Law Firm KPIs: The Numbers to Review Every Month
Law firm KPIs (key performance indicators) are the handful of numbers that show whether your firm is healthy. Reviewing them every month, rather than at tax time, helps you catch cash problems, revenue leaks, and trust issues early. Here are ten worth tracking.
Cash and Trust
Operating cash balance: do you have enough to cover payroll and upcoming bills?
Trust reconciliation status: is the three-way reconciliation complete and balanced? See: Trust Account & IOLTA Reconciliation.
Revenue
Revenue collected this month, compared with last month and the same month last year
Revenue by practice area or attorney: where the firm’s income comes from
Productivity and Collections
Utilization: billable hours compared with available hours
Realization rate: hours billed compared with hours worked
Collection rate: dollars collected compared with dollars billed
Accounts receivable aging: how much is more than 60 or 90 days past due
See: Attorney Effective Rate and How to Collect Unpaid Legal Fees
Profitability
Profit margin: net profit as a share of revenue
Overhead as a share of revenue: are expenses growing faster than income?
How to Review Your KPIs
Look at trends over several months, not a single month.
Compare against your own budget and history.
Pick two or three numbers to improve each quarter.
Make sure the underlying books are accurate. KPIs built on messy data are misleading.
How Azar Insights Helps
Accurate, reconciled books every month
A monthly KPI report tailored to your firm
Fractional controller and small business CFO support to review the numbers with you and turn them into decisions
Frequently Asked Questions
What are the most important KPIs for a law firm?
Cash, trust reconciliation status, collected revenue, realization, collection rate, receivables aging, and profit margin cover the essentials. The right mix depends on your practice areas and fee structure.
How often should a law firm review its KPIs?
Monthly. Some numbers, like cash and receivables, are worth checking weekly.
What is a good realization or collection rate?
It varies by practice area, fee arrangement, and client mix. The most useful comparison is your own trend over time and how attorneys compare within the firm.
Where do law firm KPIs come from?
Some come from your accounting system, such as cash, revenue, and expenses. Others come from your practice management software, such as hours, billed time, and realization. The two systems need to agree for the numbers to be reliable.
Can Clio or QuickBooks produce these reports?
Both include useful reports, but neither shows the full picture on its own. A monthly KPI report combines the two, using reconciled data. See Clio & QuickBooks Bookkeeping.
Related Reading
Law Firm Balance Sheet · Law Firm Profit and Loss · Attorney Effective Rate
About Azar Insights
Azar Insights provides outsourced bookkeeping, accounting, and fractional controller and CFO services for law firms nationwide. With 15 years of accounting experience, we work remotely with solo attorneys and multi-partner firms using secure, cloud-based tools.