As a firm grows, evolves, and matures partner compensation metrics that once worked may no longer work or be effective. Billable hours alone is a poor indicator of associate or partner performance and you should include more measures/metrics in the analysis. More and more law firms today realize that partner contribution and value goes beyond and involves much more than "billable hours" and their compensation systems incorporate other factors into the analysis. Billable hours is just one metric in the overall equation. As attorneys evolve from associates to partners - roles and responsibilities changes and so must the scorecard.

Last month we continued our discussion on the topic of Characteristics of Successful Law Firms and focused on partner compensation as a building block. The fifth basic building block is Planning. Successful firms have good business or strategic plans in place that serve as a roadmap for the firm.

Based upon our experience from client engagements we have concluded that lack of focus and accountability is one of the major problems facing law firms. Often the problem is too many ideas, alternatives, and options. The result often is no action at all or actions that fail to distinguish firms from their competitors and provide them with a sustained competitive advantage. Well designed business plans are essential for focusing your firm.

Question: I am a small firm solo owner, I have 4 other attorneys and 5 staff members. As we start the new year we want to focus on collecting our overdue receivables. Do you have any suggestions or tips?

Answer: Regardless of whether economic times are good or bad cash flow is always a matter of prime concern for law firms. With it taking in general 3-4 months to convert client work to cash anything the firm can do to speed up the collection cycle is always desirable. Here are a few ideas:

1. Do everything you can to keep receivables from going out to 90 days. Receivables aged one month are 93.2% collectable; three or more months are 72.3% collectable, and one year or more are 28.4% collectable.
2. Call - don't waste time with mailing follow-up letters.
3. Treat collection calls as an extension of client service. Calls should be treated as client service calls - not collection calls.
4. Caller should be someone other than the attorney who did the work for the client, qualified staff member or outsourced Accounts Receivable Account Manager.
5. Calls should be made by a trained Accounts Receivable Account Manager with client-friendly people skills.
6. Consider outsourcing to an Accounts Receivable Account Manager - not a collection firm. Our firm provides such services

John Olmstead will be participating, along with a panel of others, in an Illinois State Bar Association CLE - Building and Managing the Virtual Law Firm - on February 10, 2011 from 11:55 - 2:15 in Chicago. The CLE will be a live webcast and will be recorded as well. Click here for the Illinois State Bar website and additional details