Best Practice: Law firm financial management
Asked and Answered
By John W. Olmstead, MBA, Ph.D, CMC
Q. I am the managing partner of a 17-attorney firm in San Francisco. We have a firm administrator that we hired four years ago and he manages our financial and HR matters. I haven't a clue as to what goes on financially and this is becoming more of a concern for me and my other partners. Your thoughts would be appreciated.
A. I believe that is imperative that owners and partners in a law firm have access to financial information on a timely basis, understand the information, and use the information in a proactive way to manage the practice. I suggest:
1. The owner, or an appointed partner(s) in larger firms, obtain a basic level of understanding in basic accounting/bookkeeping and law firm financial management.
2. The owner, or an appointed partner(s) in larger firms, obtain detailed training on the accounting software system(s) along-side the bookkeeper and administrator when the system is implemented. In addition to general operation of the software, special training should also be obtained on interpretation and use of the management reports.
3. In your current situation - this may be a good time to consider upgrading your system and obtain training on the new system, review the roles of all parties, and current procedures.
4. Insure that you have accounting controls in place and appropriate segregation of accounting duties.
5. Outline your expectations and requirements of the bookkeeper and administrator, meet with them, and communicate appropriately.
Don't allow your administrator to create a fiefdom and hold you and your partners hostage.
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John W. Olmstead, MBA, Ph.D, CMC,(www.olmsteadassoc.com) is a past chair and member of the ISBA Standing Committee on Law Office Management and Economics. For more information on law office management please direct questions to the ISBA listserver, which John and other committee members review, or view archived copies of The Bottom Line Newsletters. Contact John at jolmstead@olmsteadassoc.com.