The Un-Billable Hour
Christopher T. Anderson has authored numerous articles and speaks on a wide range of topics, including law...
This episode’s discussion around the Community Table:
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The Un-billable Hour Community Table, where real lawyers from all around the country with real issues they are dealing with right now, meet together virtually to present their questions to Christopher T. Anderson, lawyer and law firm management consultant. New questions every episode and none of it is scripted. The real conversations happen here. Our first question comes from lawyer who wants to stop outsourcing his firm’s bookkeeping.
Jason: So, what I want to do is I want to bring all our financials in-house so we’re outsourcing our bookkeeping. I do have a billing manager and I want to start bringing everything in-house. We have an external CFO, fractional CFO through HTM but really want to look at what we would need for our firm as we move forward to 2023 and kind of just get your perspective on: one, if it makes sense to do this; and number two, if it does make sense, what do you see it’ll be and I don’t know if that means (00:01:34) internal CFO or controller. What level do you bring something like that in? I’m not happy about how things are operating being outsourced but I also want to make sure I protect the firm, I protect me and my family from a — I know one of my colleagues had their billing person embezzle over $200,000.
So, I’m positive that as well. So, I’m kind of — I’m not talking about today or tomorrow. I’m talking about like planning for business plan for 2023. If it doesn’t make sense, we did do that or if it does what does it look like?
Christopher T. Anderson: Okay, it’s not an all or nothing proposition, first of all. And I think it’s really important to adjust the controls and the team to the scale both in dollars but also in number of transactions. if I am recalling your business well Jason your average transaction number is fairly high.
Jason: Case value is about 35,000.
Christopher T. Anderson: Yeah, so, your number of transaction is not tremendous. You’re dealing with as far as revenue transactions are concerned or probably expense transactions. What’s the size of your team?
Jason: Five attorneys.
Christopher T. Anderson: Total team?
Jason: 15 employees.
Christopher T. Anderson: Okay. So, the way I think about this is right, but first of all, there’s three levels of financial control people, right? You’ve got your bookkeeper level, you’ve got a controller level, and you got your CFO level and that your size business it doesn’t make sense to have three FTEs. One in each of those roles. Interestingly, like one of the harder ones to fill with quality people is the lowest one. A good quality bookkeeper so you don’t screw stuff up are actually relatively hard to find. The controller level I find is the easiest to find and then the CFO is sort of in the middle. What I would think that you need at this stage is like, so if you, when you talk about bringing it all in-house, you probably need a full-time controller and a part-time bookkeeper that the controller runs and you need strong financial controls.
The CFO role is fractional and doesn’t need to be in-house yet at that size. You just don’t have enough for a CFO to do. You want a good — because a good controller can fill some of those roles. There’ll be some that are missing. You won’t get the risk management part of a CFO. You won’t get the strategic tax planning part of a CFO with the controller, but I think you can maintain that outside the business, or you can possibly find, if you can find someone who’ll do it as a fraction for you. You could might keep a quarter or a 20% CFO busy but that’s about it. But a good controller should be able to cover for you for right now.
The real important thing and for all of us that are afraid of the embezzlement thing is like just the financial controls. It’s not so hard to put the financial controls in place that make that kind of thing impossible or next to impossible. The two things to keep in mind, one of the triangle of fraud and just always keep that in your top of mind so that you’re never taken by surprise by it.
Jason: Can you remind me what that is? I’ve heard it before.
Christopher T. Anderson: Yeah, you’re putting me on the spot too. The triangle of fraud involves: one, an uncharitable need. Right? So, somebody in your team has an unshareable need that would cause them to do something that wouldn’t normally do. Gambling debt, drug problem, family member in trouble, something bad happens but they can’t talk about it.
Two, is opportunity. There is something in your business that allows the fraud to happen. This is the one we can control the most. So, the unshareable need we can sort of control by making sure that people know that they can come to you — anything bad happens, like they can come to you in a confidential way but the truth is that they might not believe you and it’s really hard to instill that level of trust among your whole team. You can target certainly the people who have the most access, right? To make sure that they’re really clean on that. But that’s harder and what’s easier is controlling the opportunity.
