Managing Case Costs Wisely

00:00 Speaker 1 Welcome to the Effective Lawyer, a podcast for ambitious attorneys who want to improve their practice. My name is Jack Zinda and I'll be your host. Hey everybody, Jack Zinda here. And I want to talk to you today about how to manage case expenses at a law firm, specifically a personal injury law firm. You know, this can be one of the biggest bottlenecks that people have when they're trying to grow and scale the practice. One of the hardest things about being a personal injury lawyer is that not only do you have to put in your time on a contingency fee, you have to front the expenses on a case. And that goes for a lot of commercial litigators as well if they're working on contingency fee in some other practice areas like class action. 00:55 Speaker 1 And so it becomes very important that you, one, have a great system to manage it, and two, know if you're meeting certain criteria that makes sense to spend money on a case or not. So the first thing that you want to do is make sure you have a way to track your case expenses that can be through more than likely a software system. You know, there's a million out there that will do that, but you want to make sure you have a software program to do that. If you are just starting out, you may not have the resources to hire a bookkeeper. So you're going to want to make sure you train your paralegal or someone on your team to set aside time to actually enter the case expenses as those are being put in. 01:41 Speaker 1 But I would advise you to have at least a part time bookkeeper when you open your practice to make sure that everything is being tracked and being tracked correctly because you cannot do it wrong because the client is going to have to pay it back at the end and you have to make sure that it is all 100% accurate. The next thing, once you have a software program, you have someone to help track it. You want to decide how much you can spend on each individual case. We set up a rule that says we don't want to spend more than 10% of the cases value on case expenses. That's not a hard and fast rule, but that's a general rule that we can grant exceptions to based on the experience level of the lawyer. 02:20 Speaker 1 But it gives us a guideline to say this is where we want to target. And the reason we pick that percentage is if you go above that, it could be a situation where the client does not get as much money as they need to make sense to resolve the case. But that means you again have to make sure that you are setting a value of the case. A lot of attorneys are very reticent to do that. You don't have to set a perfect value, just a general value of what you think the case value is. Part of our process is once a month we update what we think the general value of the case is. It doesn't mean it is an exact value, doesn't mean it's the actual value. 02:59 Speaker 1 It's something in the ballpark, or at least a guideline for we can set the case expense on and then we have a process. If it goes above that, we want to make sure it's an intentional decision to go above that percentage. The next is you may want to consider getting a line of credit or some access to capital that is not coming from your operating account. That will allow you to free up cash flow to spend on things like payroll and marketing expenses and continuing legal education and equipment. 03:40 Speaker 2 This podcast is presented by Zynda Law Group, a nationwide personal injury firm. For over 10 years, the experienced lawyers at ZLG have been partnering with outside counsel across the United States on all types of personal injury and wrongful death cases. With over 30 attorneys, Zynda Law Group has paid out millions in referral and joint venture fees since 2015. To learn more about partnering with Zynda Law Group, please email us@re referralsindalaw.com we'll schedule a time for you to meet with Jack Zynda or one of our trial lawyers to discuss your case. 04:19 Speaker 1 Now, many times when you start a firm it's difficult to get a line of credit, so you want to start small and utilize that line and then as you are paying, getting cases resolved, pay the line of credit back. You can also look to vendors that will lend specifically to personal injury law firms and pass the interest on to the clients. I know Advocate Capital is one like that and Esquire Capital is another, and there's several others that will do that sort of case expense tracking and interest tracking and those sorts of things. Sometimes the interest on that can be significantly higher than if you went to a bank to get the line of credit for your case expenses. 05:02 Speaker 1 The next step is you want to make sure that you are reviewing case expenses that you have to write off and that you have a good timeline for when you first start spending money on a case. We don't like to invest case expenses in the first two weeks if we can avoid it because we want to make sure we're going to keep the file now obviously if it's a large trucking case and we need to get an expert out there yesterday, we will. But many times it turns out a case isn't what you thought it was. So we like to have a cooling off period before we invest significant amount of money. 05:32 Speaker 1 In smaller cases, we typically wait till the first 30 days is over to request the initial set of records because many times a client ends up not being as hurt as we thought. Or maybe it turns out liability was bad in One record can cost, you know, a few hundred dollars if you're trying to get the affidavits with those like our firm does. And then on a regular basis you want to evaluate how your firm is doing on your case expenses. If you are using a line of credit, you want to make sure that you have enough money set aside in the line of credit and that you're not overusing it. This isn't one of the most sexy areas, but it is one of the most critical if you want to be successful and grow and scale your firm. 06:16 Speaker 1 The final piece of advice that I'll add is you want to be careful about putting all of your chips one case. Let's say you are just starting out and you have $100,000 line of credit. If you put all of your case expenses into one case, you're not going to have room for others. So look at opportunities to split expenses with other firms if you're in that situation by either joint venturing it or referring it out, or another avenue to split the expense cost. Even really successful attorney many times will split the case expenses amongst themselves. So if you have any more questions on case expenses or how to manage it, feel free to reach out. You can reach me@jackindalaw.com or go to our website at Zyndalaw.com and until next time, thanks a lot. 07:10 Speaker 2 Thanks for listening today's episode of the Effective Lawyer. You can learn more about our team and find other episodes of our podcast at zindalaw.com. As always, we'd appreciate that you subscribe, rate and review the pod. Thanks.