Whether you’re a solo attorney or the managing partner at a firm, lawyers are constantly trying to balance the practice of law and the business of law. It can be overwhelming to both advocate for your clients and be responsible for managing the firm’s profitability. Because of this, many growing law firms are turning to fractional CFOs to help them manage their finances and set them up for success.
What is a Fractional CFO?
A Fractional CFO is similar to a traditional CFO in that they are in charge of the law firm’s finances and work closely with its legal team and executives. However, a fractional CFO works at a reduced time commitment that fits the client’s needs. They can be hired on a part-time, contract, or retainer basis. Fractional CFOs typically work a hybrid schedule and attend law firm-wide meetings as needed. Although they are not a full-time member of the firm, fractional CFOs play a valuable role in financial decision-making.
What are the Benefits of Working with a Fractional CFO?
Two key benefits of working with a fractional CFO are cost and flexibility. A growing law firm may not have the budget to hire a full-time CFO, but it still needs financial leadership and guidance. A fractional CFO can help ensure the success of a growing firm by helping to manage finances and navigating complex capital structures — but at a fraction of the cost, based on the client’s needs and timeframe. A fractional CFO can continue working part-time, or their role can expand as the law firm scales.
Another benefit of working with a fractional CFO is experience. A fractional CFO is not a freelance accounting professional. They are a seasoned financial expert who has spent years leading law firms through financial challenges. They have the foresight to identify opportunities for growth and the vision to help protect the law firm and its team. Additionally, as a fractional CFO typically works with multiple firms and businesses, they have the experience of handling a variety of financial issues across several platforms.
What are Fractional CFO’s Services?
A Chief Financial Officer is pivotal to a law firm’s growth and success. They help optimize financial structures and performance while designing a roadmap for future opportunities and strategy. More specifically, a fractional CFO’s role at a law firm may include:
- Establishing clear financial objectives
- Assisting with software selection and implementation
- Creating a strategic financial plan
- Maximizing revenue as it relates to billing, collection, and staff utilization
- Reducing costs by streamlining processes and eliminating waste
- Advising on taxes, IRS compliance, capital structure, and regulatory issues
- Establishing budgeting and forecasting models
- Analyzing industry trends
- Monitoring the law firm’s compensation system
- Reviewing partner and associate bonus structures
- Providing guidance during a merger, acquisition, or sale of a law firm
When is a Good Time to Hire a Fractional CFO?
When a law firm works with a fractional CFO, the executive team can be confident that the firm’s finances are being managed, the team is protected, and the CFO is considering future trends and potential challenges. But what is the right time to reach out to a fractional CFO? Here are a few examples:
- The law firm has gotten so busy that the managing partners no longer have the time to handle the finances.
- The law firm’s books and other financial reports are in poor shape, or the law firm does not have a financial plan in place.
- The firm has an increase in clients but not profitability.
- The law firm has hit a financial plateau and needs expert advice on streamlining, cutting waste, and improving profitability.
- The law firm is looking considering a merger or other significant project.
- The law firm is restructuring or bringing in new partners and needs guidance on capital allocation.
Do any of these situations sound familiar? If so, it’s probably a good time to reach out to a fractional CFO.
Have Additional Questions? Contact 3sixty Consulting Group
At 3sixty Consulting, we understand the financial needs of a growing law firm. With years of experience and a vast knowledge of emerging industry trends, 3sixty Consulting Group can provide valuable guidance regarding your law firm’s most important financial decisions. We evaluate a business holistically, identifying underlying issues and key growth areas. Our goal is to help law firms sustain success over the long term. To learn how 3sixty Consulting Group can benefit your legal practice, please reach out to us at (404) 398-3888.