Today, law firms are evolving and being challenged at a faster rate than at any time in history. Having adapted to remote working and being challenged by online and self-help tools, law firms are now further challenged by technology and the lack of new talent entering the industry. Among all of this, the addition of Artificial Intelligence (AI) brings with it the perfect storm for change.
It is generally said that the two industries most likely to be impacted by AI are journalism and the legal sector. Hallucinations aside, AI will never respond and say, “I do not know the answer”, but AI still needs someone to police the output and ask the question correctly. It should already be a billable item for any major client, and law firms should have a clear AI policy and strategy in place to maximise the opportunity it presents while dealing with the challenge it could pose.
According to a recent Law Society report, adopting AI and addressing legacy technology issues is the single biggest challenge and opportunity for law firms in 2025. According to PwC, 69% of law firms believe AI will have a positive impact on revenues, and 62% have started investigating how to benefit from this opportunity.
Historically, equipping law firms with the right technology would include case management and general practice management, HR and CRM systems. This needs to change. But it’s not just about implementing some AI wizardry; what is required is a considered solution-based approach that addresses shortfalls and plans for the future. Financial planning tools, better performance analytics, improved reports and information sharing can all add significant value to how a law firm operates and performs.
Clients are becoming more demanding (and asking for fixed fees) and can more easily churn to another law firm or take some of their business away to technologies which are replacing some of the work law firms did in the past.
The legal sector is heavily reliant on personal interaction, building solutions bespoke to each client with a singular focus on each interaction. This is changing as templates and downloadable services become more common. Working remotely means less face-to-face interaction and more that can be done offline.
But it’s not just about implementing some AI wizardry; what is required is a considered solution-based approach that addresses shortfalls and plans for the future.
The pressures on the sector are not just limited to more self-service and less one-to-one service. According to the Law Society Annual report (2023), 44% of clients want reduced fees and 46% are moving to cheaper providers.
All of this is against a backdrop of increased global uncertainty. The world has never been more fractious, whether that is with wars in Europe, the Middle East and Africa or traffic and trade disputes. As a result of significant disruption, it matters ever more to build flexibility into planning for the future and to be more adaptable not just for your clients but also for staff, whether front line or back office.
Generative AI offers law firms the opportunity to undertake more research, prepare documentation and complete labour-intensive work at a fraction of the price and time. However, the gains made in terms of performance will see a reduction in fees and fee-earning time. As we have seen with online automation, generative AI will also provide much more to the end-user directly, and the ability to bypass lawyers and law firms will benefit all, save perhaps for fee-earners.
The first forays into AI have not been the best. After lawyers pursuing an injury claim used ChatGPT to help with their case, the judge threw out their claim and fined the lawyer. The AI was so generative that it made up the case references in the claim! Rightly so, the judge saw fit to blame the lawyers, not the AI.
For many law firms, the lack of focus on leveraging technology needs to change. We may not be ready for AI-driven court cases, but neither should law firms accept budget-holder forecasts completed in spreadsheets with a few models created that show an upside option and a downside option.
The impact of an AI Large Language Model (LLM) to replace the work done by several researchers and junior lawyers could be significant. Companies slow to embrace the AI opportunity and the associated impact on staffing numbers may find they lose a competitive advantage. But a considered approach is needed.
One advantage the legal sector enjoys is that it lacks the need to be at the leading edge of change. It can observe and act based on what it has seen elsewhere. This may provide a benefit, but it is short-lived and still requires a response.
Law firms must embrace the opportunity of change while learning from other sectors and industries. For law firms to flourish, a deeper level of understanding is needed around financial performance, future HR trends, staff needs and better collaboration across the business. Marrying automation with legal advice and guidance will deliver improvements, but it needs someone to drive change.
The finance function is the single department in a law firm that can produce reports to measure performance. It is the only department that has the tools to determine the most profitable clients from the biggest, forecast the ones likely to grow, and understand the true cost to serve, not just hours and receipts. However, the finance function in the law sector needs to transform itself from a business support team into a key influencer on future strategy and direction.
At VantagePoint, we drive the change that allows firms to react and respond better while delivering insight far more efficiently and with greater clarity. This enables better future planning and multiple scenario modelling, which can be done with fewer staff needed to chase invoices. Reducing lock-up can be a significant win even before greater performance insight delivers real value. The finance function is the only department that has the tools to ask the question “what if?” for each of its clients.
Gaining an advantage through automation should be an opportunity to do more and elevate the finance function rather than to do the same today. According to ERPM Insights, creating a value-add finance function is “about creating a finance vision that is aligned with the business and supports the organisation’s strategic direction.”
In our article ‘Excel: Heaven or hell’, we identified that 12% of all spreadsheets contain errors. The war for talent and the potential impact of manual work dictates that automation is a must. Not just the ability to do more, but also to bring control and consistency, and allow for greater scrutiny of the output.
Therefore, the finance function needs to provide the insight needed for law firms to plan and forecast better, develop scenarios to suit the needs of the business, regularly undertake performance evaluations to direct future strategy and respond to impacts imposed upon the law firm (e.g. client demands). The finance function needs to do all of this efficiently and consistently while using fewer talent and with a fragmented, hybrid working team.
We recognise that change can be hard. We understand that not everyone buys into finance transformation or sees the true potential early on. We try to make it as easy as possible for our clients to better understand the need for finance transformation and to commit to making the change needed.
For law firms, there has never been a more critical time to adapt, innovate and lead. The future promises to be impacted by significant change, change that will provide challenges as well as offer opportunities. We’ve led finance change projects in over 100 companies, including several well-known large and niche law firms.
Let our experts help kick-start your finance transformation.