Preparing for Year-End Success: Optimizing Firm Profitability and Performance with BigSquare
As the end of the year approaches, law firms are working hard to ensure their financials are in the best possible shape before entering a new year. Effective year-end preparation involves several key tasks: managing accounts receivable, analyzing effective rates, reviewing write-offs, and optimizing firm management metrics. Here’s how BigSquare can help you leverage real-time data for effective year-end planning and set the stage for a successful new year.
1. Managing Accounts Receivable: Focus on Realization and Client Negotiations
For many firms, year-end is a crucial time to negotiate outstanding invoices, collect payments, and manage accounts receivable (AR). BigSquare’s dashboards offer a clear view of top outstanding AR, helping you prioritize clients who may be open to early payment discounts and identify those with more complex AR histories.
Did you know: In a recent report, the most recent law firm realization rates were 90.5%, down from 91.3% the previous year? BigSquare helps manage AR and increase your realization rates.
BigSquare enables you to:
- Create a Targeted AR List: Use dashboards to build a prioritized list of clients based on AR aging, realization figures, and prior discount factors and histories, allowing for more informed conversations with clients.
- Identify Key Stakeholders: Get insights into the timekeepers involved in specific client accounts, helping you pinpoint who to contact for efficient AR follow-up.
- Clean Up Outstanding AR: Use data insights to identify invoices unlikely to be paid and take action. Cleaning up AR records prevents carrying uncollectible debt into the new year, ensuring clearer financial targets for 2025.
“We eventually did a comparison between the upgrade to our existing system, other vendors, including BigSquare and BigSquare was the unanimous winner,”
CIO, Cohen & Grigsby PC
2. Effective Rates Analysis: Understanding True Client Profitability
The effective rate—what the client actually pays—often varies from the firm’s standard billing rate. A thorough review of effective rates, by both client and matter, can reveal where the firm is sacrificing profitability and help you assess if this is due to discount requests, billing guidelines, or other factors.
Did you know: 36% of partners make proactive adjustments to a client bill because the time spent exceeded expectations set by the client? 32% of partners make proactive adjustments because the amount exceed the estimate given to the client. BigSquare helps you examine where write-offs are happening and set client expectations to reduce write-offs.
BigSquare allows you to:
- Evaluate Realized Rates vs. Standard Rates: Break down client and matter-level effective rates, enabling a granular view of profitability per client or project.
- Spot Expense Leaks: Identify where the firm may be incurring expenses beyond recovery due to unanticipated write-offs by client and matter.
- Examine Write-Off Patterns: Analyze write-offs by partner, associate, client, or matter over a certain timeframe using BigSquare’s custom date range selector. Investigate the causes—perhaps there’s misalignment in client communication, inefficiencies in associate time management, or non-compliance with outside counsel guidelines. This allows you to adjust practices to reduce write-offs and improve profitability in 2025.
- Measure Client Growth Rates and Engagement: Monitor metrics like matters per client and effective billing rates. Tracking these metrics provides a sense of client satisfaction, giving you insight into which clients are likely to continue growing their business with your firm.
3. Firm Management Metrics: Setting the Right Goals and Incentives
Year-end is also the time to assess overall firm management metrics, such as billable hours, utilization rates, partner profitability, and department growth. These KPIs are crucial for making strategic decisions about resource allocation, bonus structures, and areas to emphasize in the coming year.
With BigSquare, you can:
- Monitor Associate Billable Hours and Goals: Track associates’ progress toward billable goals, report on time spent on clients and matters, and billable and non-billable hours, as well as report on where the hours were spent (worked hours for billing timekeepers) and how much time was written off, all in one place.
- Assess Partner Profitability, Bonuses and Performance: Evaluate partner contributions by profitability and revenue. With clear data on partner utilization rates, the firm can structure bonuses based on individual performance, aligning incentives with overall profitability goals, while slicing the data by a variety of factors as needed (client, matter, working timekeeper, billing timekeeper etc.). Partner performance to KPIs can also be seen comparatively to other partners in their salary band to get the full view of performance across the firm.
- Identify Key Areas for 2025 Focus: Analyze which departments or practice areas saw the highest growth and profitability. You can use these insights to strategically focus resources and investment in the next year.
“The product is easy to use, but most of all, the data is on demand. Partners have access to the metrics immediately rather than waiting for a staff member to compile a report.”
Robert M. Gathings, CFO, Forman Watkins & Krutz LLP
Wrapping Up
Using BigSquare’s powerful data insights and intuitive dashboards for year-end preparation can help your firm proactively manage its finances, improve client relationships, and set actionable goals for 2025. From understanding AR aging and effective rates to maximizing partner profitability and improving client success metrics, BigSquare enables law firms to turn data into profitable decisions.
To learn more about BigSquare, schedule a demo with one of our experts today.
