Australia's legal profession is investing in new processes and staff members in order to drive future growth, as lean enterprises look to capitalise on improving market conditions.
That's the finding from the most recent benchmarking study from the Australian Legal PracticeÂ Management Association (ALPMA) and professional services firm Crowe Horwarth. The research looked into the financial position of Australian law firms and the major trends that are expected to shape the industry over the coming months.
The research found that Australian law firms are in a strong financial position, after seeing a sizeable increase in profitability over the last year. Over the course of 2014, Australian legal employers raised their average profitability to 15 per cent, compared to the 10 per cent recorded in 2013.
Underpinning this expansion has been significantÂ cost cutting, particularly in areas like commercial overheads. According to the research, Australia's legal firms saw a decline in overheads from 40 per cent of expenses in 2013 to only 36 per cent in 2014. Other measures like invoice payment times have also decreased, with firms devoting more resources to ensuring payments are completed.
Alternative payment structures were also cited as a major growth area, with 30 per cent of legal billing relying on a measure other than billable hours. While still a minority, the study suggested these tools are becoming increasingly common as firms look to attract and retain valuable clients.
While firms have clearly spent the last few years cutting back-end costs, the ALPMA research did highlight new trends that are developing within the sector. For example, the research emphasisedÂ that lateral legal hiring is becoming more popular, underscoring the shift that is occurring in the profession towards new growth opportunities.
Revenue is also picked to be a growth area for legal firms throughout 2015. The study found that the average Australian law firm is planning to add 10 per cent to its revenue this year. For larger firms, this figure rises even higher, with these industry leaders expected to grow their income by 20 per cent over the course of 2015.
With such strong goals for the rest of the year, 2015 is likely to see continued hiring and innovation in billing as firms look to boost their performance.