Financial Workflows with Jonathon Fishman

Dec 6, 2021

Patrick Carver

Hi, I’m Patrick Carver / CEO, Constellation Marketing

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Welcome to The Optimized Law Firm Podcast, where we chat with legal pros who can help you run a more profitable and enjoyable business.

This week we’re talking with Jonathon Fishman of LeanLaw. Their mission over at LeanLaw is to help law and professional service firms build better businesses: more efficient, transparent, and empowering. Their software improves every aspect of firms’ financial operations, from workflows to data insights.

Listen in to find out how your existing financial workflows (or lack thereof) might be holding your firm back and what you can do to improve them.

 

What’s in This Episode?

  • Who is Jonathon, and what is LeanLaw?
  • Why should attorneys care about their invoicing and time-tracking processes?
  • What are some of the big mistakes that law firms make when it comes to invoicing?
  • How can creating sound financial workflows improve your entire experience as a small law firm owner?

 

Episode 4

 

Patrick:

  1. Welcome to another episode of The Optimized Law Firm Podcast. I’m your host Patrick Carver, and I’m thrilled to be joined with Jonathon Fishman. He’s the founder and CEO over at LeanLaw. We’re going to talk about financial workflows, how to collect more, reduce burnout, and increase profits. 

So tell us a little bit about yourself and your role over at LeanLaw.

 

Jonathon:

So, I’m a serial entrepreneur, this just happens to be my fifth startup that I’ve been involved in. I originally grew up in the Midwest and during college migrated west to California, that’s where I kinda got the entrepreneur bug living in San Francisco in the early 90s. 

I split my time between Los Angeles and California and then in 2009, I had the crazy idea to move to Boise, Idaho to… My son was going into kindergarten, so we moved. My family and I moved here in 2009 and started LeanLaw in 2015 and came to market in 2016.

 So I’m the business guy who, because I live here, get to do a lot of fun outdoor stuff, I live a really groovy life in that it’s very small, I don’t have to deal with traffic and whatnot that I had to deal with in California, so I live… I’m grateful I live a really nice lifestyle, but still get to do really cool technical work from beautiful downtown Boise.

 

Patrick:

So I’m interested to learn more about LeanLaw from your perspective of what it does, who it’s for, because we’re gonna be sharing this with lots of small law firms, mid-size, and kind of those folks, and I know it’s a great solution for them.

 

Jonathon:

So LeanLaw is a Software As A Solution, it’s a invoicing platform with deep integration with QuickBooks Online, so we handle all facets of how a law firm will track time, capture expenses, manage fixed fees, assemble those into an invoice, deliver to that client, allow that to be paid, and all of that is done with deep and fluid two-way integration with QuickBooks Online. 

Our sort of mission when we think about what we want to do with these tools is to help law firms better run their businesses, better run their practices. So we’re trying to enable law firms to have the data and the tools to make better decisions on their business. And that’s our focus, and we differentiate ourselves in three ways in the marketplace. 

One is I mentioned this deep integration with QuickBooks Online. It’s integrated in the workflow of the tool, and the end result is a single-source of truth, QuickBooks Online.

The second positioning is we’re invoicing only, so we’ve refined it down to the core tools that a law firm needs to run their invoicing platform without doing all sorts of other things in practice management which really enables us to get into the weeds and really refine workflows and to bring out functionality that exists in QuickBooks Online into LeanLaw, so there’s a fluid exchange of data there. 

The third area of differentiation is that we’re very mid-market focused, so while we support what we call micro law firms, those with solo to three, four attorneys, when we think about the future of LeanLaw, we’re heavily focused on how to service that mid-market law firm, and that’s very consistent with what QuickBooks is doing with the product launch of theirs called QuickBooks Online Advanced and how they wanna move into mid-market. So you can see a lot of synergy between our two companies.

 

Patrick: 

Very cool. And early on, when you were in the formation of this business, what was the kind of that core challenge or problem that you were looking to solve for law firms? 

