Case Study: Opportunities at a Law Firm

When the owner of a mid-sized law firm suspected the practice was losing money, they brought in Ratio Accounting to find out why - and fix it.

What we found was a series of fixable problems that, left unchecked, were quietly draining the firm's profitability.

The Problems

Books Running Behind

The firm's books were consistently one to two months behind, preventing timely decision-making. Without current data, the owner had no visibility into revenue sources, individual associate production, or the relationship between compensation and output.

No Performance Metrics

There was no system in place to track whether associates were producing enough revenue to justify their compensation. Bonuses were being paid without clear benchmarks.

Payroll Errors

Previously outsourced payroll processes had introduced errors. Interest payments on the firm's SBA loan had been improperly recorded as principal - a mistake that was costing approximately $731/month in overpayments.

What We Did

Automated reconciliation to provide real-time financial data instead of month-old reports.

Created Key Performance Indicators comparing associate salaries against their production metrics. This transparent approach motivated staff and clarified bonus trajectories.

Redesigned compensation structure to emphasize retention and production rewards.

Brought payroll in-house for better oversight and accuracy.

Conducted a full expense audit that uncovered:

• A double vendor payment of $12,771 - recovered in full
• IT services renegotiated from $3,500/month to $760/month - $33,000 annual savings
• Document storage contract revised - $3,600 annual savings

The Result

Within four months, Ratio Accounting's fees were essentially covered by the savings we identified. The firm now operates with real-time financial visibility, clear performance benchmarks, and a compensation structure that rewards production.

The takeaway: Most businesses aren't unprofitable because of one big problem. They're losing money through a dozen small leaks that nobody's tracking. A systematic approach to financial management finds those leaks and plugs them.