Making the most of your accountant

Solicitors must turn to their bean counters if they are to adapt to a rapidly changing legal world.

Earlier this year the then President of The Law Society, Andrew Holroyd, spoke at a series of regional roadshows entitled ‘Alternative business structures – threat or opportunity’. The message that he and the other speakers delivered was stark – after the passing of the Legal Services Act, unless law firms get their act together and provide clear strategic focus, good leadership and good management, they are doomed to failure.

We attended the Bristol roadshow and two factors were immediately apparent. First, the questions and comments from the floor indicated there was still a significant and stubborn resistance to the necessity for change. But at least these delegates had attended. Given the seismic changes affecting the whole profession, what was more astonishing was the large number of local firms that had simply not bothered to turn up at all.

Most solicitors are rightly apprehensive about an uncertain future. For many, that apprehension is caused by simply not knowing where to look for help. But for many law firms, that positive help and direction is already available from a source they are familiar with – their accountant.

Accountants are viewed by much of the profession as a necessary evil, employed to carry out the annual audit and ensure compliance with the Solicitors Accounts Rules. They are also useful for collating the partners’ tax returns.

A large part of our practice involves working closely with accountants and lawyers. It is little wonder that we see accountants tear their hair out as solicitor clients constantly decline the offer of value-added advice that the accountant is desperate to give, but the lawyer views as either unnecessary, too expensive or both. Solicitors should think again.

Here are just a few ideas on how to use the accountant relationship to improve the performance and profitability of your firm:

• Examine first whether you have the right accountant. To move forward successfully it is essential that a law firm has a team of professional advisers who understand the profession and the firm. Thus, if your accountant has never heard of the Legal Services Act or alternative business structures, now might be the time to look around and speak to accountants who do understand the market. There are plenty out there.
• If you have not already done so you will need to examine your firm’s legal status. There is no one better suited to do this than your accountant. More than 10% of firms have adopted LLP status, but it may be that there are good reasons to become a limited company and leave partnership behind. Your accountant can advise what is best for your firm – unless you ask, you will never know.
• Perhaps the biggest fear of equity partners in their 50s is not only whether they can afford to retire, but when they do so if they will be able to take with them the capital they have toiled to accumulate over many years. The profession is facing a demographic time-bomb. Take a look at the list of partners on the notepaper of firms you know locally. Chances are, the batting order is top-heavy with ageing partners who rushed to enter the profession in the 1970s and the 1980s. The problem now is that there is no army of eager young solicitors eager to plough their capital into an uncertain future.

  Why should they? The reality is that partnership is no longer the automatic financial and career attraction it once was. This is where a good accountant can help. An exit strategy can be planned and implemented, possibly using new investment from non-lawyers in a legal disciplinary practice. The Legal Services Act is a threat, but it is also an enormous opportunity. Make sure your accountant helps you use those opportunities to the full.

• There is no one better placed to comment on your firm’s profitability than your accountant. They already spend days physically inside your offices doing the audit. Use them to give feedback on how you can improve profitability, from proper use of time costing to billing and debt collection.
• Ask your accountant to carry out a strategic review of your firm to ensure survival into the next decade. Get them to look at the firm’s premises. Is there any sound commercial business sense in the partners owning the office premises, as traditionally has been the case? Likewise, in an age of immediate communication, what is the sense in having different branch offices maintained at huge costs? Indeed, is the expensive high street site necessary at all?

Your accountant will not have all the answers, but a competent accountant will be able to offer appropriate strategic advice to help your firm survive and thrive. Crucially, you will be using the services of someone you already know and trust. There is no need to resort to the lottery of the Yellow Pages. Your accountant is a fellow professional. He or she will understand your fears, whether this is over compliance issues or just remaining solvent. Begin to grow the relationship with your accountant so that they also become a trusted business adviser.

As Andrew Holroyd kept emphasising, it is no longer enough to think as a lawyer, you also need to think like a businessman. The credit crunch and a rapidly disappearing residential conveyancing market have made matters even more urgent. The good accountant is already there, willing, able and ready to help. It is no longer a question of being able to afford to buy in those value-added skills, but the cost of the inevitable consequences of failure if help is not sought.

John Killah and Claire Russell are consultants and partners at Russell Killah.

www.russellkillah.co.uk