The other, the third leg of the triangle of fraud is the rationalization. And this one is pernicious, right? So, the third triangle of fraud is what people can — they will justify or rationalize their action in one or two ways. One, I’m not stealing. I’m going to take it out for a month and I’m putting it back, nobody’ll notice, no harm, no foul and it won’t be missed and so, I’m not doing anything wrong. The other side of that is the rationalization of _____, he doesn’t need it, I do, _____. I work my ass off for him and I deserve this. Either one satisfies the rationalization leg of the triangle.
The one you have the most control over is opportunity, right? And that will — because you can kill that one. So, for instance, my controller does not have a credit card. My controller is not allowed to make deposits, right? So, my controller does reconcile. So, you can flip these around, right? So, if you let your controller have deposit making authority then he can’t reconcile or she can’t reconcile. So, my controller does reconciliations, but my controller cannot spend, does not have check signing, does not have credit cards, does not have any ability to spend and he’s doesn’t have any ability to make deposits. So, what is my gap? There’s always a gap. My Gap is he could redirect incoming money. That would be really hard because the other mechanisms would kick in. The client would know that their bill hasn’t been paid because the reconciliation would fail. So, that’s how I keep those separations. You can divide them up any way you want. You can never let deposits and reconciliation go together. You can never let spend and reconciliation go together.
So, anyway, those are some rules for controller but as far as bringing it all in-house I think — I’m sorry, I think I’m dancing around it a little bit but I think your question just sort of — your question presumes unnecessary things. I think you can bring everything you need in-house but you probably don’t want to bring the CFO level in-house because the quality of CFO you will get for what your business is recommended spend at that role like you get a shitty CFO in-house and you may as well not have when your controller can serve as your shitty CFO. So, you better off still having an outsourced CFO. Like a magic number for an in-house CFO.
Jason: That was my next question.
Christopher T. Anderson: Full-time, five to seven million.
Jason: Okay, because we’re in a run right now. Five million.
Christopher T. Anderson: Okay. So, you’re getting there, but your transaction number — what’s your profit percentage?
Jason: We’re probably at about 22 to 23%.
Christopher T. Anderson: So, you probably want to lean more towards that seven-million-dollar number, right? You’re a few billion dollars away but you’re close, right? So that’s why you’re feeling the need. I just — do you want — right now, do you have a line item for a 250 to 300 thousand dollars CFO?
Jason: Right now, no, but that’s why I want to know what I need to know is three to six months so I can start planning for it. That’s kind of — I’m trying to get —
Christopher T. Anderson: So, I would think like when do you think you’ll cross that seven-to-eight-million-dollar line?
Jason: I’m hoping we’ll do seven million dollars this year but there’s a lot of things that have to happen. We’ll be at the 10 million run rate by the end of this year for sure.
Christopher T. Anderson: By December?
Jason: Yeah, absolutely.
Christopher T. Anderson: Then you should start recruiting for a CFO in September.
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For our next question, A lawyer is struggling to find successful job applicants through the use of online job boards.
Female: Okay. So, here is my trouble for about the last six weeks. I’ve hadn’t add out for a new lawyer, because Jenny, my senior associate left – you know what, probably the first three weeks, we had a minimum amount of pay being about $75,000. So, I moved that up to $100,000 as the base pay. Still can’t get any –
Christopher T. Anderson: First of, what are you doing?
Female: We’ve got it on LinkedIn. It’s through HR Partners so they loaded it on LinkedIn.
Christopher T. Anderson: The big job boards.
Female 1: Yes. And we’ve sent it to some of the law schools, the local law schools, but we’re asking for experience, of course. At a minimum of experience.
Christopher T. Anderson: I’ve given up sending it to law schools. That’s been a dry hole for a while for me. It used to be something good and it just isn’t. I just don’t think that the lawyers are going there anymore. What that is complete conjecture on my part but it is what it is. I haven’t verified that but it is a dry hole. Again, I’ve used law schools across the country and it just hasn’t been working.
