Bonfire Night is a time for fireworks, sparklers and spectacular displays. But when it comes to your law firm’s finances, “going up in smoke” is something you want to avoid.

Most finance problems do not appear overnight. They often start with something small. A process takes a little longer than it should. A spreadsheet is created to work around a limitation in a system. A reconciliation is delayed because the finance team is dealing with more urgent work. A report takes days to pull together because the information sits across different systems. Individually, these issues may not seem significant. Over time, however, they can add pressure to your finance team, increase the risk of errors and make it harder for partners and management to get a clear picture of the firm’s financial position.

A closer look at your finance function could reveal where time, resources and efficiency are being lost.

When your finance team is burning the candle at both ends

A busy finance team can often keep things moving, even when resources are stretched. Payments are processed, reconciliations are completed and month-end reports eventually make their way to the partners. The problem is what happens in between.

Imagine a finance manager spending the first few days of every month chasing information from different departments, checking spreadsheets, resolving discrepancies and preparing reports. By the time the information is ready, they are already thinking about the next deadline. The work is getting done, but the process is consuming more time than it should. This can become particularly challenging when a member of the finance team is on holiday or off sick. If only one person knows how a particular process works, even a short absence can leave a significant gap.

For firms facing this kind of pressure, outsourcing some or all of the finance function can provide additional capacity. Cashroom’s team of legal finance specialists can support firms with day-to-day legal cashiering tasks, allowing internal teams to focus their time where it is most needed.

Don’t let manual processes spark problems

Manual processes are common in law firms. Sometimes they are necessary, but sometimes they remain because “that is how we have always done it”. For example, a firm might export information from its practice management system, manipulate it in Excel, manually check the figures and then enter information into another system. While this might work, every additional manual step creates another opportunity for something to go wrong. A payment could be entered incorrectly. A figure could be copied into the wrong spreadsheet. A reconciliation could take considerably longer because someone has to investigate a discrepancy between two sets of records. None of these problems necessarily creates a crisis. But they add friction to the finance function and increase the amount of time spent checking and correcting work.

Technology and integration like The Cashroom Portal, can help reduce this reliance on manual processes, particularly where financial information can move between systems automatically.

When compliance starts to create pressure

Legal finance comes with responsibilities that cannot be overlooked. Client money, reconciliations, transactions and financial records all need to be handled appropriately, with processes that support the firm’s regulatory obligations.

Consider a firm where the finance team is under significant pressure. A routine reconciliation takes longer than expected because several transactions need investigating. At the same time, the team is dealing with payments, billing queries and month-end reporting. When resources are stretched, there is a risk that important compliance-related tasks become another source of pressure. Compliance works best when processes are clear, the right checks are in place and the people handling the work have the appropriate knowledge and experience.

For law firms, having experienced legal finance professionals involved can provide valuable reassurance that financial processes are being managed with the regulatory environment in mind.

What’s burning through your partners’ time?

Not every finance issue sits within the finance department. Poor financial processes can create work for partners and fee earners too. For example, a partner might need to chase an outstanding invoice because there is no effective credit control process. A fee earner might contact the finance team several times because they cannot easily see the status of a transaction. A managing partner might wait for management accounts because the information takes too long to compile. Each interruption might only take a few minutes, but across an entire firm, those minutes can quickly add up.

Partners should have access to the financial information they need to make decisions, without becoming involved in routine finance administration. A well-supported finance function can help keep those responsibilities in the right place.

Don’t let your financial visibility disappear in a cloud of smoke

Good financial information is only useful if it is available when the firm needs it. Management accounts can help partners understand revenue, costs, profitability, cash flow and performance across different areas of the business. But if producing those reports is a lengthy manual exercise, they may arrive too late to influence decisions.

For example, if a department’s costs have increased significantly over several months, the firm needs to know sooner rather than later. Waiting until year-end to identify the issue leaves fewer opportunities to address it. Accurate and timely reporting gives law firm leaders a clearer view of what is happening financially and where attention may be needed.

For firms looking for better visibility, Cashroom’s management accounts service provides regular financial information to help partners and management understand performance and make informed decisions.

Is your technology helping or hindering?

Most law firms rely on technology to support their financial and operational processes. But having the right systems in place is only part of the picture. They also need to work together effectively and be used to their full potential.

A firm might have invested in a practice management system, accounting software and other financial tools, but still find that information does not flow smoothly between them. This can leave staff switching between systems, checking information manually or finding workarounds when a process does not work as expected.

If information held in a practice management system does not feed through to the relevant financial processes, the finance team may spend unnecessary time checking and transferring information. The technology is there, but the firm is not getting the full benefit from it. This does not necessarily mean replacing existing software. Better configuration, integration or training may be enough to improve how systems work together and reduce unnecessary administration.

Keep the fireworks for Bonfire Night

There is nothing wrong with a little excitement on Bonfire Night, however, your law firm’s finance function should be predictable, well organised and under control. If small finance issues are starting to take up more time, create unnecessary pressure or make it harder to get the information you need, it may be time to take a closer look.

After all, the only thing that should be going up in smoke this November is a firework.

Cashroom provides outsourced legal finance services to law firms, including legal cashiering, management accounts, payroll, credit control, statutory accounts and tax returns.