Success in business
The ultimate marker of a successful business is the strength of its bottom line. Profitability is everything if you want to survive and thrive. The route to healthy profits is maximising income and minimising costs.
You don’t necessarily need us to tell you about maximising income. Revenue generation is your forte, achieved by good marketing to create new business opportunities in the first place, and even better legal service provision and client care thereafter to secure a stream of repeat and referral business.
Your legal software provider can assist in this area by offering solutions containing features such as automation to reduce your workload, application availability for greater uptime, intuitive time recording to capture more chargeable activity and advanced analytics to monitor performance, to name a few. But that’s not the main focus here. We’re concentrating on minimising costs.
Where cost cutting is concerned, we’re going to show you how outsourcing services, specifically outsourced legal cashiering, can help you to drastically decrease your overheads.
In-house vs outsourced costs
To begin, consider the standard costs associated with employing an in-house cashiering staff member. Outgoings encompass recruitment and selection; induction, mentoring, training and development; annual bonus; overtime; temporary cover for long-term sickness, maternity and paternity; 10 metres of office space necessitating rent, rates and service charges; IT hardware equipment and office furniture; 1 user licence for legal accounts software; telecommunications; tea, coffee, sugar, milk, water and fresh fruit provision; social events including Christmas parties; other financial rewards such as referral, length of service and staff introduction awards; and miscellaneous schemes including car parking, healthcare and gym membership.
This extensive list can easily run into tens of thousands of pounds. And it’s by no means the biggest expense which is, of course, salary. To give you an impression of average cashier earnings, this table compares salaries by region:
Note: These averages were calculated from jobs advertised on various recruitment platforms throughout June 2017.
In comparison, outsourcing is charged at a set affordable, monthly, transaction-based fee, all-in, which scales up or down according to your own level of busy-ness. Clearly, then, outsourced cashiering is by far the most economical way to manage this highly skilled, time intensive and heavily regulated business process. In real terms, outsourcing means doing the same job (better, we would argue, as your supplier is a specialist in its field), namely all the normal cashier duties, for substantially less cost.
Finding the right people, training them on an ongoing basis, paying a regular salary and benefits, providing a physical workspace fitted out with all the requisite technology and telecommunications is an extremely costly affair.
Not forgetting workplace pensions which warrant special mention. It’s yet another mandatory overhead, relatively newly introduced, if you employ just one person. To fulfil your Pensions Regulator obligations, you must enrol your staff into a pension scheme and contribute towards it. The minimum employer contribution is currently 1%, rising to 2% in the 2018/19 fiscal year and 3% from April 2019 onwards. More if you’re a generous employer.
If you’re lucky enough to recruit the perfect candidate with an ideal skill-set and strong work ethic, you don’t want to lose them. Employee churn is a major challenge. One of the ways you can retain your talent is to offer a competitive remuneration package. People aren’t driven by money alone but that’s not to say it’s not important. It’s something that can entice your staff to stay with you for the long term. Ultimately, you could end up paying more than anticipated for your cashier’s salary, with incremental adjustments higher than national inflation rates.
And what about ambition? If your cashier wishes to climb the proverbial career ladder, they’ll be looking for promotion opportunities. Even if you do succeed in retaining your star performer, it may be by providing a pathway to progression elsewhere in your business. That means an empty pair of shoes in your cashiering department and back to square one with yet more excessive spending on recruitment.
Other cost factors
It’s also nigh-on impossible to plan for unexpected, sudden costs not originally factored into your annual allocation of monies. The possibilities are depressingly endless and could be anything from a staff member deciding to retire early to market-driven hike in office rent. Conversely, with a pay-as-you-go pricing plan, you know from the outset what your monthly outbound spends will be, with no hidden extras on top, which can easily be absorbed into your overheads.
The other cost-related factor to take into account is how outsourcing immediately converts fixed costs into variable costs, as mentioned earlier. Scalability affords you much more flexibility and control of your budget. When you expand, you scale up and pay more. When you contract, you scale down and pay less. As a business, you become more agile and responsive to the changing demands upon you as a result.
Hopefully by now we’ve demonstrated that the delivered cost savings are decisive when evaluating your outsourcing options. It’s glaringly obvious that your bottom line will be much healthier by moving from a traditional in-house setup to an outsourcing agreement, but this isn’t the only financial aspect to take into account.