One of the things I will recommend that you do if you haven’t done because somebody else on this call was with me when we did this on — using a distributed – a syndicated job-hunting board that like pushes it out to a bunch of it like – so, like the one that you’re using and we actually went to the platforms and ran and just look for a job and we were shocked at what we saw. The job was misquoted. There were reviews of the business that were really shitty, but they weren’t of the right business. Like they had said Anderson Law Firm but it was the wrong Anderson Law Firm. So, like people were coming on Indeed and on Monster and on Zip and hitting this add and looking like, oh shit, I don’t want to apply there. And we would never like — just because you’re using syndicator like you would never have known. There’s no reason to know that. It was just like why is volume so low? Well, you know, maybe that. So, if you haven’t done that, do that and make sure that the dollars that you’re offering are out there and what not.
Female 1: Okay.
Christopher T. Anderson: The other fact of the matter is right now, bizarre as it may seem because everybody remembers like a year ago when all hiring was really hard. The paraprofessional market has loosened up. There’s lots of admin staff, there’s lots of paralegals, that’s loosened up. The attorney hiring market is still tight in the traditional job board search. If you’re really looking, you’ve got to headhunt. Like doing the equivalent of a Google ad isn’t working, right? So, the pool marketing isn’t working for attorneys. You’ve got to go find them or get someone that will and they’re hard to find because one, let’s face it, out market is too small to really attract good recruiters. And so, you got to find little recruiters that are actually doing a good job and most of them aren’t. Like, in by a good job, I mean, finding people who have jobs and weren’t thinking of moving or at least not out loud, right? And that but who might not be happy.
In your line of business, of course, you’ve got sort of the built-in. I don’t know how much you’re using this but you’ve got the built-in pool of people in public defense and DA’s offices.
Female 1: The hard part there is the people who just sat for two years and got paid. It doesn’t look very good to go out into the cold cruel world where you could — you know, another COVID roll could keep them home for another six months without having to work.
Christopher T. Anderson: Yeah. But they also like — I think people are seeing the (00:15:00). They’re saying let’s get out there. But you’re right. I mean, people are scared to move right now. So, you got to go them and you got to show them why they want to. And so, my last point to you I think on this is recruiting is marketing and we have to follow all the rules of marketing. We have to follow the five commandments of marketing. We have to determine what the role is worth so we can say what the ROI is on our spend. And we have to remember the most important rule which is people don’t buy fats, people by emotion. So, is your marketing copy replete? Because the job boards don’t like you to do it but is it replete with why with your mission. If it’s not — if it’s like when you go to some of these — and I don’t know anything about the recruiter you’re using so I’m not speaking about them. They will have bots, your copy or give you preferred copy that they say works and they’re full of shit.
Female 1: Right. We didn’t do that. We got our copy and I think I haven’t had a little feedback that it sounds like it’s a really great place to work but you better work really hard. So, I think it’s got to be a little more purpose driven enough that we did. Finding enough person who does want to fight, who really does want to fight and wants the ability to fight without being shut down. We’re still fighting the case because it’s the right thing to do not necessarily because they need to finish it and move it.
Christopher T. Anderson: If that’s your copy, I need to work with you.
Female 1: I know, that’s not my copy but it is more of the situation that we want. We would have feel like they can come in and really change people’s lives by fighting.
Christopher T. Anderson: So, here’s the other thing. So, criminal attorney Atlanta. What are you actually advertising in?
Female 1: Probably Murrieta. But yeah, I’ve heard the prosecutors are making like over $100,000 a year which I’m surprised.
Christopher T. Anderson: You’re also invisible.
Female 1: There it is right there.
Christopher T. Anderson: There we go. So, you’re not too bad. It says a hundred so that update has been made. Yeah, there’s nothing nearly enough mission here. I love that you want to get straight to the point. Everybody is fast paced and growing. (00:17:14) This doesn’t even talk about what you’re about. Why do you do this? I know your practice. You’re a passionate criminal defense lawyer. You have a mission and it’s not there. That ad wouldn’t piss anybody off or send anybody away. That’s how I know it doesn’t work.
Female 1: Okay.
Christopher T. Anderson: But it is like, if you don’t think about it as marketing, you’re not thinking about it right and that’s relevant for every single person that’s listening to this. Just like the two jobs of marketing are, one, to attract your ideal client. And number two is always to send everybody else the hell away. You’re recruiting ads should do the same thing. If it’s not sending people away, it’s a bad ad.
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Our last question involves a lawyer seeking help preparing the internal messaging to her team after firing an employee.
