In today’s business climate, a CFO should be considered a necessity and not a luxury when operating a law firm. While it might not, at first, make sense to hire one for a smaller practice, CFOs handle vital duties that lawyers may not have any knowledge of. After all, a lawyer’s job responsibilities should be handling what they know best – the practice of law – rather than dividing their focus and conducting business and financial matters.
Still, it can be challenging to know when to bring a CFO on board, and the benefits may be somewhat nebulous to those who aren’t necessarily familiar with the position. Here, we at LevLegal answer the question about why law firms need to consider and look at hiring a CFO seriously.
How Can Hiring A CFO Help?
A CFO will typically provide support and handle financial reporting, including profit and loss statements, balance sheets, managerial reports, and cash flow. Additionally, their duties include banking activities and cash management, and they are responsible for capital management and allocation.
If your law firm is looking to grow, it’s vital to have a CFO on board. A CFO frees up lawyers to practice law rather than focus on running their business and the finances involved. By hiring a CFO, a law firm understands and handles how to allocate resources and project revenue best and make better data-driven decisions.
A CFO takes the guesswork out of financial matters and usually supervises a firm’s bookkeeper and tax preparer; they also help manage the day-to-day work involved, ensuring that everything runs timely and efficiently.
Know When To Hire A CFO
There are a few different signs to watch for that can signal that it’s time to hire a CFO. These include:
When your bookkeeper is unable to answer questions that the partners in the law firm might have;
When members of the law firm don’t understand the advice given by their tax preparer;
When your law firm is bleeding cash;
Or if the law firm is looking to or planning on growing in the near future.
If you’re starting to feel that financial aspects of running a law firm are beginning to get outside of your control – or you have more questions than answers – a CFO can help. Hiring a CFO for your law firm can help smooth out the financial process and increase profitability and productivity even for smaller firms.
The freedom that a CFO provides a law firm is key to their importance. With a CFO in place, you can stop stressing out over the financial minutiae and instead focus on more critical, such as high-level management and decision-making.
There are options for hiring a CFO, and you don’t necessarily need to bring someone on full-time in the office. Particularly in the case of smaller law firms, a good virtual CFO or controller can do the job just as well, if not better. When evaluating what option works best for your law firm, it’s essential to look at your firm’s cash flow rather than the number of attorneys working there.
When hiring a CFO, you want to look beyond just handling financial transactions. You want someone who has entrepreneurial qualities and understands your business – how you acquire clients, how clients are serviced, and how revenue is generated. You also want someone who will fit well with the firm’s general dynamic, so it’s essential to evaluate their soft skills.
Without a CFO, the financial matters fall either to you, as head of the law firm, or delegated to a partner who will need to dedicate significant time and resources that could be better served elsewhere. Whether you’re a small law firm looking for options or a large firm looking for assistance, LevLegal is here to help. We offer full-service law firm consulting, including offering virtual law firm CFOs. Let us help you find the CFO option that’s right for you.