Easy ways to maximise profit
As the cost of salaries and premises soar, Giles Murphy gives pointers on how to maximise your firm's profitability by using methods such as invoicing more frequently and getting fee earners to work one extra hour per week
Costs such as salaries, IT and premises are all becoming more expensive as medium-sized firms try to maintain their competitive position. This puts pressure on the bottom line, making it essential to get the best results from a firm’s existing resources. Many sophisticated business models can be applied to supposedly improve performance. However, there are some basic techniques that can help improve profitability, and demonstrate how small changes in practice management can have a direct and positive impact on profits, usually within a few months. Increased profits mean increased partner drawings – an objective of all professional firms. Although many firms may already have tools for monitoring their systems, they are rarely used to the full, and information might not always be acted on. After all, in many small- to medium-sized firms, the finance partner and his team rarely have the luxury of being able to concentrate exclusively on practice management. It is to be expected that if a client requests advice, this should take priority, so it is a good idea to periodically review a firm’s procedures and systems to maximise potential.Consider three of the most typical areas where small changes can help to raise profitability. Much of the following centres on agreeing realistic and definable targets with staff so that they take ownership for specific tasks. These targets should then be monitored and included in monthly management accounts so that the management team knows how each area is progressing.To illustrate, let us imagine a hypothetical firm with 30 partners, 60 fee earners, 30 support staff and a fee income of £15m per year with an overdraft of £3m.
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