Female 2: So, I am firing my managing attorney on Tuesday, yey me. So, I need some scripting help with the messaging to the remainder of my team after I do that.
Christopher T. Anderson: Ding dong the witch Is dead, does that work?
Female 2: Probably not.
Christopher T. Anderson: What is the reason in your mind why this move needs to be made?
Female 2: There’s a whole lot of reasons. He’s a drama queen. He doesn’t hold people accountable because he has a need to be liked. The ultimate reason that was the nail in the coffin as to why it’s being done Tuesday is because he showed a sexually explicit video to another employee. There are so many reasons as to why he’s getting fired.
Christopher T. Anderson: Why are you waiting?
Female 2: Because I’m on vacation and I thought it would be irresponsible for me to fire him and then leave for a week.
Christopher T. Anderson: Okay. So, first of all, I believe so as far as scripting is concerned that in these situations less is more. I don’t think from what you’re explaining that your team will see this as arbitrary. The reason you want to explain it so the team doesn’t get afraid that you’re like starting to lop heads for reasons that have nothing to do with performance, but have to do with like your ability to pay, right? You don’t want people to be getting afraid.
From what you’ve just explained it sounds to me like nobody’s going to be surprised, right? If this person is a drama queen. If this person is showing sexually explicit pictures, like it’s not the first time. It may be the first time you heard about it. There’s plenty of reasons why that everybody knows why this person needs to go. And to me, the scripting, if I were in your shoes and I was making this change, my scripting would be very simple. I would get everybody to gather, this is a supervising person, this is a leadership person in the team. I just say, “Guys, from time to time, it becomes apparent that a member of the team does not exhibit the core values that I stand behind and that we all stand for. And I make a decision to make a change. I’ve made that decision regarding John. I don’t know his name. And so today or yesterday or whenever you talk to them, Friday was John’s last day. I certainly appreciate that most of you understand that that’s still a difficult decision to let – we’re small family and it’s difficult to let anybody go, but the path forward is to stand strong in what we believe. And so, we’re going to be looking to fill this role. And if anybody feels strongly or has any strong reaction to this, I invite you to set some time on my calendar. I’ll be glad to speak with you one-on-one. We are not going to have a group discussion about this because everybody has different feelings and different interactions with this individual and this could easily turn into gossip or using your word in a non-impeccable way and I don’t want to foment that but if you’ve got questions, concerns or whatever I’ll be more than happy to hear them. I’ll just hear them one on one.” That’s what I would say.
Female 2: Okay, that’s simple.
Christopher T. Anderson: Because you don’t want this to turn into a bitch season. and by the way, when you do this, look for and listen for people who come to you and say, oh my God, thank goodness. It’s been such shit show with him. But who didn’t come to you before because that’s a serious red flag as to those people. How dare people in your organization understand there to be such a problem with the business and yet not have the guts or the integrity to tell you because they don’t — that means that they don’t care, right? And quite honestly, those people when they show up from time to time in my business, they go on high on my watch list. When they say it, I say thank you very much, but I’ll ask them. Why didn’t you come to me earlier? Because the other thing I’m looking for is it something about me. Have I done something in the business to make people not want to come forward with that and that’s an opportunity to find that out but I’m also really careful about who those people are and why they didn’t why they wouldn’t come forward. Is that script help you.
Female 2: it was very helpful.
Christopher T. Anderson: Or like seriously, short and sweet. Details are not your friend here.
Female 2: Okay, got it.
Christopher T. Anderson: I’m happy to help more with that. All right.
Female 2: Thank you.
Christopher T. Anderson: You’re welcome. Thank you all for being here. It’s been a great episode of the Community Roundtable for the Unbillable Hour. This is the only time we’re doing at the last Thursday. This is always going to be third Thursday at 3. It’s so easy to remember. Third Thursday at 3 eastern time, 12 o’clock pacific. Take care.
Jason: Thanks Christopher.
Male: Thank you for listening. This is been the Unbillable Hour Community Table on the Legal Talk Network.
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|Published:||September 13, 2022|
|Podcast:||The Un-Billable Hour|
|Category:||Marketing for Law Firms , Practice Management|
The Un-Billable Hour
Best practices regarding your marketing, time management, and all the things outside of your client responsibilities.