According to the Wolters Kluwer 2022 Future Ready Lawyer Survey, entity management software is widely considered one of the most important technologies for modern legal departments and law firms.
The shift from antiquated methods to a more dynamic entity management software solution is largely fueled by compliance concerns. Aging technology stacks simply cannot meet the growing regulatory requirements facing the 21st-century legal industry.
However, industry leaders are looking beyond mere compliance and actively pursuing ways to make their organizations more efficient, agile, and profitable. This paradigm shift has further incentivized legal departments and law firms to adopt entity management software. Early adopters of this technology will gain a distinct advantage over those that cling to outdated compartmentalized processes.
In a recently published eBook, the Athennian team reports findings from an extensive examination of the state of entity management. We explored why entity management software is no longer just a nice-to-have tool but will become a necessity in 2023.
The Biggest Entity Management Challenges Facing Legal Departments
According to The Current State of Legal Entity Management, nearly nine out of ten organizations report encountering entity management challenges.
Each organization's specific challenges will vary based on the scope of its work and the complexity of its suite of entities. However, compliance appears to be a chief concern among most organizations.
According to the same study, 20% of entities have not been in good standing with regulators for approximately two years. This figure does not account for entities that have been out of compliance for less than 24 months, which means that far more than one in five entities may be out of compliance.
Compliance requirements within the legal ecosystem are rapidly changing and evolving. Aging technology and antiquated entity management processes limit organizational agility, thereby hindering the ability to adapt to these changes.
Processes that require physical documents are particularly detrimental to an organization’s ability to achieve and maintain compliance. Physical document management is also inefficient, time-consuming, and excessively costly.
Despite these facts, 10% of legal departments rely entirely on physical documents for entity management. Another 43% of legal departments leverage paper files to facilitate a portion of their entity management processes. Over half of all legal departments are inadvertently hindering their own productivity and transparency by relying on physical documents.
Another major hindrance to record visibility is data siloing. Data silos are created when organizations use disjointed processes and technologies to manage vital documents. Entity management software eliminates this pain point by serving as a single platform through which legal organizations can manage all critical information and data.
Signs It's Time to Revamp Your Entity Management Processes
Even if your entities are in compliance, your entity management processes may be due for an overhaul — especially if you are among the 40% of organizations that either have no formal processes in place or use manual tactics to manage entities.
Some other warning signs that you need to revamp your entity management processes include the following:
- Late filings have become the norm
- Delinquent subsidiaries threaten your standing with regulators
- Locating important information is tedious and inefficient
- Information or records are inaccurate and error-laden
- You rely on tax and finance teams to achieve compliance
Alone, any of the above shortcomings undermine organizational efficiency and hinder your ability to manage your entities. Cumulatively, these issues can lead to noncompliance, client dissatisfaction, and penalties from regulatory authorities.
Benefits of Entity Management Software
Even though most legal organizations still rely on physical documents for entity management, the tide is beginning to turn. According to the 2022 Deloitte report, An Inside Look at Legal Entity Management Practices, 40% of organizations anticipate deploying entity management software by 2025.
As organizational leaders learn the value of entity management software, adoption rates have accelerated. Investments in specialized entity management software have also spiked. For instance, Athennian raised $33 million in its Series B round in March of 2022.
Athennian has also experienced a 500% growth in annual recurring revenue since 2020. At the time the eBook was published, 2,500 users were leveraging Athennian to manage nearly 400,000 business entities. These numbers are expected to double over the next few years.
Adopters of Athennian are unlocking benefits such as:
Emerging legislation like the Corporate Transparency Act (CTA) demonstrates why legal departments must focus on agility in order to maintain compliance.
Under the CTA, the timelines for many traditional reporting requirements were condensed. Entities that fail to comply will face stiff penalties, such as individual fines as high as $10,000 and per-day penalties of $500 until a violation is resolved.
Athennian’s entity management software provides organizations with the ability to streamline compliance and reporting. In turn, this will empower them to adapt to new legislation like the CTA and avoid crippling financial penalties.
Decreased Entity Management Costs
Managing entities manually is cost-prohibitive. It also strains organizational resources and hinders employees from engaging in more dynamic, value-driven activities.
With Athennian, organizations can automate traditionally inefficient processes using cloud-based workflow tools. Automation will drastically decrease entity management costs and save countless hours. For instance, Dentons Bingham Greenbaum LLP adopted Athennian and lowered its entity creation time from four hours to just 30 minutes.
Digital transformation, in general, optimizes the productivity of law firms and legal teams.
Entity management software is a key digital transformation catalyst that enables firms to break away from manual processes in favor of technology-driven alternatives. In turn, this will lower operational costs, reduce the risk of human error, and empower teams to become more productive.
Download the Full eBook
Would you like to further explore the state of entity management and the benefits of adopting Athennian’s cloud-based entity management software?
We invite you to download the full eBook, which contains additional statistics demonstrating why entity management software is necessary for modern legal departments and law firms. It also cites several case studies highlighting the momentum that entity management software is gaining among North American legal organizations.