Measuring matter profitability remains a challenge for law firms
Mike Hinchliffe, managing director, EMEA, at Tessaract draws on findings from Tessaract’s Mind the Delivery Gap research, conducted in partnership with LPM, to explore how integrated systems help build a more accurate overview of financial performance
Every pricing decision, hiring decision and growth plan depends on understanding one thing: which matters actually make money.
Yet our Mind the Delivery Gap research, produced in partnership with LPM, found that only 18% of law firms are completely confident in their ability to assess matter profitability. A further 38% say their view is inconsistent or inaccurate, while 67% of leaders report that users experience frustrations with their core systems.
Together, these findings tell a clear story. Many firms don’t have a profitability problem; they have a matter visibility problem.
Why profitability is so difficult to measure
Matter profitability isn’t determined when an invoice is raised. It’s shaped throughout the lifecycle of a matter.
Firms need real-time visibility of recorded time, work in progress (WIP), write-offs, matter budgets, billing, resource allocation and lockup. When this information sits across disconnected systems or relies on manual reporting, it’s almost impossible to build an accurate picture of financial performance.
By the time profitability issues appear in a month-end report, the opportunity to correct them has often passed.
Better visibility leads to better commercial decisions
Accurate profitability reporting isn’t about producing more reports. It’s about helping people make better decisions while work is still in progress.
Partners should be able to see which matters are exceeding budget. Fee earners should know which matters need billing, where time is missing and when work is drifting beyond scope. Finance teams should be able to identify lockup before it affects cash flow.
When the right people have access to the right information at the right time, firms can take corrective action early instead of reacting after profits have already been lost.
Connected systems create better commercial intelligence
Our Mind the Delivery Gap research also found that 67% of firms experience frustrations with their core systems. Frustrating technology doesn’t just reduce productivity; it creates commercial blind spots.
Modern, connected legal practice management software (PMS) brings together matter management, finance, billing and reporting into a single source of truth. With accurate, real-time data, firms can monitor profitability as matters progress, reduce lockup, improve pricing decisions and strengthen overall financial performance.
Conclusion
The firms that outperform over the next decade won’t simply bill more hours. They’ll understand which work creates value, identify risks earlier and give their people the commercial insight needed to act before profitability is lost.
Our Mind the Delivery Gap research shows that many firms are still struggling with inconsistent profitability data and disconnected systems. The opportunity lies in improving visibility, not simply producing more reports.
Read our Mind the Delivery Gap research to explore the findings in more detail, or book a demo with Tessaract to see how cloud-native PMS and real-time commercial intelligence can help your firm measure matter profitability with confidence and reduce lockup.
