The legal industry is facing a perfect storm. While profits in many firms have risen, the push for growth has led to key financial fundamentals being sidelined. This year, 86% of firms plan to hike rates, yet 75% anticipate higher write-offs as discounts are used to protect client relationships. This creates a dangerous “doom loop,” where rate increases are eroded by concessions, undermining long-term profitability.
To thrive in this challenging environment, profitability must be a firm-wide responsibility. Every function – including lawyers and associates – must understand how their actions impact the bottom line.
So, how can firms embed financial awareness across their teams and drive meaningful change?
Building Financial Acumen: A Three-Step Approach
To truly transform profitability, firms need a structured strategy that marries training and incentives with the right tools.
1. Train Lawyers in Financial Literacy
The latest market research from BigHand reveals that the legal sector increasingly acknowledges the need for a firm-wide commercial culture, but the data also presents a gap. While 74% of firms provide associates with WIP/AR data and profit information, only 34% offer formal training on financial performance. Without this education, lawyers may struggle to interpret the data or grasp its broader implications.
Financial training is more than understanding spreadsheets; it’s about connecting the dots between action and profitability. Empowered lawyers will be confident and decisive in client management, ultimately strengthening relationships. Conversely, lawyers lacking in commercial acumen may be unable to demonstrate the calibre of financial literacy clients expect, impacting their ability to win business.
Encouragingly, 64% of firms recognise the need for better education and plan to train lawyers on commercial awareness, albeit at a slight lag; just 54% anticipate delivering the training in the next 12 months. To truly embed a culture of commercial acumen, financial training must become a priority.
2. Align Incentives with Profitability Goals
Embedding financial goals into performance reviews and incentive structures is essential to encouraging enthusiastic participation from lawyers, while also fostering a culture of accountability around their efforts in boosting firm profitability.
More firms are now aligning performance reviews with financial objectives, with 42% planning to include metrics such as reducing WIP, improving debtor days, and increasing matter profitability. However, reviews alone may not be enough. Reward structures can reinforce these objectives, tying bonuses and promotions directly to financial outcomes.
These measures not only encourage better financial habits but also demonstrate that every individual has a role in driving the firm’s success.
3. Leverage Business Intelligence Tools
Technology is transforming how law firms approach financial performance, with Business Intelligence (BI) tools leading the way. These solutions offer role-specific insights, empowering lawyers, management, and finance teams to make data-driven decisions.
BI tools provide actionable insights tailored to each role. For associates, they offer visibility into WIP and AR, helping them manage their matters more effectively. Finance Business Partners and data scientists – now employed by 36% and 38% of firms respectively – leverage these tools to align business goals with financial objectives, uncovering opportunities like better cost control and improved realisation rates.
The numbers tell a story of progress. Today, 44% of firms use BI tools, and an additional 20% plan to implement them within the next 12 months. Furthermore, these systems are becoming increasingly expected by clients, with 54% prioritising technology adoption to demonstrate value.
Why Act Now?
The pressure on law firms is intensifying, and firms that delay embedding financial acumen risk falling behind. A culture of financial awareness is essential for improving profitability, building resilience, and meeting client demands for value. By investing in financial training, aligning incentives with profitability goals, and leveraging Business Intelligence tools, firms can futureproof their operations and foster stronger client relationships.
To navigate the challenges of 2025 and beyond, firms must act now. Download the BigHand 2025 Annual Finance Report to explore strategies that will help your firm thrive in a competitive market.