Because it sounds kind of now, it’s maybe shifted, or maybe it hasn’t shifted, but your focus now is a lot on the invoicing product. Was that the same as when it started or has it kind of shifted over time? 

 

Jonathon: 

Well, I think the first… I think when we started, we were thinking a little bit more broader in what they call practice management, which means it does document management, email management, docketing different facets of running a law firm, and we had some really groovy integration with Google Apps

The epiphany we had in the first pivot of the company was to say, “Hey, let’s be great at something,” and we chose invoicing to be the most important workflow. ‘Cause law firms can manage documents and other facets with different tools, but if they can’t run their finances, if they can’t get their bills out and collect money, they fail, so we were all most interested in that invoicing workflow and felt like that was a unique place in the marketplace to focus our effort.  

So while we had initially a broader vision, the accounting and invoicing workflow was a very easy pivot to narrow our focus, and that just liberated us because we didn’t have to be an expert at document management, we didn’t have to be an expert at email management, and other facets and then we allowed ourselves to really deep dive into what are those workflow requirements for the invoicing of the law firm and focus. That’s the… 

After five startups, I can tell you, one of the most important few lessons I’ve ever learned is focus, focus, focus and even more focus.

 

Patrick: 

What do you see as the benefits in terms of the existing process that most lawyers use to collect money and do invoicing versus what your system is enabling them to do? 

 

Jonathon: 

I think that you have to understand, especially if we’re talking about micro law firms, and even in larger mid-market law firms, lawyers aren’t trained to run businesses. And I actually am a guest lecturer at a local law school here, and give an annual speech to a law class, and they’re just dumbfounded at the information I’m giving, because they’re not taught this elsewhere. They’re like, “Oh my gosh.”

And I’m just giving basic information about running a law firm, but the thing most lawyers run their practices on gut. “I kinda know what my billables are, so that I can translate that to income,” and they’re running in a very cash flow mindset. So when you think about how does LeanLaw benefit a law firm, you have to even take a step back and say that fundamentally, there’s the capture of the billable hour, which in most law firms is the Holy Commodity, the billable hour, and they’re chasing that billable hour trying to document it, trying to bill it, trying to collect it. And certainly LeanLaw offers some tools to better capture that time, but I don’t think that’s the real focus.

The idea of LeanLaw and really what we aspire to do with law firms is to help them create sound workflows, these repeatable best practices that start with a collection of time and end with the collection of payment, whether that’s increasing a trust retainer to help with receivables or other facets.

If we create good workflows, we get good data, and if we get good data, we can interpret it and make change about where we want our practice to go. So instead of just running it off the seat of our pants by gut, now we can actually see and understand what practice areas are profitable, how staff is being utilized. From those places, we make good decisions about what it is they wanna do

And the benefit, of course, could be increased income, but it also might be time, time to put back into your clients, time to put back in your community, time to put back into your family. So their benefit is really a derivative of creating these best practices about how we operate.

And in doing so, of course, in a 21st century mindset of being in the Cloud and having your data stored properly and being able to work wherever you need to work, and having data at your access wherever you are. So I think that we talk about burnout. I don’t know if we’d solve burnout per se, but if we can create better workflows, the derivative effects is that they can run a better practice and a better business, and from there, I think we mitigate or at least put them in a position to make better decisions about how they wanna use that time.

From an overhead perspective, I think that LeanLaw helps and certainly can outsource or even self-serve some function of your invoicing platform that historically it’s done by administrative staff, but that’s, the idea of really reducing overhead, that’s almost a mindset that is almost independent of the tool, although we facilitate some of that. 

And we’ve seen real case studies of lawyers that came out of bigger firms that had a larger overhead, started their own practice, and radically changed their life from having a $15,000 a month overhead down to three in a matter of weeks and really not a loss of clients. And that change that… I’m thinking of one person in particular… That change is dramatically.

But that LeanLaw was a catalyst and one of the tools, but that was really about a mindset. So the mindset was that that lawyer wanted to make that change and then LeanLaw became a tool that helps him facilitate that invoice in workflow as a function of that. He had other tools like box.com for data storage and Microsoft 365 for his email management and whatnot, but the tools are a function, but it’s really the mindset that drives that.

