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Policies and Procedures

If you tried to fly an aircraft full of passengers, without clear-cut policies and procedures (which are adhered to strictly and without exception), sooner or later you would have a number of air disasters on your hands! People would die and airline companies would quickly go out of business as people took to travelling by rail or road as the safer alternatives!

Running a business without clear cut policies and procedures does not have quite the same dire consequence from a loss of life perspective, but the business consequences can be just as dire and inevitable!

Policies and Procedures + Systems
As it is our business to implement Practice Management Systems into the SA Legal Market, we are routinely surprised at the absence of clear policies and procedures when it comes to the daily running of various legal businesses. There are two sides to this issue. On the one hand management have to decide what they want to control and who must control it. On the other hand you have to have systems which will enable you to implement the various policies and procedures. Many systems are just not designed to sufficiently accommodate such control. We are proud that GhostPractice has specifically been designed to enforce the various policies and procedures that should ideally be instituted at every practice. What is more, we learn from our clients every day and our system development always reflects our never-ending desire to improve the business performance of every GhostPractice client.

The areas that are in need of policy and procedure are numerous. Below I will explore some of the common processes; the policies and procedures that relate to those processes and some possible consequences we have observed from poorly implemented policy and procedure:

Process: Taking on new clients
Policy and Procedures that need to be defined

  1. Every new client should fill in a form (either on-line via the practice web page or in writing at the practice reception).
  2. Management should be aware of each new client “application”.
  3. Each client should be issued with a welcome letter and reference information.
  4. Management should always be personally involved in welcoming new clients on board.
  5. The client information should be captured centrally into your practice management system.
  6. The procedure should include a conflict check; check for duplicates etc.
  7. FICA checking has to be done!
  8. Obtain a clear mandate from the client and set expectations on billing. Do it in writing.

Consequences of poor procedures and systems when taking on new clients

  1. Without a formal; controlled process, individual attorneys can do work for the firm’s clients, invoice them and collect the money into personal accounts without management knowing about it (this is based on real examples where this has occurred).
  2. The firm could unwittingly violate a conflict of interest.
  3. If multiple client accounts are opened for the same client (a very common occurrence) then your management reporting will be difficult to automate. In poorly applied practice management systems it is often the practice to open a client account for every matter handed to the firm. A new matter for an existing client should always be linked to the existing client account.
  4. If FICA is ignored or applied haphazardly, you open yourself up to the risk of a R10 million fine…say no more!
  5. If there is an unclear mandate, clients will query fees and push for discounts based on the lack of clarity on this issue. Cash flow will be affected.

Process: Billing clients
Policy and Procedures that need to be defined

  1. Whose responsibility is it to raise fees? When a letter is dictated, should the attorney record the fee or should the secretary record the fee when she types it?
  2. You should be setting department defaults for billing but also allow for matter level settings so that you have flexibility.
  3. Make sure there is a monthly review of not only fees; but any Work in Progress or Unbilled work. How long is it acceptable in each department to have unbilled work go unconverted?
  4. How are disbursements processed? There should be a controlled and efficient process in place to ensure that all disbursements are processed and billed out to clients immediately. Reports should highlight where this process has failed or taken too long.
  5. Billing processes need to be refined and automated where possible. Staff should be mandated to bill easily for common processes like emails; telephone calls. Bulk, end of the month billing should be outlawed, let alone discouraged!

Consequences of poor procedures and systems when billing clients

  1. If it is not clear where the responsibility for raising the fee lies, then the fee will not get captured!
  2. Each department will have different methods of billing clients (e.g. Conveyancing on registration; RAF on conclusion of the matter; Litigation monthly or on milestones; Collections on payment from the debtor etc). Not having these defaults set and applied via your system can lead to poor cash flow (the number one killer of all businesses).
  3. If you don’t look at your age analysis, you will never consistently collect your money. Equally, if you don’t look at the age of your work in progress you will needlessly drag out the ultimate collection of your money and kill the business.
  4. Before you have something to review, you need to make sure staff have the tools to easily capture the most common, production intensive fees. Then you have to enforce the system and make it a non-negotiable measure of staff performance. If it’s not in the system, it doesn’t exist. Let this become your maxim and you are on a path to better management!

Process: Receipt of money
Policy and Procedures that need to be defined

  1. The first and non-negotiable rule is that all money received must be received into the firms trust account and then transferred against fees raised.
  2. The processing of receipts should be accompanied by a system driven notification to the person responsible for the matter. The more people aware that money is being received and allocated, the less likely a mistake or fraud is possible.

Consequences of poor procedures and systems when receiving money

  1. Falling foul of the law society and fidelity fund regulations and requirements could end in the closure of your practice.
  2. Systems should make the process visible and efficient. With system based notifications, users will quickly identify the miss-allocation of a receipt. Without such system awareness, you will have irate clients to deal with and an administration nightmare (especially where there is a large volume of receipts going through the firms trust account).

Process: Payment requisitions and payments
Policy and Procedures that need to be defined

  1. This is clearly where things can go horribly wrong from a fraud point of view. Partners need to be signing off all requisitions and matching these requisition to payments made from the system as well as matching these payments made to the daily banking. Delegating the checking of this procedure is hugely risky. With the right reporting in place, this can all be accomplished daily in a matter of minutes and everyone can sleep well at night!
  2. The trick is to make the process efficient without losing your controls. A good system should enable the requisition to be captured by the secretary. The requisition should be printed from the system without any recapture. It should be signed and then, once signed by the partner; it should be processed by the bookkeeper or partner (again they should not have to recapture any detail if it has been approved).

Consequences of poor procedures and systems when dealing with payments

  1. If the process is not checked and balanced daily, you are open to fraud (bookkeepers or secretaries alike can change the bank account number on the clients invoice or process to a personal bank account).
  2. If you aim to delegate this totally, then the procedure can become cumbersome and time consuming.

Process: Collecting your cash
Policy and Procedures that need to be defined

  1. The question of who is responsible for making sure clients pay must be clearly set.
  2. Fee earners and especially the partners cannot abdicate their responsibility here. Collection of outstanding money should only fall to accounts once the fee earner has exhausted all possibilities.
  3. The system needs to provide simple reports and tools to make it easy for the fee earners to call on clients for outstanding payments.
  4. Collecting the cash starts with effective fee debiting so needless to say, as set out above, the fee debiting process needs to be clearly set.
  5. There should be consequences for over-reaching and debiting unrealistic fees. If the money cannot be collected then it is likely that your fee procedure/policy has failed you.

Consequences of poor procedures and systems when collecting your cash

  1. Lack of responsibility leads to a lack of accountability. No one is to blame, but nobody gets paid either!
  2. If fee earners don’t take responsibility for their fees, then a credit controller or bookkeeper cannot perform miracles when trying to collect the debt. Everyone loses.
  3. Poor fee debiting procedures leads to poor cash flow.
  4. Without consequences for poor practice, you will have overstated income and under achieving cash flow!

The above are just a few examples of where you should be looking to institute effective policies and procedures. You need to do this using the systems you have. If you find that any of the above is difficult to implement with your current systems OR if you would like to implement the best possible procedures with the best possible system, then perhaps you need to give us a call. We can supply the Practice Management tools which will help you to effectively write your own Policy and Procedure Manual for your business!

If you would like to discuss any of the above points, please feel to contact me at matthews@korbitec.com or on 082 568 4738.

Yours in Law

Matthew Spagnoletti
GhostPractice

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