billable hours
- Utilization rate (billable hours divided by available work hours)
- Realization rate (hours billed divided by hours worked)
- Collection rate (fees collected divided by fees billed)
Financial
- Age of accounts receivable
- Fees per matter
- Profitability by client or practice area
Marketing
- Cost per client
- Website traffic and lead conversion rate
- Number of matters opened
- Referral sources
Looking at these numbers over 18–24 months can reveal patterns and opportunities. Talk through the trends with your CPA or accountant. What is your most profitable work? What drains your time but produces little return? Where does your best work come from?
Setting Fees: Are You Charging Enough?
Many lawyers struggle to set – and raise – fees.
If you Google “How much does it cost to get a divorce in Greensboro?” you’ll see everything from $1,000 in uncontested matters to hourly rates averaging $550 in some consumer surveys. Clients are doing this research before they ever call your office.
Rather than guessing at what your clients can pay or pricing yourself at the bottom of the fees charged in your area, use available resources to do market research on fees:
- The Clio Legal Trends Report (state and regional data)
- Online salary and billing guides from recruiting firms
- Fee affidavits filed in litigation
- Feedback from trusted clients and referral sources
- Judges’ insights on rates typically awarded in your practice area
Factor in Overhead
Your rates must cover:
- Rent or mortgage
- Staff compensation
- Malpractice insurance
- Technology and software
- Marketing expenses
- Your own compensation and profit
Too often, solos and small firms price based on what feels reasonable rather than what is sustainable. If you don’t know what it costs for your team to perform the work, you cannot set an appropriate fee.
Customize and Experiment
Alternative fee arrangements can differentiate your firm and improve client satisfaction. Alternative fee arrangements can look like:
- Flat fees
- Phased billing
- Subscription services
- Unbundled services
- Consulting or educational offerings
If no one is hiring you at a particular price point, that’s useful data. Adjust accordingly.
And remember: many solos and small firms raise rates far less frequently than mid-size or large firms due to fear of client pushback. In reality, there is often room to increase fees, especially if you have not adjusted them in years.
Billing: Capture the Work You’re Already Doing
Revenue leaks often occur not because lawyers lack work – but because they fail to capture and bill it efficiently.
Manual time entry and end-of-day reconstruction of tasks can cost you thousands of dollars per year. Instant or integrated timekeeping systems reduce lost time and improve accuracy.
Best Practices for Healthy Timekeeping
- Standardize the process across the firm.
- Track all time – even on fixed-fee matters.
- Record phone calls, meetings, travel, and administrative coordination.
- Build in weekly review time so billing is not delayed.
- Lead by example – senior lawyers should model good timekeeping.
- Tracking fixed-fee matters is particularly important. Without data, you cannot determine whether your flat fee is profitable.
- The Value of Good Billing Descriptions
Clients don’t just review totals – they review descriptions.
Compare:
“4 hours – draft documents, client call”
with:
“Drafted motion for summary judgment addressing statute of limitations defense; telephone conference with client regarding evidentiary strategy; revised affidavit for filing.”
Specific, date-tagged entries convey value. Vague entries invite write-downs and disputes. Poor visibility and communication around billing often lead to unnecessary write-downs. Transparency builds trust – and protects revenue.
Clients Hate Billing Surprises
From their perspective, nothing annoys your client more than surprises when it comes to billing. When your response to a client asking about fees is, “it depends” – your client might say to you:
- “You’re the lawyer, you should know what this will cost.”
- “Before we start, give me a worst-case scenario.”
- “If something changes, call me.”
Your clients see these statements as excuses or delaying tactics:
- “The case was more complicated than we thought,” or
- “I’ve already written off some time…”
- “I’ll check with the managing partner and get back with you.”
These responses undermine your client’s confidence in you. Instead, set expectations early. Provide cost ranges. Update clients when circumstances change. Consistent communication reduces disputes and improves collections.
Collections: Time Is Not on Your Side
Accounts receivable lose value quickly. Industry data shows expected realization drops significantly as accounts age:
- 0–60 days: ~90%
- 60–120 days: ~80%
- 120–180 days: ~50%
- 180–365 days: ~20%
- 365+ days: ~10%
In other words, waiting hurts.
Make Billing a Priority
Many firms bill 30 – 60 days after work is performed and are paid 90 days (or more) later. That creates a four – to six-month cash flow gap.
Consider:
- Billing more frequently
- Sending invoices electronically
- Including payment links
- Keeping a credit card on file (with proper engagement letter language)
- Automating friendly payment reminders
Studies show 85% of electronic invoices are paid the same week they are sent, and 57% are paid the same day. Your clients want online payment options.
At Lawyers Mutual, I have occasion to hire lawyers to perform work for me. I love it when I receive a bill the same day I get the work product that includes a link to pay by credit card. In those cases, I pay the bill the same day. In the rare case that I don’t do pay that day, I have already signed an engagement letter agreeing to have my credit card on file charged on the 20th day following the bill.
The work I just paid for is never more valuable to me than the moment I receive it – the firm knows this and capitalizes on the ease of a credit card transaction to make life easier for both of us.
Credit Cards, Trust Accounts & Ethics
North Carolina ethics rules require careful handling of trust account funds. Merchant fees should never be deducted from your trust account, and safeguards must prevent unauthorized debit transactions.
Lawyer-specific processors such as LawPay are designed to avoid commingling of funds and protect IOLTA compliance. ACH payments can reduce processing fees.
If you are unsure about compliance, consult NC ethics opinion – 2013 Formal Ethics Opinion 13 – Disbursement Against Funds Credited to Trust Account. Catherine Reach has written blog posts for the North Carolina Bar Association on the ethics of charging processing or convenience fees to make up for the credit card processing fee. The short answer is don’t do it, but read Catherine’s August 2020 blog post for more information.
Document Your Core Processes
One of the most overlooked financial health tools is process and procedure documentation.
Identify:
- How a client is onboarded
- How time is captured
- How bills are reviewed
- When invoices are sent
- How follow-up occurs
- Who is responsible at each stage
Walk through the process. Test it. Adjust it.
When everyone understands the system – and leadership supports it – collections improve.
And yes, asking for money is hard. But forfeiting revenue is harder.
Be respectful. Be consistent. Follow up early. Pick up the phone when needed. Often, a conversation reveals whether the issue is dissatisfaction, confusion, or a temporary hardship that can be addressed.
A Final Thought
Financial health is not about squeezing clients. It is about aligning your fees, billing practices, and collections processes with the value you provide.
That alignment creates:
- Predictable cash flow
- Reduced stress
- Better client relationships
- The ability to invest in technology, staff, and growth
- And ultimately, a more sustainable and enjoyable practice
You worked hard to become a lawyer. Make sure your business systems work just as hard for you.
Camille Stell is Vice President of Risk & Practice Management for Lawyers Mutual and a Fellow in the College of Law Practice Management. She regularly consults with solo, small, and mid-size firms on financial health, compensation systems, and succession planning. Continue this conversation by contacting Camille at camille@lawyersmutualnc.com or 800.662.8843.
