Seven Tips for Improving Law Firm Billing Efficiency

Vol. 3, No. 1

Loretta Ruppert is the Sr. Director with LexisNexis Law Firm Practice Management. Follow her on Twitter @LorettaRuppert.

 

  • Does it really make sense to keep track of nonbillable time?
  • What can be gained from having my staff keep track of their hours too?
  • How can better invoices help my bottom line?

 

Geneva Yourse was a relatively new attorney when she took a big risk: she quit a secure job as an attorney with a family-friendly firm. Why? Because she wanted to pursue something bigger: hanging her own shingle.

Hanging up a shingle may be a solitary endeavor, but it isn’t an isolated dream. LexisNexis research indicates there are roughly 450,000 solo- or duo-law firms in the United States. Though legal experience is often helpful, stepping outside the infrastructure of an existing firm has drawbacks, and it introduces an entirely new set of challenges that come with running a business.

Mrs. Yourse anticipated some of these challenges, such as developing a list of clients, but she was caught off guard by a number of problems, including time-wasting activities. As every owner of a private practice knows, unless you are operating under an alternative fee arrangement, if you aren’t billing, you aren’t earning money. It’s an easy concept to acknowledge in theory: Who in the legal profession would disagree that time is money? The test comes at the end of each day in the tally of billable hours.

For solo and duo law firms, billing research shows that for every hour spent sitting in an office, 24 minutes is not billed, and according to the research, small and solo lawyers work a nine-hour day on average. This equates to 3.6 hours, or 40 percent of your time, that doesn’t add to the bottom line of the law firm.

                                                                                                            

Getting a Handle on Time Management

For Mrs. Yourse, the answer was simple: she would track all her time. This would provide her with a record of time keeping for analyzing all her activities. The goal wasn’t just to account for billable hours, but also to account for how she was spending her nonbillable time. Only by analyzing those nonbillable hours could she see where and how she was spending such a large chunk of time and develop a plan to refocus her priorities.

She found that keeping account of all her time—billable or not—was especially useful for making business decisions. For example, she had accepted some cases based on a contingency fee model. When a case was settled, her timekeeping enabled her to understand whether or not the contingency was profitable or more profitable than her hourly billable rate.

Business Process, Policy, and Billing Efficiency

For a solo practice, a business process policy might sound like overkill, but it drives toward two overlapping objectives. First, putting goals in writing—even personal business goals—is often the first step toward crystalizing the intent and developing a strategy for meeting it. Second, solo firms often grow into duo firms, or solos hire a paralegal or support staff to enable the billing attorney to focus on practicing law.

Here are seven things solo and small-law firms can do to improve billing efficiency.

 

1. Require All Time Keepers to Bill for All Hours

As Mrs. Yourse found, it’s hard to manage time if you are not measuring how you’re spending that time. Certainly this will enable decision making about priorities, and as the business grows, you’ll know when it makes sound business sense to hire additional support staff or to bring in a partner.

 

2. Require Nontimekeepers to Account for Hours, Too

Billing drives the motivation for timekeepers to account for time, but how support staff are spending their time can be equally important from a business perspective. By tracking this, attorneys can see how support staff contributes to nonbillable activities, enabling attorneys to focus on billable work. In addition, this can lead to the business justification of new tools, technologies, or a reset of priorities that can help reduce expenses.

 

3. Set Categories and Codes for Nonbillable Hours

Law firms often have precise codes to associate with billable hours. For example, document preparation on behalf of a client is coded differently than a phone call or email communication. Likewise, it’s a worthwhile endeavor to put some thinking into nonbillable codes and the activities that should be included under those codes. Professional development, operations and marketing are examples of high-level categories that can be further broken down into subcategories. As a case in point, marketing might be broken down further into networking at events, if you’re presenting at a local social club or bar association, and content marketing if you’re writing contributed articles for journals.

 

4. Look for Ways to Hand Off Nonbillable Tasks

With good timekeeping records and a solid understanding of how time is being spent, you’ll begin to see other ways to hand off nonbillable tasks to support personnel. Indeed this is the value proposition behind support staff: to keep you focused on billable work!

 

5. Clear and Simple Invoices

For some firms, it may be less about the amount of the bill than it is the bill itself and what it communicates or fails to communicate about the work being completed. Complicated invoices that are too hard for the client to understand, or bills don’t match up with client expectations—all can create resentment in the client’s mind. This increases the likelihood of a bill challenge, which usually means that a client is less likely to pay in a timely manner.

 

6. Habitual Write-Downs

It’s easy for lawyers to slip into a habit of writing down bills, even without client prodding. Whether it’s merely goodwill, diminishing the value of their own work or efforts to curry favor with clients, making a regular habit of credit memos or write-downs not only creates client expectations of more write-downs, but it also devalues the importance of the firm’s work, both literally in billings and in the mind of the client.

 

7. Legal Technology

There’s no shortage of tools available to small businesses for billing and accounting, but there is one guiding principle worth considering: look for tools designed for lawyers. From trust accounting to ebilling compliance, practicing attorneys have unique needs (and ethics) that generic tools are simply not designed to handle.

 

Three years after starting her firm, Geneva Yourse sold her firm to a slightly larger firm, an exit that would not have been possible without sound business practices, including billing efficiencies. She continues to practice law for Cauley Pridgen, P.A., an entrepreneurial law firm based in North Carolina.

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