The financial health of small-to-medium sized law firms will be put to test as a key legal industry association prepares to launch a financial benchmarking tool.

The Australian Legal Practice Management Association (ALPMA) is calling on law firms to submit data for a study that will ultimately create the financial benchmarking tool for the industry.

ALPMA is hoping to come up with eight key financial indicators of practice health for the tool, all of which can be compared across a variety of filters including partner numbers, fee revenue and geographic area.

ALPMA's national president and the general manager of Coleman Greig Lawyers, Warrick McLean, told Lawyers Weekly the tool will fill a need in the market for key financial performance indicators for small and medium-sized firms.

"In some of these firms, having a look at these things on a regular basis can be a real challenge," he said.

McLean said developing the tool is a direct response to ALPMA members who have expressed an interest in accessing simple information for understanding and improving their financial performance.

"There's been a bit of a gap in this [level of] the market for this kind of tool ... Firms in the smaller and mid-sized end of the market want to become more sophisticated in how they measure their financial performance."

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ALPMA will draw on the existing Crowe Horwath Open Measures tool from accounting firm WHK Group in order to create the performance indicators.

Key measures to be reviewed include profitability, work in progress days and return on capital deployed.

The results of the study are expected to be revealed in May.

Only firms that submit data will have access to the benchmarking tool.