Think about it this way: Your high-value legal administrator might be your highest value employee, especially if they have been with the firm for a long time. They’ve been around long enough and done enough tasks to know how the business operates on a microlevel, sometimes in ways even you might not know.
First impressions matter. In a service-based industry, the client experience is the business, and your legal administrator is a critical touchpoint. They set the tone for engaging with prospective, new and existing clients, both directly and indirectly, by setting the tone for the office as a whole. They are scheduling office happy hours, arranging lunch deliveries, and generally doing an untold amount of invisible labor to keep the office running smoothly.
And then there’s bookkeeping.
Legal administrators often serve as a one-person, in-house finance team. They keep up with bills — both accounts payable and receivable. And if clients don’t pay on time? They’re the ones on the phone, making sure that cash is still coming in.
This also means the administrator is reconciling the books on a monthly basis and presenting historical financial reports to the partners, which understandably takes some time after month-end. By the time partners get the reports — often weeks later — it’s too late to make course corrections if there’s something problematic, such as a dip in cash flow. This information is essential when you’re trying to understand if you have the right amount of work in the pipeline, or if you need to bring in more business. It’s also crucial to understand your real-time financial picture before deciding on the size of your partner distributions (or you risk over-distributing and then needing to draw on a line of credit).
THE BENEFITS OF HIRING A CFO TO WORK WITH YOUR OFFICE MANAGER
When a legal administrator is wearing all the hats, the risk of burnout is real. Bringing in a specialized financial team provides your office manager with a partner, allowing them the bandwidth to concentrate on all the things you thought they would do originally, before they took on the financial piece. Even after you hire a virtual chief financial officer (CFO), the legal administrator will still be involved in the finances — but the full weight of that responsibility is off their shoulders.
“When your legal administrator is wearing all the hats, the risk of burnout is real.”
By the same token, bringing in a specialized finance team also comes down to helping your business expand and grow. Part of growing and scaling your business means being intentional with who does what, and why.
When you hire a CFO to work with your legal administrator, you get:
- Timely reporting: If a firm waits a month to run the latest financial reports, then firm leadership is going off of information that was relevant four weeks ago. I’ve seen this happen: You might look at your cash account and see hundreds of thousands of dollars, but when you reconcile, you end up with a fraction of that amount. If, in the meantime, you’ve made an overly generous distribution, you risk running out of cash and needing to tap into your line of credit.
- Forward-looking financial reports: Timely reporting is just the first step. You need to use your up-to-date reports to produce forward-looking statements that anticipate bumps in the road. That requires a specialized finance team, which goes way outside the realm of an administrator’s skill set. Asking someone to master both is a recipe for burnout.
- Separation of duties: It’s considered best practice to have a third-party review account reconciliation for payables and receivables. When the same person in the office is issuing or depositing checks and reconciling the books, that leads to potential mistakes, mismanagement and, in the worst case, fraud. Often it falls to a partner to review these transactions, but again — if the person reviewing the books has other priorities, it’s unlikely this will be done to standard.
When you hire an outsourced financial professional, expect a period of internal adjustment (or, let’s be honest, growing pains) as your office learns to work with the new team and vice versa. But after onboarding, the legal administrator benefits from the ability to focus on the parts of their job that they do best. Because, at the end of the day, if you can’t find and keep good people to work for you or serve your clients, all the bookkeeping in the world won’t matter.
