The Professional Evolution of the Law Firm CFO

The role of the law firm CFO is changing. Traditionally, chief financial officers have focused on budgeting, financial modeling, internal controls and tax information reporting as their primary responsibilities at law firms. However, today’s leading CFOs are using their technical expertise, critical thinking skills and leadership influence to drive performance and implement real change at their firms.

Here are three ways the role of the law firm CFO is changing.

• Today’s CFO is a strategic partner.

The CFO is a key member of the firm’s strategic planning team. As a leader working closely with the managing partner to formulate a vision for the future of the firm, the CFO brings invaluable analytical skills and an intimate understanding of the firm’s financial picture that can help shape the change agenda. As a manager implementing the strategic plan, the CFO’s ability to create a detailed implementation timeline and execute according to management’s vision is critical. The CFO should “gut check” the plan to confirm that the desired future financial performance is realistic for the firm and consistent with current and projected market conditions.

• Today’s CFO goes beyond cutting costs.

Typically, CFOs would respond to economic pressures by cutting costs, perhaps squeezing suppliers and vendors, reducing staff or freezing spending. While cost reduction measures are still an important part of a financial and performance improvement plan, today’s law firm CFOs dig deeper to look for different ways to impact the bottom line. They contribute strategic ideas, such as geographic expansion, analysis of top and bottom line profitability by service line, financial due diligence in connection with M&A activity, formulating the economics around compensation packages for lateral hires, and they take initiative in all aspects of the firm’s operations that could positively or negatively impact profitability.

• Today’s CFO embraces technology.

Technology is changing the way law firms do business at all levels and many successful CFOs are increasing the use of more robust data to measure and improve financial performance. Although the legal industry still lags behind other industries on the technological front, leading law firms are embracing the power of digital. The 2016 Report on the State of the Legal Market shows that upper-tier law firms (those with better overall financial performance) have significantly outpaced lower-tier firms in several important categories, including the implementation of technology to improve practice management and operational efficiency. The report data suggests that law firm leaders and “firms that are proactive in pursuing new strategies … are more likely to achieve stronger financial results.”

Law firms that want to prosper in the current hyper-competitive market, “will need to seriously address the inefficiencies and unnecessary costs that have become deeply embedded in the way most firms operate,” according to the report. Today’s top CFOs are leading the change that will enable their firms to evolve and thrive in today’s legal market and in the future. The combination of having the leadership and vision of a change agent along with the planning and organizational skills of a project manager will position law firm CFOs for success.

Contact us to learn how Kaufman Rossin helps law firm CFOs to make a greater impact on the future success of their firms.