 

Patrick: 

Very cool. And before, when we’re talking about setting up some of those workflows, or especially as they relate to the financial systems or financial processes within a business, what do you think are some of those really foundational activities that a law firm needs to integrate within their process, whether it’s invoicing, whether it’s having a dedicated accountant or different things that can help them get to that state of workflow that makes sense, and it’s not too cumbersome on running the business? 

 

Jonathon: 

So the model is not rocket science. You just follow the life cycle of a client. And if you map that out from the engagement letter and what constitutes in an engagement letter in terms of what the parameters of how the cost and payments, and what happens if you don’t pay me, to the receipt of a trust money as a function of retainers, to the capture of time, to the preparation of invoice, to paying the invoice… 

It’s a really explicit life cycle, and it’s not rocket science to most law firms to track that. So that’s just basically… By understanding those processes, you can begin to create best practices and LeanLaw, of course, matches right up to that, to enable some workflows along that. But I think success comes with one, accepting that you’re going to have to work in a slightly different way, meaning the firm has to want to change, right? 

Many firms right now are going through a transformation of Boomers aging out and retiring, and Gen Xs are coming in. The Millennial voice is rising up and saying, “Hey, we have to operate in a different way,” so there’s some explicit tension between that aging group and the young group and the Generation X. 

Those people who are now in a position of authority in a law firm know enough and appreciate technology that they understand it, they may not be technical in nature, but they’re trying to build a law firm that can be competitive and retain its talent, so that forces them to have this conversation, and so one success metric or tactic is ensuring that you have the right skills at the table to help facilitate this change, ’cause there’s an aging architect, an aging architecture that exists, a lot of folks are still on servers, COVID-19 has certainly put tension on, “Hey, we have to get off of on-premise tools into the Cloud,” and when they make that time or make that decision to change, one of the success tactics is engaging the right professionals to help you make that change. 

It’s less of a technical change, sometimes they go to their IT people, but that’s actually the easiest part. It’s really the accounting and setting up the best practices is how the chart of accounts are set up. How do we salvage the workflows? How do we migrate the data? How do we train the team and how do we train the accounting team? And what data do we want out of the system? 

And so we always advocate to engage and many times recommend into our deals a QuickBooks Pro Advisor and what LeanLaw calls a LeanLaw Accounting Pro that can help steward that process from the law firm side ’cause we’re the software vendor. Sometimes they look to us and we’re like, “Hey. You gotta make sure that you give your staff the time and space to learn the accounting program or learn LeanLaw.” 

So, one, is about recognizing the importance of change. 

Two, is enabling the staff in the law firm the time and the space and the energy to actually go about this process of making change. 

Three, is engaging and making sure we have the right people at the table to help steward the process.

And then the last piece is actually executing it, doing what you say you’re going to do, and following through and being a participant. You can’t just delegate it all off to folks.

Now, you can… You don’t have to do it all, you don’t have to pull the levers, but the challenge for these firms is they’ve got to still practice while they make this change, and that’s why having the proper team with the proper space and time to actually do the work really impacts the outcome of what we see for law firms making this transition.

 

Patrick: 

What do you think, in terms of invoicing, is a major mistake that you see often when it comes to law firms? 

 

Jonathon: 

Well, I don’t think it’s a derivative of LeanLaw. I’ll break it down into three areas where law firms stumble. 

One is they don’t track time contemporaneously, so if the billable hour is your commodity, you gotta capture it just in time. The minute… And there’s lots of studies that say this, but if you wait till the end of the day, you lose a certain percentage of time, if you wait til the end of the week, you lose a certain percent of your time, if you wait till the end of the month, you lose a certain percentage of your time. 

So one thing is tracking time contemporaneously, and we have four different ways for people to track time, so we accommodate the many different personalities of time trackers. 

