Chief Financial Officer of GTG Advocates, Andrew Demanuele speaks to The Malta Business Weekly about the role of the financial controller in a legal outfit and the benefits this can bring to a law firm
According to Andrew Demanuele, most law firms like GTG Advocates in Malta, bar a couple, employ less than a hundred persons and mostly hire 40 persons or less. To this end they might consider the role of a financial controller as being redundant, in particular due to “the misconception that the accounting and financial filings requirements of a law firm may not be as taxing and complicated”.
The above misconception, the law firm says, could in due fairness be nascent from the fact that according to the terms of the 14th schedule of the VAT Act, subject to fulfilling certain criteria, law firms (not associated as a company) may opt to use cash accounting rather than accruals accounting. Furthermore, a law firm is not required to file audited financial statements.
Demanuele explains that for these reasons, some law firms do not look at the bigger picture and see very little added value in the role that a financial controller could play within their organisation. A very common structure is that small- and medium-sized law firms in Malta may employ an accounting clerk to take care of basic tasks such as issuing of invoices and making/collecting payments and then outsource the obligatory filings with the Commissioner for Revenue. “The role of a financial controller in a law firm has more to offer and is more vital than most would recon,” Demanuele confidently asserts.
In some ways the role of a financial controller can be a difficult role to define, particularly in a boutique law firm like GTG Advocates. They clarify that “it spans between pure accounting, finance strategy and leadership. Working in such environment requires accuracy as well as efficiency and flexibility. Thus, aside from keeping an attention to detail and financial discipline, one would also need to capture the bigger picture in mind.”
As with any other business, the financial controller in a law firm is “the professional responsible for financial stability”, they continue. He is the person that is accountable for the financial health of the entity, minimises financial risk but at the same time promotes growth by developing strategies and plans for the long-term financial goals. Together with his team, he also assists the managing partner and the rest of the management team in taking strategic decisions by producing information that is timely, accurate and actionable which in turn allows decisions to be taken.
GTG Advocates maintain that having an in-house financial controller, even in a small legal outfit, provides other benefits. First and foremost, this person would ensure that the financial system in place is appropriate for the organisation. “This system should at least streamline invoicing and bill collection, reduces errors to a minimum, minimises record-keeping redundancy and ensures compliance with tax and accounting regulations.”
The law firm ensures that the role, when properly executed, would bring with it “cost savings, financial discipline and proper accountability as well as the potential for further growth and scalability”. This would improve short- and long-term business performance.
For those law firms which also provide corporate services, the financial controller may also add another dimension when advising and servicing clients, Demanuele remarks. “Most foreign investors seek the services of a law firm when establishing a presence in Malta. These services would include the incorporation of a company or a similar structure, applying for licenses, advising them of their obligations and so on. At this point the law firm may maximise its turnover by also offering accountancy services since this expertise is already available in the firm and is a requirement of the client.”
GTG Advocates thus conclude that having a financial controller as part of a law firm is nowadays a necessity, which “positively contributes to the proper functioning of the organisation but also adds to the bottom line”.
Andrew Demanuele is also Finance Director at Afilexion Alliance