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Best Practice Tips: Law Firm Management—Held Hostage by Office Manager or Bookkeeper

Asked and Answered 

By John W. Olmstead, MBA, Ph.D, CMC

Q. I am a partner is a small family law firm in Tucson, Arizona. There are two partners in the firm and two associates. We have an office manager/bookkeeper, a receptionist, and two legal assistants. The office manager was hired one year ago. The other partner is retiring next year, and I am purchasing the practice from him. I became a partner last year. I am new to the management side of the practice and have been relying on the office manager who also serves as our bookkeeper. I am at my wit’s ends with our office manager and I believe that she is not suited for the position. She has no organizational skills, she misses deadlines, vendor bills are not paid on time, and client bills are not sent out accurately and timely. I have counseled her on numerous occasions to no avail. I believe we need to replace her, but I am reluctant since no one else here knows what she does or how she does it. A new billing and accounting system was implemented last year and she was the only one trained to use the system. What do we do if we terminate her or she quits? We are hostages. I would appreciate any ideas or thoughts that you may have.

A. I understand and appreciate your situation. It sounds like you have not documented your procedures in the form of a firm procedures manual, and everything is in the office manager’s head. This makes it difficult for someone to take over her responsibilities if she leaves the firm for whatever reason, but not impossible. It will probably be difficult to get her to develop one now as it may signal to her that her time with the firm is short and she may start looking for another position. You may have to just bite the bullet, terminate her, rehire the position, and go from there.  It won’t be fun, but you will make it through. You might consider the following:

  • The office manager probably has handwritten notes that she has used to roughly document how she does things. Collect and review these.
  • Contact your billing and accounting software provider and have them help you with any training needs and procedural issues. Back in my old life when I did software work with law firms, I often was called and assisted firms with such situations.

After you get the position staffed and past the crisis, develop a detailed written manual of procedures for the office. Not just the office management side but the client service side—attorneys and paralegals as well.

I believe that it is imperative that owners and partners in a law firm have access to financial information on a timely basis, understand the information, and use the information in a proactive way to manage the practice. I suggest:

The owner, or an appointed partner(s) in larger firms, obtain a basic level of understanding in accounting/bookkeeping and law firm financial management.

  • The owner, or an appointed partner(s) in larger firms, obtain detailed training on the accounting software system(s) alongside the bookkeeper when the system is implemented. In addition to general operation of the software, special training should also be obtained on interpretation and use of the management reports.
  • Ensure that you have accounting controls in place and appropriate segregation of accounting duties.
  • Outline your expectations and requirements of the office manager/bookkeeper, meet with her/him, and communicate appropriately.

Click here for a bookkeeper listing of duties
Click here for our financial management topic blog
Click here for articles on other topics

John W. Olmstead, MBA, Ph.D, CMC, (www.olmsteadassoc.com) is a past chair and member of the ISBA Standing Committee on Law Office Management and Economics and author of The Lawyers Guide to Succession Planning published by the ABA. For more information on law office management please direct questions to the ISBA listserver, which John and other committee members review, or view archived copies of The Bottom Line Newsletters. Contact John at jolmstead@olmsteadassoc.com.

Posted on January 9, 2019 by Rhys Saunders
Filed under: 

Member Comments (2)

Rhys:

Contact me if you need assistance.

John D'Arco

Attorney at LawCertified Public Accountant

2  N Central Ave Suite 1800

Phoenix, AZ 85004

(602) 325-4701

1(866) 293-8040 Fax

Who does the auditing on the accounts?  Is there no outside CPA or CPA firm? 

The part of John's response about setting up "controls" is absolutely imperative.  The idea is not necessarily to catch an employee you don't trust.  IMO, the idea is to set up a system that dissuades people from their fairly inclination to do things like "just borrowing" from the escrow account.  Talk to your CPA or a CPA firm and put in some controls, pronto.  Have them do an audit if there are any questions.  Do whatever you need to in order to protect the integrity of your firm's finances and its financial reporting.  That is even more important as to your escrow account.  I use an outside CPA firm for taxes.  It has a bookkeeper (lower level) who reconciles my checking account offsite.

Bite the bullet and deal with this problem now rather than later.

And if your employee wonders what is up, explain that this is all a part about "sound management" that you have read (and you are reading it right here).

Good luck -- but don't put this off.