When Ince & Co collapsed, it was said to have owed creditors £36 million. One of the issues that contributed to the firm’s decline is thought to be cash flow problems, resulting in part from a decline in turnover and a large WIP book – issues that can hit law firms of any size.
Law firms can take steps to protect themselves from these problems by ensuring they have a steady stream of incoming clients and by avoiding working with clients that might struggle to pay.
Law firms can make use of data such as that provided by Red Flag Alert to help with both these issues. Here’s a look at how.
Build a Pipeline of Perfect Clients
For any business, having a pipeline of potential clients is important to keep sales coming in. However, law firms often rely on referrals from brand and partner connections and this presents a growth opportunity for firms willing to take matters into their own hands by building a data-driven, outbound sales strategy.
- Effectively Segment the Market
Law firms can use data to segment the market into highly specific customer profiles based on metrics such as a company’s industry, number of employees, performance, or a range of highly-specific financial metrics. Red Flag Alert’s data can be filtered, which makes it easy for firms to build lists of potential clients.
In our recent article on Micromarkets, we explored the value of segmentation in more detail. For a law firm, clearly defining a client type and then targeting them with focused messaging will be highly effective. Different departments in a firm probably have different customer types, so targeting these customers with a specific offering will generate more productive sales conversations.
For example, if a department in a firm specialises in construction litigation, then being able to identify every potential customer in that sector will be hugely valuable. Red Flag Alert could identify every construction firm:
- Within 75 miles.
- With a turnover greater than £6m.
- Operating in a specific sub-sector.
- That has experienced £500,000 of bad debt in the past two years.
- With poor liquidity.
This may provide a sweet spot of firms that will be receptive to litigation law advice. And there are thousands of different configurations – a law firm can really dial into the customers that are right for them, and with Red Flag Alert’s key decision-maker dataset, they can contact the appropriate person in that organisation.
Once law firms have these lists, they can then target each customer segment with sales campaigns optimised to be effective for businesses that fit that profile.
- Strike When the Iron is Hot
You may have found the perfect target customer, but if the time isn’t right they will be less receptive to your sales attempts. Because of this, knowing when to approach a lead is crucial to the sales process.
Red Flag Alert’s data is updated in real-time from ten leading sources. Using this data, law firms can identify when there may be an opportunity to target a lead. For example, if you notice a company growing, it could be a good time for a firm specialising in employment law to offer its services. Or if a company has appointed a new managing director, it may be the right time to start a conversation about legal services.
- Look for Opportunities Within an Existing Client Base
In a similar vein to the point above, businesses can use real-time data to spot opportunities within their existing client base or with prospects who have expressed an interest in using their service but are yet to commit.
With Red Flag Alert, law firms can set up alerts that show when a client is experiencing significant changes in its business. This may be the appointment of a new director, a profit warning, the opening of a new office or fast growth. Using these alerts will provide firms with a well-timed opportunity to approach clients with specific and relevant offerings.
Manage Financial Risk
Law firms often have issues with cash flow, in part due to the long period between invoicing for work and receiving payment. This is especially prevalent in law firms that have inadequate credit control processes or those with very high wage bills.
Many law firms have a large WIP book and by the time work is invoiced it may be disputed by clients that have forgotten the specific details of an engagement.
It’s important that law firms manage this risk by monitoring the companies they do business with. Red Flag Alert is a vital tool for business monitoring as it provides an easy-to-read financial health rating that shows how likely it is that a business will fail in the next 12 months.
If a company you work with is at risk, your firm could begin to take steps to protect itself should the business be unable to pay for your services. These steps could include looking for new clients or demanding shorter payment terms.
Beyond the health rating, Red Flag Alert also provides in-depth financial information on all the businesses in its system, allowing law firms to dive deeper into the financial health of key clients to assess risk in more detail.
Finally, the ability to set up alerts means law firms will be notified as soon as any of its clients begins to experience financial distress. This lets them start putting in place protection procedures at the earliest possible opportunity.
Manage Regulatory Risk
Anti-money laundering (AML) regulations implemented by the EU and the UK are highly relevant to law firms of all sizes. A key requirement for staying compliant with these regulations is that law firms know exactly who they are working with. The regulations put the responsibility on firms to ensure compliance: if their clients are found to be involved in irregular activity, the firm will be held accountable. Red Flag Alert is the perfect tool to ensure KYC procedures are robust and fit for purpose.
Having in-depth data on the companies they work with gives law firms the information they need to see exactly who they are working with so Red Flag Alert has developed an anti-money laundering service to help businesses stay compliant.
Our AML service was developed in conjunction with Begbies Traynor plc and GB Group plc, so we’re confident that it is the most comprehensive solution on the market in the UK.
- Full range of risk level checking.
- Unbeatable match rates.
- ID verification.
- Enhanced due diligence.
- Monitoring alerts.
- Simple interface.
- Secure audit trail.
Also, the AML service screens against sanctions lists and PEPs.
Make Your Law Firm Data-Driven and Build Competitive Advantage
Red Flag Alert’s real-time data is extensive:
- 6.5 million UK businesses.
- 20 million key decision-makers.
- 100,000 data updates every day.
- 100+ indicators of financial health.
- 50+ filters of key business data.
- 7 detailed financial health ratings.
- 2.6 million telephone records.
Red Flag Alert is more than just a software solution and this is how we ensure you get the most out of working with us:
1. Analysis: Initial consultation to determine your requirements.
2. Set-up: Our data experts configure Red Flag Alert to meet your business needs.
3. Support: We’re here to help – just pick up the phone.
Whether you need to drive your sales, manage risk, or ensure compliance, our team are here to help.
Contact Richard West on firstname.lastname@example.org or 0344 412 6699.