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Accommodation charges
all direct costs associated with the provision of office space, including: mortgage costs (if any) rent, rates, service charges, premises insurance and depreciation (where applicable) but not utilities costs. Capital equipment
generic term covering capital items used in routine practice operations (cars, IT, office equipment etc.) Credit check - external
the establishment of a client's creditworthiness through the use of external agencies Credit check – internal
the determination of a client's credit status within the firm. Disbursements
generic term taken to mean all money paid out by the practice on a client's behalf and not included in the time and cost recording system. Typically these include; legitimate travel expenses, court fees, registration costs, levies, fees paid to other professionals in the furtherance of the client matter etc. Fee earners
all those who ordinarily work on client matters and generate fees - salaried partners, associates, consultants, staff solicitors, legal executives, law clerks and 'paralegals'. Full Time Equivalent (FTE)
Employees. A method of counting part and full time employees collectively. Interim billing
Bills rendered prior to the completion of a matter. Usually at regular intervals; monthly, quarterly etc. Intranet
A private network of computers that are able to share files and data using a device referred to as a 'server'. IT
Information Technology; generic term covering all computer equipment; computers, PCs, servers, printers, scanners and software (not telecommunications). Lease purchase/rent-to-own
generic term used to cover all finance industry agreements where capital equipment can be financed by regular (usually monthly) lease/rental payments for a fixed period followed by a payment of an additional pre-agreed sum. Title to the goods then transfers to the lessee. Lock-step
Partner remuneration system whereby all partners move, over time, (typically 4-10 years) to parity of profit share. Management report/account
The timely production of day-to-day financial information that enables the smooth running of the firm. It is the term used to describe periodic reports for management which are based on simple cost accounts and performance. Notional Income
regular drawings/income paid to partners net of final profit share, when available. Operating/Overhead expenses
all expenses excluding accommodation charges, partner drawings/notional salaries, staff salaries/wages, interest and tax. Typically this will include marketing, training, PI insurance, utilities, post, telecommunications, information technology (IT), stationery and professional fees, etc. Partner
equity partner, i.e. a person entitled to share in a firm's profits. Partnership capital account
A partnership's capital account represents the liability of the partnership to repay an individual partner the capital that has been contributed to the firm. It is distinct from the current account which shows any undistributed profit at any point in time. As a rule of thumb a partner's capital (including any retained and undistributed current account balance) is typically around 50%-66% of the estimated share of gross profits for the forthcoming year. Partnership capital is required to finance the running of the business while income is being generated. The amount will be a compromise between: The desire for maximum drawings balanced against fiscal prudence; Financial efficiency including accurate forecasting; The nature of the business - the speed with which it is able to render bills and obtain payment. Performance related drawings/pay
Partner (income) that is dependent in part, or in whole on the quantum of fees billed. This can include drawing regimes where an individual partner's earnings can fluctuate according to personal and 'group' billing volumes. Profit
money available for distribution to equity partners after all fixed and variable costs have been met. Quartile
One of three variables dividing an entire population into four equal groups. Recovery
The proportion of work in progress that has been billed. Recovery rate
The relationship between work in progress and the amount billed; e.g. if WIP system shows a value of 10,000 has been recorded and only 8000 is billed, the recovery rate is 80%. Revenue
unless specified otherwise, revenue comprises all fees and other income generated by a practice. It may include, rents, investment income, directors fees, bank interest, etc. (It is noted that an increasing number of practices have partnership deeds preventing any partner from holding directorships in client companies. This reflects changing attitudes in corporate governance and conflict of interest.) Staff costs
staff salaries (including those of salaried partners), fringe benefits at cost and any notional/regular equity partner salary. ALL salary figures are presumed to be gross, i.e. the total cost to the practice. Support staff
generic term to describe all non fee earning staff. Training/professional development
courses, seminars, and conferences designed to develop specific legal or practice management skills. In jurisdictions with mandatory schemes only 'qualifying' courses apply. Utilities
water, power, gas charges but not 'service' charges levied by property owners to cover routine maintenance/running costs. Work in progress (WIP)
A generic term used to describe un-billed recorded time and costs. |
