“Around £4 billion is owed to the top 50 law firms at any one time”*
Lock-up as in….unpaid bills, debtors, or un-billed work in progress. Talk to many Finance heads in the professions about these issues and expect grimaces with much teeth-gnashing. In a recent survey by accountants Smith & Williamson, nearly 70% of firms think that performance improvement in this area will be an important source of funding*.
In the rest of the business world, getting paid for what you do is extremely important. For a lot of lawyers and other professionals, it seems not to matter much despite the considerable problems caused (having to fund borrowing, lack of ability to pay themselves or invest in growth). In a market that is more dynamic by the week, old-fashioned views about money being a dirty word are not just outmoded – they are becoming more and more dangerous to continued health and survival.
This must change and soon. For everyone (not just partners or senior staff). Here are three things that can help.
Accountability where it matters. Let’s start at the top. How motivated are the owners of the business to making it happen? Here’s a clue – only 23% of firms surveyed have Lock-up as one of the three principle measures of partner performance*. Start to change this for the better, see it through robustly when remuneration assessment occurs, and things will begin to improve. What gets measured and rewarded gets done.
“It’s the way we do business”. This is a message that has to come from those at the top (cf. Accountability above) that is then applied and reinforced for everyone – associates, managers, anyone earning money working for clients. Engagement letters must include Service Level Agreements, with an agreed billing process written into the client contract. Time sheets are completed on time and invoices issued promptly. Underperformance in these areas is not just ignored or tolerated: reward and career progression at all levels depend upon being successful.
Professionalise the process. This is all about culture change. Often it needs some additional help, particularly early on. So if you haven’t already – as well as measuring, compiling, and sharing data on what is (not) happening where – make it someone’s job to provide material assistance in ‘doing it’ where needed…and empower them to act. If you think you already have this and debtor days are still in three figures, you haven’t.
“Number one, cash is king; number two, communicate; number three, buy or bury the competition” Jack Welch.
Your firm is a business so it needs to be treated like (number) one.
James Newberry runs People Scope, a consultancy, interim, training and coaching firm working with lawyers, accountants and other specialists to help them operate successfully outside of their comfort zones. http://www.peoplescope.com.
* 22nd Annual Smith & Williamson Law Firm Survey 2016