The second thing is that they don’t handle their accounts receivable correctly. Some of that’s visibility and LeanLaw has many different ways where lawyers can see live real-time accounts receivable. Some of that is not taking trust money or taking trust money as the initial retainer and then not continuous. I mean, if you have money held in trust and you use that to pay your invoices, you never have an accounts receivable problem.

And we know some law firms that the most important metric in the firm is of the invoices that got paid in a given month, how much of that was paid from trust money? That’s the most important metric in the firm because you always get paid if you have trust money. 

So tracking time, accounts receivable, is probably the two largest or most significant sort of bad habits of law firms. 

The other is that there’s sort of inertia around producing invoices. Some law firms, it’s just baffling to me that they’re like, it’s October and they haven’t gotten their May, June invoices out. So what is it in that law firm that’s causing such a huge delay in getting invoices out? Who’s making it so complicated? 

I also think that one of the things we’re seeing in LeanLaw is that law firms are creating new business models with our clients. It’s not the utopic subscription model, but more and more, we’re seeing law firms create flat monthly retainers that they can track time and create that more sticky relationship with their clients. That doesn’t displace the billable hour, it’s still the holy grail of law firm billing, but I believe clients are more inclined to listen to different business models, but to get back to your specific question, I think that people that stumble with time entry and they stumble with accounts receivable more than any other facet of their invoicing workflow.

 

Patrick: 

Yeah, that makes sense. Do you think it’s interesting… I was just chatting with a firm, they’re kind of a younger generation law firm, and they’re really tired of doing billable hours and tracking it, and kind of, if somebody calls them in the car, remembering to take that down, all those sorts of things… 

They’re more interested in moving to a flat fee type of model. You mentioned you’re seeing it more. Do you think that’s where the industry’s going or do you think there’s always gonna be a place for time tracking and the kind of the billable hours model? 

 

Jonathon: 

Well, I think time tracking is always important because even if you just use the function of time tracking to understand how much energy and time went into it. Time tracking goes into the staff utilization, it goes into the profitability of the model. Sometimes it goes into the transparency of the work done so that you can validate that I did what I said what I was going to do or that this hour. 

So I don’t think it divorces you from time tracking. What it does is it mitigates that moment, that 6/10th of an hour, the ones we bill with six minutes for something and get a 0.6 or a 0.1 time entry. I think we as buyers are more apt to consider more of a subscription model that’s been built into our mindset that we have a greater tolerance to buy something that way. I do think that younger lawyers, millennial lawyers, interacting with millennial businesses, that makes a lot of sense.

The challenge is that you have to validate that there’s a budget existing in the client’s work that says okay, you’re spending these dollars already, so let’s just make that more of a subscription model and here’s some benefits to it. 

So I see it as absolutely a viable trend, and I know lawyers from LeanLaw world that came out of their corporate world and said, “I’m billing you on a monthly basis and you’re my client until you stop paying me.” And that’s the way it works and they’ve had a wildly successful practice and I talked to a young lawyer here in Boise, and he said he was struggling to try get clients to buy into it.

So I don’t think it’s a perfect solution that everyone’s going to do but that doesn’t mean that you can’t think of dynamic ways in how you want to create that client relationship, and how you can productize your services such that it’s easier for your clients to interact with you. 

It’s not absolutely going to always be a subscription. Maybe there’s a hybrid. Like LeanLaw has a feature that says, “We’re gonna charge you X dollars every month and if we go over then we do a discounted rate. We can track all of that in a fixed fee.” 

So there’s different ways of approaching it that it doesn’t have to be the absolute, I’ll only work in a subscription model. There are either components of productization, I can do this work for X dollars, and it just takes the pressure off the billable hour. It doesn’t divorce you from it, you still wanna track time because time is essentially the cost of goods sold. That’s what went into your product so it’s to suggest… It’s like lawyers don’t think this way, it’s like a restaurant not tracking the cost of ingredients and food costs as understanding the profit. Just looking at income doesn’t tell you what the profit is. You have to look at the food cost. In a services business, labor is your cost, so it’s important for the law firms to be paying attention to labor.

