Data exists everywhere and anything that we do results in more data. Law Firms collect large amounts of data every day. However, few firms have realized the need for analyzing this data in order to improve their business. Data analytics is becoming more important in many industries, and the legal sector is no exception.
Simply put, data analytics is the science of examining data in order to make a conclusion about some information. Legal data analytics applies specifically to the business and practice of law. Legal analytics harnesses technologies, such as machine learning, artificial intelligence, and searching, to clean up, structure, and analyze raw data from case files, court documents, and other legal documents.
While still in its infancy, legal analytics will play a crucial role for the law firm of the future. A law firm’s business insights are the backbone of its success. Knowing which lawyers are contributing the most to your law firm’s profits, the law firm’s client growth rate, revenue growth rate, debt-to-equity ratios etc., are just some of the critical questions that law firm data analytics can help demystify.
By monitoring the right success metrics for your law firm, you can make a major impact on your firm’s revenue and growth. You can look at key performance indicators (KPIs) related to number of new clients every year, number of new cases every year, number of new paying clients in the current year as compared to past years, the number of new clients by category, and the estimated average value of each new case. Legal analytics can also help you better understand productivity KPIs like the number of billable hours, the utilization rate (which is the number of billable hours worked divided by the number of hours in the workday), and realization rate (the number of billable hours invoiced divided by the number of billable hours worked) for your firm and for each lawyer.
Armed with insights into your law firm’s performance trends, you can start being proactive instead of reactive. For example, if you’re monitoring billable hours and find that certain months of the year
tend to be slower for your firm, as those slow months are approaching, you can dedicate more time to bringing in more business to prepare for the anticipated decrease in cash flow.
Some of the major benefits of Data Analytics to law firms include;
1. Improved Efficiency
With increased ability to gather large amounts of data at a quicker rate and visually representing it, law firms can make informed decisions to help achieve specific goals. Based on data, a firm can build a culture of efficiency and teamwork in which employees are able to share in the decision-making process.
2. Smart Decision Making
The relevance of a business is solely based on decisions. Effective decisions help in ensuring and fostering growth as opposed to ineffective decisions. Therefore, providing properly analyzed data, appropriated conclusions can be made from it. With correct analysis, law firms can eliminate errors that arise as a result of decisions made with no support.
3. Predict Future Trends
By using predictive analytics technologies, law firms can analyze historical data to predict future outcomes and the likelihood of various outcomes occurring. These technologies typically use statistical algorithms among other technologies, and allows firms to predict future trends and stay ahead of the competition. Such decisions might include knowing when to diversify into other geographical regions, when to hire more attorneys or support staff, or what expenses to reduce to increase the firm’s bottom line.
Enfinite Solutions recognizes the importance of data analytics in law firms. With our custom-made cloud-based application LawAnalytix, law firms now have the opportunity to use their data as a decision-making tool.
Integrated with our law firm management system WakiliCMS, law firms use LawAnalytix to view statistics and trends such as client growth rates, revenue growth rates, realizations rates, utilization rates, debt-to-equity rations, partner performance, employee turn-over just to mention a few. The added advantage being that the data does not have to be captured and organized again in LawAnalytix as it was already captured in WakiliCMS.
Overall, this data-driven approach can help you gain insights to help you make better business decisions and improve the productivity and efficiency of your law firm.