Many people have historically viewed the firm’s “chief financial officer” (whether formally referred to within the firm as CFO, director of finance or controller) as simply the top “bean counter”. Often they’re viewed as impeding progress, requiring everyone to jump through hoops before any project can be approved.

 

Fortunately for many firms, this perspective is rapidly changing. In today’s legal environment, the CFO has become an integral part of firm management, particularly in regards to technology.

 

Historically, the finance department at a law firm has been associated with back office functions such as recording time, preparing bills, collecting receivables and paying bills and salaries. They have been significant users of technology, but have not often assisted with the management of technology.

Today the CFO often works as a team with the firm’s IT management, partnering with the firm’s chief information officer. Law firm CFOs are becoming more hands-on, taking leadership roles in IT strategy, initiatives and operations.

 

This structure mirrors the trend in the general business environment. Earlier this year, CFO Magazine and Morgan Stanley surveyed more than 250 CFOs and related executives in a variety of businesses. More than 70 percent of the respondents reported playing a greater role in IT purchasing and strategy issues than they did a year ago, with more than 30 percent indicating their role was now significantly greater. It’s also interesting to note that in the same survey less than 60 percent of the respondents felt their firm’s technology expenditures had in the past produced the return on investment they expected.

 

A close working relationship between finance and technology, and between the firm’s CFO and CIO, can go a long way toward improving operations for both groups, and for the firm as a whole.

 

Rather than implementing several disparate systems, many firms are today looking to integrated practice management systems. Selecting and successfully implementing such a system requires the input and buy-in of many constituencies, including lawyers, legal secretaries, finance and IT.

 

Decisions regarding such a system are sometimes made by the firm’s attorneys based upon the needs of a small practice group. In these cases, the needs of the finance department, and the impact on IT, are frequently overlooked. Similarly, decisions made solely to address finance- or IT-related requirements often result in a poor solution for the firm as a whole.

 

A classic example illustrates how working in a vacuum often negatively impacts an IT project: A managing partner was impressed by the demonstration he received at a legal technology trade show and convinced everyone that the firm needed a particular system. Unfortunately, after the project began a number of issues were identified related to the tracking of detailed financial information and integration with an existing financial system. Other issues related to data storage and traffic over the firm’s network were identified later. As things began to fall apart, the lawyers blamed finance, finance blamed IT and IT blamed everyone. Instead of increasing efficiency, the new system had increased the complexity of many processes for many users, resulting in a significantly negative return on investment. After large amounts of both money and effort were expended by the firm, the decision was made to suspend the project.

 

The firm’s financial and IT management then performed a top-down analysis of the firm’s needs and objectives and developed a projection of the anticipated payback to the firm from a new project. After reviewing the results of this analysis, the firm ultimately approved the new project and successfully implemented a different set of tools. Unfortunately, many firms experience similar problems to some degree when implementing new IT projects. They can often be avoided through the active participation of the firm’s CFO in the planning and evaluation process.

 

The CFOs role as part of the management team should be to discuss and evaluate the firm’s business requirements before the IT department is involved and a project started. They should also look at the firm’s overall business needs, technology project planning and the firm’s return on its technology investment before approving significant new projects. Projects are perceived as failing more often when finance begins evaluating ROI and effectiveness of a project after it’s completed.

 

While more and more CFOs are taking a hands-on approach to technology, they’re optimally not micro-managing all IT-related decisions. Their focus should be on payback, return on investment and operational efficiency resulting from IT expenditures.

 

Law firms, like other businesses, need to make intelligent decisions regarding the use of their financial resources. The importance of properly planning for and evaluating the return on investment for IT expenditures has increased in today’s business climate. Making your firm’s CFO part of the team can go a long way in improving ROI.

 

About our author . . .

Gary S. Wong, CPA, is vice president of consulting services for ProLaw Software.  Mr. Wong is a certified public accountant with more than twenty years of experience serving law firms.  He can be reached at (800) 977-6529 or by e-mail at gsw@prolaw.com.