 

Patrick: 

So one of the last questions I have is, for a growing firm, whether it’s small or a microfirm or into the midsized, for someone who is growing, expanding, but they’re also stressing about financial management and kind of wearing a lot of different hats. 

Is there one thing or what would that one thing be that you would recommend to kind of get them started in the right direction if they’re looking to make changes to their financial systems? Whether it’s adding software, is it getting a good accountant? What are some of those things that you think are great starting points for someone in that mind set? 

 

Jonathon: 

I think number one is having the right intellect at the table. As I’ve mentioned earlier, good workflow create good data. Good data allows you to interpret information and make changes. So if you’re a growing firm and cash flow is a concern, you better have a strong financial workflow with good reporting to understand where cash flow is and understanding, not just how much cash I’m making, but understanding where the cash is coming from. What different disciplines or practices are producing the most profitable work? 

Also looking at your staff and staff utilization, “Am I really making the most of the staff I have at hand and are they producing income for me or are they just a cost center?” So having the right advisor to not only help you create those workflows, and this is what the bookkeeping community does, but also that’ll rise up above that and help you understand and interpret the financial information is absolutely critical. No tool alone will solve the problem. Some people say, “If I get a new tool, I’ll just be in a better place.” and that’s the wrong mindset. A tool’s a tool. It’s just a hammer. But it’s the mindset. 

So if I said one thing you would do is hire a LeanLaw Accounting Pro, a QuickBooks ProAdvisor and make sure that you have the right workflows that produce the right data, so you can get the right reports and interpret that information. Because if you don’t have that data, or if you’re not interpreting correctly, you are running your business by gut and scaling is enormously difficult because all you do is think about… We call it the swamp. And if… The overhead swamp. 

But if you think about a law firm or lawyer’s practice, there’s only two ways to improve financially, produce more revenue. So I’m gonna go out, get more clients, but I bill by the hour. So I have a certain amount of hours I can bill a week, times my staff. So if one way is increasing your revenue, the other way is reducing your overhead.

There’s only two ways that they can get out. Most attorneys can’t increase revenue, in the sense that they get a client or two, they can get a niche, maybe they can change their build longer, but that doesn’t necessarily, appreciably really change the dynamic. They see a little bit more cash flow, and they feel in a better position, but it’s not a game changer. 

So the real truth is overhead, and overhead is all about really staff. That’s what we talk about. So you really have to understand, are you utilizing your staff well? Some of it is office. Could we work virtually? Or could we work in a lighter overhead? When you get down into the software and some of the phones and things like that, those costs become really trivial.

So when we think about how lawyers need to change their practices, we think either, A: Can you increase revenue? And the only way you’re gonna be able to do that is really understanding where your money is coming in and what work is more profitable, or thinking about reducing overhead. 

And it doesn’t mean you need to fire a staff member. It means if you can create better workflows that are more automated, now that staff member maybe could bill or maybe that staff member could take more work off of your plate, because they can do more project management. If they’re out of leads, they now become available to do things that are more productive for the law firm and that turns potentially a cost center into a revenue center.

 

Patrick: 

Definitely. That’s really smart. 

Is there anything we haven’t discussed today that relates back to those three prongs I mentioned earlier about helping law firms in terms of profitability, decreasing burnout, and putting time back in their days? Is there anything that you think of that LeanLaw helps with that? That we didn’t touch on today.

 

Jonathon: 

Well, I think we touched on a lot of really good stuff. I would go back and say that what we’re seeing with success with LeanLaw is that firms have said, “We believe that QuickBooks Online is a great accounting package, and we want a lean tool that extends this functionality.” And when someone embraces LeanLaw, they’re also embracing these best practices related to workflows and the derivative effect is that they’re getting their invoices out more efficiently, they’re collecting their money more efficiently, and most importantly, they’re leveraging trust accounting more effectively, and trust accounting is really critical in terms of accounts receivable. 

If you have money held in trust, you can pay your invoice in trust. Thus, you never have an AR problem. So phase one of a LeanLaw adoption is all about workflow enhancement and better reporting.

