Armanino Blog
Article

Four Survival Strategies for Law Firms During COVID-19

by Kendra Edson

At this moment in time it seems that few — if any — industries will be immune to the collateral economic impacts of the COVID-19 pandemic storm. Law firms face similar challenges but continuing to take disciplined and practical steps in the days, weeks and months ahead will help put you and your management team in a better position to emerge from this with your firm intact.

Here we offer four survival strategies leaders of law firms can use to help navigate through this unprecedented time:


Manage Your Cash Closely

We all know that cash is king right now. Think strategically about how to improve your firm’s cash position, while reducing unnecessary outflows:


Revenue/Inflow:

  • Tightly manage collections/AR:
    • Schedule a weekly “check in” call with your attorneys
    • Delegate and document who will be contacting clients for collection
    • Call clients to secure commitment on when they will pay and confirm by email. Follow up with them weekly if necessary
    • Consider offering a discount (10-20%) for those who pay within 15-30 days
    • Send out bills as close to the end of the month as possible. On large matters, review prebills mid-month so changes and updates are completed
    • Shorten your billing cycle. Identify clients who can be billed mid-month
    • Monitor cash receipts daily
    • Review trust accounts for money that should be transferred
    • Apply all unapplied cash
  • Secure external financing
    • Draw down on your existing revolving line (s) of credit if possible
    • Inquire with your bank about increasing your line
    • If you have existing covenants that you fear defaulting on, discuss them openly with your banker (before you risk breaching them)
    • Consider alternative sources of financing and assess whether you qualify for an SBA PPP or EIDL loan

Expenditures/Outflow:

  • Review compensation firm-wide
    • Reduce or suspend partner draws
    • Implement temporary salary decreases (partners, associates, staff)
    • Modify work schedules/compensation for non-exempt employees (e.g., 80% pay/4-day workweek, 60% pay/3-day workweek, etc.)
    • Consider furloughs as an alternative to layoffs (Learn more in our Furlough FAQs)
    • Reevaluate pension plan matching and employer contributions and consider funding them quarterly or annually (vs. each pay period)
  • Review all vendor contracts and firmwide operating expenses
    • Audit all expenditures and classify as essential vs. non-essential
    • Eliminate all non-essential expense; be honest about what you can live without
    • Renegotiate fees and payment terms on essential services where possible (e.g. review parking to see if it can be suspended while your firm works from home)

Tightly Manage Your Work Flow

It’s time to utilize and allocate your human capital resources wisely.

  • Review all current clients/matters
    • Make sure people are working only on those who will pay — stop working on clients that aren’t paying and alert clients accordingly
    • Implement retainer agreements where you can
  • Establish a mandatory daily timesheet submission policy for all timekeepers
    • Monitor to see where there is excess capacity and shift work to those individuals
    • Make sure everyone is working/billing as much as possible and that it is realizable time
  • Evaluate your firm’s practice areas and shift resources to those that might pick up in the current environment and away from those that might drop off
  • Monitor contingency case work (and costs) closely and/or move those clients to hourly or fixed fee pricing if possible

Reassess and Rebudget

2020 is looking a lot different than you might have expected just a few short weeks ago. Right now, your focus will be on surviving the next 4-6 months, so projections and monitoring will be key.

  • Develop management reports that let you focus on the most critical issues
    • Create a detailed weekly 10-12 week rolling cash flow budget
  • Monitor cash, A/R and billable hours daily
  • Run multiple iterations of your budget and monitor them weekly/monthly

Communicate, Communicate, Communicate

You, your team and your clients have all been adapting to a tremendous amount of personal and professional change as a result of the COVID-19 pandemic impacts. Since most people are working remotely (many for the first time) and meeting face to face is currently not an option, finding other ways to stay well- connected are critical.

Internal Communications:

Schedule daily or weekly team calls (via video, ideally) to check in with your people. Having a routine touch point will help them keep connected to each other, your clients and the firm itself. Eat lunch or breakfast together or hold a virtual happy hour. Ask your people for input into the format and schedule that works best for them.

Update your people on firmwide developments. Be as transparent as you can. Hold video town hall meetings. Let them raise questions and concerns while you keep them engaged with the firm’s essential mission of providing value to your clients.

External Communications:

Call your clients and friends in the business community. Ask them how they are doing. Share what you’ve been experiencing both on a personal level and within your firm. Show empathy, listen well and above all, be genuine. Consider scheduling complimentary 15-minute conversations with 10-20 of your best clients, referral sources or peers each week to share your particular areas of expertise and brainstorm together.

This is probably not the time to aggressively pitch new business. Rather, taking the time to freely demonstrate your knowledge and approach (with the reassurance you won’t be sending a bill for your time), you will surely strengthen and expand the relationship. Down the road, that personal investment of your time might pay unexpected dividends.

Without a doubt, this is a uniquely challenging time and we don’t have a crystal ball to know when it will end. That is unsettling for us as humans on a fundamental level, but the better we are all able to adapt, the better position we will collectively be when we all come out on the other side.

For regulatory updates and other information on running your firm through disruption, visit our COVID-19 Resource Center.

April 07, 2020

Stay In Touch

Sign up to stay up-to-date with the latest accounting regulations, best practices, industry news and technology insights to run your business.

Author
Kendra Edson - Manager, Consulting - Los Angeles CA | Armanino
Manager
Resources
More News and Insights
Webinars
Webinar
See how to say goodbye to 2020 and start 2021 with a successful accounting strategy.

December 10, 2020 | 1:00 PM - 2:00 PM PST
Webinars
Webinar
Understand next steps and important developments.

December 10, 2020 | 9:00 AM - 10:00 AM PST
Webinars
Webinar
Phil Sanderson discuss the current state and possible future of the gaming industry.

December 7, 2020 | 11:30 AM – 12:30 PM PST