Law Practice Management News
Ideas for Lawyers and Managers That Dare To Be Different June 2011

in this issue

Law Firm Strategy: Where to Start

Contingency Fee Profitability: Can You Make Money From Contingency Fee Work

Solo-Small Firm Question of the Month - Balancing Firm Trust Accounts

Come and See Us At the Missouri Solo & Small Firm Conference in June at Lake of the Ozarks

John Olmstead to Present at Association of Legal Administrators Meeting in Des Moines, Iowa

Johns Photo

John W. Olmstead


Welcome to Olmstead & Associates Law Practice News, a law practice management resource for practicing attorneys, managing partners, administrators, and others that must keep updated on all aspects of law firm management.

Our Law Practice Management E-Newsletter is distributed on the first Wednesday of each month. Look for it and send us your emails with your ideas for topics that you would like covered. I wish to thank those who take the time to email me with their thoughts and comments. I encourage our readers to do so.

  • Law Firm Strategy: Where to Start
  • Many law firm leaders realize that the status quo is no longer a receipe for success. New approaches ranging from the acquisition of clients and talent to new services delivery models are needed. A competetive strategy is needed. The common question is where to start.

    Strategic planning is essentially a five step process. The first step begins be asking questions. Start by asking the following questions:

    Read on . . .
  • Contingency Fee Profitability: Can You Make Money From Contingency Fee Work
  • As fee revenues have become depressed during the past year more firms are considering alternative fee arrangements and practice types. Here is a question posted by an insurance defense firm concerning profitability of contingency fees and whether they should venture into such practice areas.

    The CEO of Howrey LLP, when interviewed about the law firm's recent dissolution, advised that deferred profits from contingency fee work led to the firm's demise. Howrey is a good illustration of what can happen when the risks of contingency fee work is not considered or managed. Contingency-fee work can pose major risks for law firms, as they earn no fees if they lose those cases and sometimes have profits deferred in protracted litigation. In addtion, cases can be lost with no fee whatsoever recevied. Whether your firm is considering "big deal" litigation or bread and butter run of the mill personal injury litigation you may want to consider the following:

    Read on ...
  • Solo-Small Firm Question of the Month - Balancing Firm Trust Accounts
  • Question I am the sole owner of a small firm. I recently hired a new bookkeeper. While she has worked in a few other law firms these firms did not require her to manage a high volume trust account. Our firm has a high volume of transactions that flow through the firm's trust account. We have had problems in the past with prior bookkeepers and outside accountants that did not balance/manage our trust accounts properly. What suggestions do you have or resources do you suggest?

    Answer: Failure to properly manage, balance, and reconcile the firm trust account can be a major problem for law firms - from professional responsibility, accounting, and tax aspects. From a bookkeeping standpoint - failure to maintain a trust account sub-ledger for each client that has money in the trust account and insuring that all of the sub-ledgers balance and reconcile back to the trust account bank statement in the biggest problem that I see. You must do more than simply maintaining a checkbook journal register - you must have a sub-ledger for each client. If the firm reflects the trust bank account on it's balance sheet there should be either a contra asset account or a liability account relecting the same amount reflected in the cash account. The total of all of the sub-ledgers should also equal the number in each of these two general ledger accounts. All should reconcile back to the trust account bank statement. If the firm does not reflect the trust account on the balance sheet - then the trust account bank statement should be reconciled to the sub-ledgers.

    Many time and billing programs have trust accounting modules that fully automate the trust accounting management function, maintain the sub-ledgers, write trust account checks, and reconcile the bank statement against the client trust sub-ledgers.

    There are a whole array of issues that you need to be aware of and stay on top of concerning retainers generally, firm trust accounts, and other matters. You, your bookkeeper, and your CPA need to get educated on all of the ramifications.

    Here are a few additional suggestions:

    1. Get a copy of your local rules and read them. For Illinois lawyers - get a copy of the Illinois Rules of Professional Conduct of 2010 published by the Attorney Registration and Disciplinary Commission of the Supreme Court of Illinois. www.iardc.org.
    2. Insure that your bookkeeper and CPA read these rules and implement appropriate systems to ensure compliance.
    3. Get your hands on a copy of the book - ABA Guide to Lawyer Trust Accounts, by Jay Foonberg. Book can be obtained from the American Bar Association website. www.abanet.org
    4. Reconcile monthly.
    5. Use appropriate software to write checks, record deposits and transfers, renconcile bank statements, and maintain the client trust sub-ledger.
    6. Maintain a journal.
    7. Maintain a client trust sub-ledger.
    8. Insure that funds are transferred to the firm's operating account when fees are earned and appropriate accounting entries made at that time in the firm's books.
    9. Stay on top of the trust account.
    10. Insure that your bank and credit card company are following proper procedures. Insure that your bank takes services charges, charges for printing checks, etc. from your operating account rather than the trust account.

    You are right in desiring to get a handle on this sooner than later. Sit down with your bookkeeper and CPA, get educated on the rules and procedures, and implement appropriate policies and systems now. It is always easier to prevent a mess than to clean up one.

  • Come and See Us At the Missouri Solo & Small Firm Conference in June at Lake of the Ozarks
  • We will be hosting a booth again this year at the Missouri Bar Association's Solo and Small Firm Conference on June 9-11th at Lake of the Ozarks. If you are attending the conference drop by our booth and visit with us.

  • John Olmstead to Present at Association of Legal Administrators Meeting in Des Moines, Iowa
  • John Olmstead will give a presentation entitled "Selling Your Ideas to Your Partners: The Administrator as Internal Consultant" on July 20, 2011 at the ALA monthly meeting held at the Iowa State Bar Association. Contact Phyllis Heatheriton, President-Elect of the Iowa Chapter - Phyllis@duncangreenlaw.com for additional details.

  • FREE Guide to Law Firm Management Best Practices
  • Download a FREE copy of our Guide to Law Firm Management Best Practices.

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