In this blog, we discuss the importance of managing case costs and financing resources for plaintiffs law firms, featuring insights from Tim McKey, CEO of  Vista Consulting, who authored this article.

As plaintiffs law firms experience growth and witness an increasing number of cases, they encounter a challenging balancing act. First, they must skillfully manage the customer experience through increased intake. Then they must manage an uplift in case costs by securing the necessary resources to support this expansion.

Challenges of Managing Case Costs

Navigating the complexities of managing case costs and the irregular cash flow associated with case settlements presents a significant challenge for growing plaintiffs law firms. These costs can vary widely, encompassing everything from administrative expenses to the fees associated with acquiring expert testimony. Given the nature of contingent case revenue, it’s crucial for firms to develop a strategic approach to case cost management. This not only ensures financial sustainability but also positions the firm for successful outcomes.

Here are three challenges plaintiffs law firms typically face in managing case costs effectively:

1. Rising Case Volumes: As plaintiffs law firms take on more cases, tracking and managing case costs becomes increasingly challenging. Each case brings its unique expenses, and overlooking any detail can impact the firm’s profitability and compliance.
2. Cash Flow Strain: Financing case costs can strain a firm’s cash flow, especially when multiple cases are incurring costs simultaneously. The need to cover court fees, expert witnesses, and other expenses can create financial pressure.
3. Resource Allocation: Allocating the right team members and financial resources to each case is essential to ensure that no case falls through the cracks.

Options for Building Out Accounting and Financing

To effectively confront these challenges, plaintiffs law firms must adopt a sophisticated and proactive strategy for their accounting and financing mechanisms. This involves not just the diligent tracking of expenses and revenue but also the implementation of scalable financial practices that can adapt to the firm’s evolving needs.

Here are some impactful strategic options that plaintiffs law firms can consider:

1. Start with Outside Resources: For smaller and growing firms, it may be prudent to initially engage external accounting and financing experts. These professionals can help establish robust accounting practices, track expenses, and navigate the complexities of case cost financing.
2. Fractional CFO: As the law firm continues to grow, bringing in a fractional CFO can be a strategic move. A fractional CFO can provide specialized financial guidance and support while allowing the firm to maintain flexibility in its resource allocation.
3. Hire a Full-Time CFO: When the firm reaches a certain size and complexity, hiring a full-time CFO becomes a viable option. A dedicated CFO can lead the financial department, streamline accounting processes, and offer strategic insights for sustainable growth.

When to Consider Each Option

The decision largely hinges on the firm’s current size, financial health, and the complexity of the cases it handles.

• Start with Outside Resources: This is a suitable option for smaller firms just embarking on their growth journey or those looking to strengthen their financial practices. It provides immediate expertise without the long-term commitment of a full-time hire.
• Fractional CFO: When the firm’s caseload and complexity begin to increase, a fractional CFO can offer specialized financial expertise on a part-time basis, providing the firm with a cost-effective solution.
• Hire a Full-Time CFO: As the firm continues to expand and manage a high caseload, transitioning to a full-time CFO may be necessary. This step is ideal when the firm requires dedicated financial leadership to oversee all aspects of its operations.

Case Cost Financing: Unlocking Growth Potential

One transformative strategy for managing case costs and financing resources effectively is to explore the range of case cost financing options available in the legal industry. For more details, read the blog “Understanding Law Firm Funding Options: Contingency Fee Law Firms”.

By strategically partnering with reputable financing providers that specialize in legal funding, plaintiffs law firms can not only free up valuable capital but also benefit from tailored financial solutions. This approach enables firms to reinvest freed-up capital in crucial areas such as hiring top legal talent, expanding their operational capabilities, and implementing innovative technologies. Through case cost financing, law firms can attain financial flexibility.

Leveraging Technological Advancements for Strategic Growth

The journey of growth for plaintiffs law firms comes with unique challenges in managing case costs and financing resources. By proactively addressing these challenges and investing in the necessary resources, plaintiffs law firms can position themselves for sustainable growth and long-term success amidst the evolving legal landscape.