Get 1 email per week with industry news and tips for growing your business

Oops! Something went wrong while submitting the form. Please reload the page and try again or email us at hello@mighty.com

Medical Finance

Plaintiff Finance

5 Hidden Costs of Outdated Legal and Medical Funding Software

November 19, 2017
-
6min read

The evolving operational and strategic needs of companies navigating any rapidly expanding industry often outpace their technology.

When many of today's top funders got their start, legal funding software options were non-existent, so it comes as no surprise that as the legal and medical funding industries continue to grow at an unprecedented pace, we're seeing more and more companies struggling with outdated software.

Some funders have taken on the costly and challenging task of building and maintaining custom, proprietary software applications from scratch. While others have attempted to customize pre-existing systems designed for other industries (i.e. Salesforce, Zoho, ACT)  which rarely provides a strong long-term solution. Square pegs, meet round hole. 

Today, most of these 'legacy systems' inhibit business scalability and growth, as legal funders now need an all-purpose operating-system to support and amplify business and enable teams to run more efficiently. For example:

  1. Operations: processing new investments and tracking current investments; automating and improving workflow.
  2. Strategy: generating meaningful, accurate reports and analytics to drive business decisions.
  3. Capital: reporting to current investors and using data to raise favorable capital from new investors.
  4. Security: keeping data safe from insiders and outsiders

Spending money on tech solutions can be expensive, but failing to keep up with tech advancement is almost guaranteed to cost you more in the long run. This article will explore five hidden ways you may be losing money on outdated technology:

  1. System Upkeep
  2. Operational Inefficiencies
  3. Employee unproductiveness
  4. Capital Costs
  5. Internal data risks

 

1.  You're spending growing amounts of money on system upkeep

The costs of maintaining that expensive legacy system you built (or the software platforms you jury-rigged to fit your business) ten years ago are not going to get any cheaper.

In fact, it is probably costing you a lot more than you think:

  • Developer costs increase over time, and system maintenance becomes more difficult the more outdated the software is.
  • Older systems have increased failure rates, and crashes and system downtime are a money pit. According to Microsoft, it costs nearly double to fix a computer system that is more than four years old!

If it hasn't happened already, there will come a point where you're spending more money to maintain your legacy systems than you would have if you had upgraded at the right time.  

2. Inefficiencies are eating away at your margins

It's no shocker that efficiency means better processes, which lead to more profit.

The typical legal or medical funder's technology stack is often some combination of:

  • System-of-record software or spreadsheets (proprietary or industry-adjacent)
  • Lead management software or spreadsheets
  • Document management software (Dropbox, or other cloud services)
  • Spreadsheets for calculating payoff schedules and populating contracts
  • Word document auto-generating templates for contracts and other documents.

By using multiple, unintegrated or disjointed systems to run your business, you are certain to be losing money. For one thing, you are putting a hitch in your operations and processes and using time switching between them that could better spent elsewhere.

Beyond that, more likely than not your information (payoff amounts, attorney contact, dates, etc...) does not match up across those systems, making it time-consuming at the least to find basic information, and potentially costly -- one typo on a payoff could cost you tens of thousands of dollars.

The more of these needs your core funding software can handle in an efficient, user-friendly way, the more easily you can train employees, and the more business you can accomplish in the long-term.  

3. Your employees are less productive

By leveraging modern tech, companies can maintain a connected, efficient workforce that can act on-the-go, while outdated or clunky software makes employees inefficient (and unhappy) for a number of reasons:  

  • User unfriendliness, when you're spending 90% of your day in a given system, ease-of-use matters for both business efficiency and team member morale
  • Document management struggles, such as maintaining accurate spreadsheets for payoffs.
  • Communication challenges, such as the inability to work from home/on the road or quickly receive answers to time-sensitive questions.
  • Lack of automation helping you with document, contract and payoff generation, e-mail templates, and texting assistance (e.g. for reaching out to plaintiffs).
  • Being forced to spend time resolving tech issues rather than focusing on business tasks.

If time is money, and happy employees are more productive (and in turn make your clients happy), then why wouldn't you make every effort to increase productivity and improve day-to-day labor for employees in the trenches?  

4. You're paying more for your capital

Make no bones about it, in today's environment, most capital providers demand that legal and medical funders use modern software to their maximum advantage.

Software and systems-of-record often enter the conversation during the due-diligence process of  finance deals and demonstrate at least two key-characteristics of the legal funder to the potential capital provider.

First, it demonstrates professionality. It's simple, a modern software system is seen as more professional than an outdated program, or worse, spreadsheets. In this case, appearances do matter.

Second, capital providers often need assurance that funders can both accurately track their portfolios and provide clean, accurate data that demonstrates the veracity of their investments. Often, outdated systems are limited on both of these fronts.

Worst case, using outdated software could cost you a deal outright. The second-to-worse case, with legacy software, your cost-of-capital will be more expensive to compensate the provider for the additional risk. Either way, you pay!  

5. You're paying for internal data risks - whether you know it or not

It comes as a surprise to most funders that the #1 (and #2, and #3 info security risks are posed by their own employees ( see this article from CIO.com and digitalguardian.com). 

Modern software often offers the ability to maintain user roles and permissions, audit logs, audit trails, and the ability to "roll back" your instance to any previous point-in-time.

If your outdated tech doesn't offer these basic features/applications, there will be immediate or eventual ramifications, such as disgruntled sales employee making off with your list of attorneys or merely being unsure who on your team sent the most recent payoff. On top of these potential issues, the older your tech gets, the harder it will be to properly support your data and perform disaster recovery in a worst-case scenario. Even extremely cautious companies suffer data issues; unfortunately, if they can't recover from them, precautions are futile.

You'll never be able to safeguard your data from every threat and with 100% certainty, but you can drastically reduce your cybersecurity risks by ensuring you have a solid, modern system in place.  

Conclusion

Today, due to the obsolescence of many funding companies' core funding systems, and the recent availability of enterprise-grade legal funding software, tech-savvy funders are looking to modern solutions to help both avoid loss and achieve new levels of growth and efficiency in an increasingly competitive market.

People have a hard time leaving what they know, and instead, convince themselves their existing setup is good enough to keep investing money into -- this is well known in the behavioral economics world as the endowment effect.

It's a bias best avoided. Update your systems, future-proof your business, and avoid losing or wasting money due to outdated tech.

Get 1 email per week with industry news and tips for growing your business

Oops! Something went wrong while submitting the form. Please reload the page and try again or email us at hello@mighty.com

Download the free Legal Funder’s Handbook

Close

Legal Funder’s Handbook

Get over 100 proven tips to supercharge your funding business today

Oops! Something went wrong while submitting the form. Please reload the page and try again or email us at hello@mighty.com