It would be an oversight to write regarding the costs associated with outsourced cashiering services without covering cash flow management generally. A steady flow of monies in and out are essential to keep your business running. This is about establishing good billing and payment practices, distinguishing between your client and office accounts, reviewing your key financial indicators regularly, and staying compliant with the SRA Accounts Rules and CLC Accounts Code.
Your outsourced cashiering provider should be competent in managing these tasks on your behalf. Fully conversant in the latest accounting rules, trained to industry-recognised standards – typically holding an Institute of Legal Finance & Management qualification – and following a professional development programme, your cashier will manage your books in their entirety from your bank accounts and ledgers to reports and VAT returns.
They are up-to-date in cashiering best practice, so you don’t have to be. With their input, you’ll identify any red flags immediately in order to keep your finances in the black and have actionable financial intelligence from which to grow your business.
There is also the matter of security. As a law firm, you handle enormous sums of client monies. Conveyancers are an obvious target and scams relating to rogue house owners and buyer deposit redirection have made headline news over the past few months. But it’s not only conveyancers who hold and pay monies from client account. Every law firm does. With fraudsters and cybercriminals trying their hardest to purloin your financial assets, you have to tighten your defences in order to keep them at bay and your finances intact. You’re reliant upon your cashier and accounts software to do so.
It thus follows that you’re placing an inordinate amount of trust in your in-house cashier who’s required to fulfil an important role in the management of your finances. Amongst their many responsibilities are bank reconciliations, online banking, inter-account transfers and paying invoices. Your internal controls must be watertight in order to monitor your cashier’s actions and transactions so that if anything’s amiss, it’ll be noticed straightaway. In-house cashier fraud isn’t completely unheard of. While we don’t want to engender suspicion of your employees, it’d be naïve to assume it will never happen to you. It’s rare, admittedly, but not outside the realms of all possibility.
For cybercriminals, your client information is valuable too. This can be used for all manner of illegal purposes and you can be held to ransom for its safe return if stolen. In fact, you’re duty bound to protect your clients’ confidential and sensitive data, not only by the Solicitors Regulation Authority and other industry regulators but also by the Information Commissioner’s Office. Under EU General Data Protection Legislation, coming into force next year, penalties are enforced of up to 4% of global annual turnover or €20 million – whichever is higher – for failure to comply. Protecting your data is equally as important as protecting your finances.
With your accounts software, you can reduce the risk of fraud with anti-money laundering checks, credit screens, conflict of interest searches, proof of identity document capture and breach warnings to preserve your matters and their associated finances. There’s also data security in the form of ISO-accredited data centres, password access, SSL encryption, firewalls, penetration testing, system monitoring, replication, physical security measures and more industrial-strength security protocols. The significance of your software is not to be overlooked.
With outsourcing, stringent measures are in place to supervise each cashier who will be subject to team, section and senior leadership controls. Regular reports showing potential or actual breaches, anomalies and late arrival of monies keep your finances in check. There’s simply no room for error or deliberate deception in an outsourced setup.
And there’s more
Although costs are the major benefit, there are a whole multitude of other advantages derived from outsourcing. We’ve written on this subject extensively before. Read our earlier article titled ‘Ten reasons to outsource your cashiering’. You’ll find information relating to concentration on higher priority tasks, assured regulatory compliance, built-in emergency planning, availability of value-added support, simplified annual accounting, straightforward auditing, assisted external accreditation and more. Not least of these is access to back up from the wider cashiering team as opposed to working in isolation. This is one of the reasons an outsourcing bureau can keep your finances under closer command.
Breaking with tradition is never easy. Even the most forward-thinking amongst us can be averse to change. However, with outsourcing services and legal accounting software advancements, traditional isn’t always best when it comes to managing your finances.
While we appreciate outsourced cashiering may not be right for every law firm, if it does fit your business’s needs, just imagine the cost savings and other benefit gains to be made. You may even prefer a hybrid approach comprising an outsourced cashier and in-house accounts clerk. Every business is different and the one-size-fits-all solution doesn’t always apply. Your outsourcing vendor should openly discuss your options and devise a strategy unique to you.
Remember too that not all outsourcing companies are reputable and reliable with a proven track record in your sector. Careful screening is recommended. Read our ‘Ten questions to ask your outsourced cashiering provider’ article to assist you here.
Julian Bryan joined Quill Pinpoint as Managing Director in 2012 and is also the Chair of the Legal Software Suppliers Association. Quill is the UK’s largest outsourced legal cashiering provider with 35 years’ experience supplying outsourced services and software to the legal profession.Tweet