Last time we looked at the issue of 'conventional' solicitors' accounts programs versus newer practice management systems - and in particular those that allow firms to record, measure, monitor and analyse key performance indicators (or KPIs). Now you may be tempted to think 'why bother?', particularly if your billings are up and there is a steady stream of money coming into your firm. But does this really reflect your practice's true financial position?

Many partners still take the view that if billings are up, then they are free to go ahead and increase their drawings by a comparable percentage. Even leaving aside the old adage that 'turnover is vanity, profits are sanity' (in other words, it is not your total billings that count but the profitability of the practice), if you do not have good financial data at your disposal, how do you know if the amount you bill a client accurately reflects the amount of time your firm spent on that matter? For example, how much time was unbilled and was any time written off?


Charles Christian: good biling management makes perfect sense

Then there is the question of how much money the client actually paid - again, it is now almost standard practice for clients to query the bills they receive - and how long did they take to pay you in full? In terms of cashflow, is it better to have a few clients who pay big bills slowly or a lot of clients who pay their smaller bills promptly? Without the ability to analyse your financial data, you will never know.

Finally, there is the question of just who are your best clients and what are your most lucrative practice areas? For example, research within the professional services sector generally suggests that approximately 15% of clients generate 45% of turnover and a massive 70% of profits.


They are followed by a 25% tranche of clients who generate 35% of your turnover and 20% of your profits. And then there are the 60% of your clients who generate 20% of your turnover and just 10% of your profits.


The problem many high street firms face is their fee-earners are working long hours trying to service the needs of this third group of clients who, in terms of the profits they yield, are barely worth getting out of bed for in the morning. But if you cannot identify them or measure their true value, you cannot make informed decisions on what to do with them.


Instead of going for the quick-fix solution of dropping them, you should first see if you can increase the revenues they generate by cross-selling to them and increase their profitability by streaming your business processes and working practices - but you cannot do any of this unless you have access to good practice management information and key performance indicators.


Charles Christian is an independent adviser to the Law Society's Software Solutions guide