But when you start to see firms get into phase two, now they’re getting into staff utilization, they’re looking at practice areas, effectiveness, meaning which practice area is most profitable? So I really fundamentally believe that the secret sauce is picking an accounting package that is an open dominant market platform like QuickBooks and then using… I’m a founder and owner of the company, so using a tool like LeanLaw to extend its functionality, and having that QuickBooks ProAdvisor as part of your team to help you navigate it, because it’s not just QuickBooks. 

You gotta remember it’s not just LeanLaw, QuickBooks is a platform. There’s other facets of the platform like Expensify, and Bill.com and InvoiceShopper and other tools that we think are really important that really make this super-charged, robust financial workflow. And if we win that workflow… You can be clumsy in document management, you can be clumsy in email management, you can’t be clumsy in your financial management. You just suffocate financially.

And I think that the one key thing that I would want your audience to hear is that if you’re gonna work on your business, there is not a better place to work on your business than on financial workflow. A lot of people have this idea that, “I’ll go work on the marketing and I’ll go do this and that.” And the truth is, there is probably more gains to be had at getting better at billing and collecting and understanding the reporting than there is in thinking you’re gonna spend money and become better at marketing. 

And I know you guys do marketing. But the truth is, if you can’t run your financial workflow all you’re doing is you’re getting more clients to burn through more overhead, and you really wanna increase profitability. And so, getting good at billing just elevates you and I will say this to your burnout point, there is nothing, nothing more stressful to an attorney than cashflow and potentially not being compliant with their trust account. We didn’t really talk into the specifics of how LeanLaw, helps facilitate their compliance, meaning a lawyer can lose their license if they’re not compliant with their trust account.

We’ve helped facilitate that by best practices, reconciliation, etcetera, but what creates stress for a lawyer is cashflow. “Do I have enough cash to pay my bills?” And, “Are my trust accounts compliant?” I mean, there’s some other things, but from a financial perspective, those are the two, and LeanLaw and QuickBooks Online, they’re pairing together with a proper QuickBooks ProAdvisor, that mitigates much of that stress, which puts them in a better place to be joyful and serve the clients better.

 

Patrick: 

Yeah, it’s a great point. I think it’s so essential because even for us, we developed over two years… In the first two years, and didn’t really pay a ton of attention to the financial aspect, and we hit that point where we were getting more clients and on paper everything looked good, but ultimately, we weren’t making gains in terms of profitability. 

And that really required me to improve my education on the financial side and develop some of these systems. And it’s put us in a much better place today to be able to grow and accommodate more. I totally agree with you.

 

Jonathon: 

And I think what’s missed here in my last point is that lawyers became lawyers because fundamentally, they wanna help people. They’re stewards of the law, they uphold the rule of law in society, and they take that very seriously. And when they start to run their own practices, in many instances, it can drag them out of that place of joy because they’re down in the weeds of trying to run a business, and if you get good at running your business and you begin to really understand, not only what clients are after, but what clients bring you joy, what work you like to do, what people you like interact, you’re really getting back to you burnout, you really mitigate that burnout, because you’re not grinding as hard.

It’s much easier to go take a meeting with a client that you know will be profitable and you know is in alignment with your moral compass and what you wanna be doing as a lawyer. That makes life far better for that law firm, and it’s interesting how revealing financial information can be. It won’t tell you what joy is, what client’s enjoy and what isn’t, but it can give you indicators of what you like to do. 

And I think that’s important about understanding your financials, because just getting more clients going up that revenue ladder won’t necessarily make your firm more profitable, nor will it made your life any better. Many times it’s about, to your point, recognizing how to be profitable, and then from there, “What clients do I like to work with, and are also good clients financially?”

 

Patrick: It’s a great position to be in once you’re there, so it’s a… Recommend everybody to check out LeanLaw. It’s leanlaw.co, is that…?

 

Jonathon: 

Yeah, so it’s leanlaw.co, is our website. You can get to us through the Quickbooks app store, if you’re in Quickbooks, or of course, any web page. And thanks for having me today.

Patrick Carver

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