Legal Practice

5 KPIs to Make a Law Firm More Profitable

Make a Law Firm More Profitable


The profit and market reputation is access to every business. There must be some yardstick by which we can measure the performance of the firm. Key performance indicators(KPI) are those indicators that are way beyond the billable hours, and they are just indicators. They are not something financial but are actionable in nature. Advancement is knocking at the door, and many of the lawyers are adopting such techniques. It is setting up a foundation for success that is based on KPIs. This will help us in understanding the functioning of the law firm in and out.


One of the primary reasons for the failure of any business is not having sufficient funds or a lack of cash flow. Money or finance is not the aspect of the successful running of the business, but one of the most important aspects of running a business, or a law firm. When we match the KPIs properly with the goals and targets of the law firm, this results in understanding the reason for both success and failure.

It is not always necessary for the billable hour’s rate in order to earn a profit, but there are other ways that can result in the profit. There are other ways also by which we can increase the same, which shall be beneficial for both the clients as well as the law firm. In this article, some of such ways we are discussing for the profitability of the law firm.

One of the most predictable sources of cash is the client. Because in exchange for legal services you receive remuneration. So, structure the cash incurred for getting those clients or in client development. Analyzing that will increase firm and client experience.

Read Also – How to Generate Billable Hours in Small Law Firms?


1. Realization and realization reports

Realization is to understand what the law firm is collecting and what the firm is paying. This includes the amount of time spent in a case, how long the client takes to give the payment after receiving the notice for payment, payment of stamp duties for the clients. The plan must be very clear as to analyzing the minimum amount of funds the firm must have at all times for its survival.

The client will not pay the bills as per your convenience, but as per their suitability. Analyzing the time for collecting the money from the clients will help you understand how to frame the strategy to pay your bills within the due time.

Make a realization report which shows intact the figures of expenses and future expenses and preparation for contingencies. At all times, there keep a backup fund and maintain it by the profit fund.

Read Also – Importance of time tracking for lawyers

2. Revenue and expenditure

It is a very important KPI to manage revenue and expenditure. To save money and earn a profit, it is first important to know where are you spending the money. It is important to do things more efficiently. Analyzing the aspect of where the firm is spending helps to discover the ways of more profit.

3. Efficiency

A law firm that is technologically forward will be able to undertake more work because you can complete work at present and in the future more efficiently. For example, there are chances that a document might be lost due to some natural phenomenon or careless human action, but that is not the scenario when you adapt to legal case management software. Client calendaring and auto-updating the method of receiving feedback from the client is a suitable method to be adopted.

On similar lines, when it comes to calculating the billable hours of the law firms when done manually, there are chances that it may go wrong due to human error. So, automating this process helps to increase efficiency. As the work when done by a human can increase the administrative works and also the chances of error in high.

The major target is keeping the client happy and using the technology for the betterment and increasing efficiency. The higher the efficiency, the more effective is the working, the better the functioning of the law firm. Increased efficiency will, in turn, increase the rate and quality of performance, which will, in turn, result in more cash flow into the firm because of the satisfaction provided by you at work.

4. Timekeeper

Timekeeper simply means keeping track of the time and on the billable hours. Keeping track of how much time you are engaging in completing what kind of work. This will also help you understand and keep a record of what task is time-consuming, which increases the billable hour, but the performance is not as expected. It will also help to understand how much fees you are charging from the client. Billable hours and the time spent on working in that particular case are never the same, and thus keeping track of the same, i.e. billable hours is really necessary.

5. Distribution of work

The world is competitive. So, when you hire someone to do a task make sure, they are worth it and extract the best possible for the benefit of the firm.

Delegate the work necessarily. For example, when it comes to taking a printout, this task can be done by a person responsible for administrative work, then why engage an associate in it. Then the billable hours though remain the same but the person responsible though is paid less salary, so ultimately it results in satisfaction to both law firm and the client.

We strive in a scenario that focuses entirely on the clients and is governed by their demands. In such a scenario, the advancement of business might seem a tougher challenge. Having the KPIs for your law firm helps monitor your own performance, time spent and reveals other such growth information about the firm which then becomes the guiding step towards the development. Law firms are working strategically, which in turn helps develop the business, which is the whole purpose of starting a law firm.

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by supriya dash

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