Outsourcing your law firm’s finance function may feel like a scary step to consider.
Firms fear a loss of control, heightened risk of breaches, and security issues.
However, says Alex Holt, the reality is very different and if firms ask the right questions and choose the right outsourced solution, there are significant benefits to be achieved.
Here are some key areas for you to focus on when considering that option:
It’s important to carefully examine the technical expertise of the outsourcer. For the cashiering expertise, ask to speak to two or three other firms who have used their services, and check there have been no problems. Don’t forget to also investigate their experience of utilising the specific practice management system that your firm uses. A good outsourcer will have a breadth of experience with your system and will be able to lend expertise on the use of its accounts package. If they don’t, things can very quickly become messy.
That technical know-how can also be crucial when your firm wants to analyse management information. An outsourcer should always give you sufficient resource (but not excessively charged resource) to make sure postings and money transfers happen in real-time, and without backlogs.
Making your financial data work for you
Coupled with these up-to-date postings, the accurate inputting of data and proper system usage will underpin the reports you take from your system. If you can’t trust the data, how can you make informed business decisions? Once you have the data, are you able to analyse it? The best outsourcers have management accounts capability and can produce packs that ‘interpret’ the data for you.
Reducing risk and your risk profile
Make sure their internal and external fraud measures are robust. They should have appropriate accreditation (The Cashroom have Cyber Essentials Plus) as well as ongoing training regimes for their cashiers to keep the knowledge up-to-date. They also need rigorous recruitment, monitoring, and supervision processes for their own people.
Bear in mind that your Professional Indemnity Insurers will be interested (they already are) in the make-up of your finance function. PII brokers and insurers recommend us due to the improved risk profile we create, and firms using our services will receive more favourable premium reviews as a result than if they kept the function in-house or outsourced to other providers.
The risk profile extends to areas such as payroll and completion of statutory accounts, and again the best outsourcers of finance functions will be able to provide these elements with similarly robust security and efficiency.
Outsourcing should never be an all or nothing choice
There are softer elements to this decision. You should make sure that the outsourcer will give you a designated key team of people with whom you can build a working relationship. Otherwise, you will be working with a faceless machine. It is also very possible that you have staff already providing some elements of your finance function, and a good outsourcer will absolutely be able to work in concert with the in-house resources on an ongoing basis.
We have many clients where we work alongside the in-house team, and our flexible scalable resource is seen as invaluable in providing the support they need. This can especially be the case for firms in a growth phase, who have a core team that needs augmenting, or where a spike of activity is likely that may overwhelm the firm’s internal capacity.
There are many elements to consider when deciding on outsourcing your finance function, but maybe the best place to start is to find an outsourcer who will engage you, understand your concerns, provide concrete reassurance, and give you the confidence to entrust this vital area of your business to them.
Finance outsourcing for law firms as part of re-imagining a law firm is never as scary if you feel like you’re in this together.
Alex Holt is Director of Business Development at The Cashroom. He spent a number of years as a partner in a top 50 law firm, before co-founding a specialist legal sector executive search business. More recently Alex headed up the strategy for a global IT outsourcing business to enter the legal sector. He joined The Cashroom in 2014, taking the company into England and Wales and leading new market and product exploration.