Many law firms will undoubtedly see the benefits of having a good head of finance or finance director to oversee their finance function and for them to use the financial information to steer the firm on strategic matters. Unfortunately, many firms cannot justify the cost of employing such a person full time in their firm.
First and foremost, let’s be clear about what we mean by such a finance director (FD) function. A traditional FD will work with you to lead your finance and accounting function. In particular they tend to focus on building systems to monitor both inputs and outputs and report to key decision makers in a clear and meaningful way in order for the firm and individual fee earners to improve both performance and culture. They use their knowledge to stimulate and drive strategic thought to improve the firm, the processes within the firm and to achieve the objectives of the owners of the business.
Examples of services they provide include annual budgets, forecasts, preparation of monthly management accounts, monthly KPIs, regular feedback and coaching to fee earners on their own performance, proactive suggestions for improvements in KPIs, general queries and proactive support to name a few. In short, the role is varied and should be bespoke to the requirements of your firm.
The benefits are clear, although there is a cost of employing a person with the skills to undertake that role effectively. Many firms end up employing a head of finance, typically at a lower cost, without the necessary skills to assist strategically and the partners then need to analyse a mass of financial information which may not be relevant to the decisions that need to be made.
Firms therefore still have a cost but not the benefit. A solution that is growing in popularity in the legal sector is to outsource the FD function in order to lower the cost but improve the service. There are a number of benefits to outsourcing the FD function for your firm, including:
Certainty: here should be a clear scope of work set out at the start of the engagement that states exactly what work the external party will be responsible for, the timescales for delivery and the fee. This way your firm will know, with no ambiguity, when they will receive their FD reports, enabling key decision makes and fee earners to focus on their own core activity and client matters.
Flexibility: With an agreed scope comes the opportunity to adapt it as your firm adapts and goes through changes. Bespoke solutions should always fit the needs of your firm and nothing should continue in perpetuity without regular reviews.
Specialists: Outsourcing your FD function will mean you are getting expert help from specialists with technical know-how. Legal sector specialist accountants will have years of experience and a diverse legal sector client base that they will be able to draw upon for best practice knowledge makes them best placed to assist and advise your firm. The key here is this also allows your own specialists to work on what they know best and ensure they are utilised to the best of their abilities.
Clarity: Engaging with third parties for FD services will bring much clearer thinking to your firm. You will be getting unbiased strategic advice from people who are not caught up in the day-to-day running of your firm. The advisors will be able to look at the firm’s finances as a whole and also drill down by departments and/or fee earners to see where improvements can be made. They may also set targets to challenge and influence culture and performance.
Cost saving: Outsourcing is usually a cheaper option than employing a full time member of staff.
More and more firms are currently engaging with Armstrong Watson’s Law Society endorsed Legal Sector Team to provide them with the FD support that they need. Feedback from those firms is that their practices have been revolutionised as a result.
“We engaged the Armstrong Watson legal sector team to provide outsourced FD services and to assist us through a period of transition following the departure of our previous in-house FD. Their knowledge of the issues and bespoke recommendations have helped to refocus our management thought process and implementation of our strategy. Armstrong Watson has refreshed the output of our accounting function and that has allowed our management team to focus attention where necessary. We use their user friendly KPI focused information and this allows for a joined up approach with our strategy and informed management decisions. All in all, we are delighted with our decision to outsource our FD function and wish we had done it long before.”
Managing Partner, mid-sized law firm
If you would like to find out more about the FD services Armstrong Watson’s specialist Legal Sector Team can offer you, then visit our website or call Andy Poole, our Legal Sector Partner on 07828 857830.
