Law Firm Billing Efficiencies: Room for Improvement?

Vol. 3, No. 5

Loretta Ruppert is the Senior Director with LexisNexis Law Firm Practice Management. Loretta brings experience as a previous business owner and legal technology consultant, a manager of professional services for a CPA firm, an accountant, and a subject-matter expert for developing back-office software. Probably most relevant, she is a former law firm employee and user of law firm practice management and financial systems. Follow her on Twitter @LorettaRuppert.

 

  • How can your firm increase its billing and productivity?

 

As a lawyer, you’re all too aware of the painful truth about profitability—if you’re not billing it, you’re not profiting from it. In other words, if you’re not capturing your billable time, you might as well be working for free.

The efficient use and recording of hours is paramount to any law firm’s productivity level—and central to the health of a firm’s bottom line. Whether you are an attorney or paralegal with billable requirements, or you work in an administrative or operational capacity like accounting or IT, the key to maximizing productivity boils down to enabling those with billable hour requirements to spend their time doing billable work.

How much of your employees’ available time translates into billable hours? Most nonbillable hours are clearly linked to practice management or administrative tasks, as shown in a July 2012 LexisNexis survey on billable hours. The findings were consistent across firms of all sizes and locations.

If the tasks are nonessential, it’s an easy fix: put a stop to it, no questions asked.

However, if the tasks taking time away from billable hours are essential to the performance of the firm, there are two ways to decrease their impact to your bottom line:

  • Require timekeepers to hand off nonbillable tasks to administrative employees.
  • Decrease the time it takes to perform those tasks by employing the proper technology.

Because one of the necessary tasks is timekeeping, your goal should be to make this process as efficient as possible. Timekeeping gets exponentially easier and less time-consuming if your practice management program has an automatic time-tracker. That way, no one has to waste time trying to remember, say, what they were working on between 2 and 2:30 p.m. last Tuesday afternoon. Proper tools can capture and clearly spell out unbilled hours in daily reminders, so it’s a simple matter of determining whether each period of time is billable or not.

According to the survey, size matters, too. Some law firms are simply more efficient than others. For example, the overcommitted practitioners at solo law firms spend 40 percent of their time on nonbillable tasks, while larger firms with 20 or more attorneys spend 27 percent of their time on nonbillable work. The firms in-between, or those with 11–20 attorneys, seem to have found the sweet spot, managing to keep unbillable time at just eight percent.

                                                                                                                                         

How to Amp Up Legal Billing and Accounting Productivity

Innovation in technology for the legal market has come a long way. Tools for matter management, document collaboration, billing, and accounting have matured greatly over the last decade. Cloud-based offerings especially offer simplicity and ease of use.

There are important considerations to take into account when deciding if your firm is performing up to par when it comes to effectively managing billing efficiencies. They include:

 

1. Billing Practices

For some firms, it may be less about the amount of the bill than it is the bill itself. Complicated invoices that are too hard for the client to understand, invoices that don’t make it clear exactly what the client is being billed for, or that don’t match up with client expectations all result in poor billing practices. This can lead to client resentment, which may make them more likely to challenge bills and less likely to pay then in a timely manner.

 

2. Making a Habit of Credit Memos and Write-Downs

It’s easy for lawyers to slip into a habit of writing down bills, even without client prodding. Whether it’s because your lawyers don’t put a strong enough value on their own work or because they’re trying to curry favor with their 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, literally and in the mind of the client.

 

3. Integrate Accounting and Billing

Who wouldn’t want to reduce the time between sending a bill and getting paid? That’s exactly what integrated systems should do for a law firm because the system shows client-related checks and trust account disbursements in one system. Proper tools will mitigate concerns with reconciling accounting and billing data, reduce duplicate data entry, and cut human-prone errors.

Although many firms have time and billing systems in place, not all software is created equal. Once you’ve decided to make the investment in technology, be sure to consider the following:

 

1. Understand the Differences Between Generic and Legal-Specific Time and Billing Software

Generic time and billing software doesn’t automatically help you keep track of and maintain scrupulous trust account records the way legal-specific programs do. It also won’t have the built-in e-billing compliance checks that top-grade financial management programs have. Such features prescreen your e-bills for client-prohibited time and expense entries automatically, before they are received by the client and bog down invoice approvals and cash flow. And those are just two of many advantages you’ll gain from top-rated legal-specific time and billing programs.

 

2. Get More From Your Time and Billing Software Than Capturing and Invoicing Billable Hours

There’s a virtual gold mine of data to be gleaned from your time and billing program, if only your time and billing software were capable of the type of reporting and analytics required to extract that precious material. You need a financial management program that interacts with your time and billing software so you can create the reports and analyze the data that will help you improve profitability. Better yet, get a comprehensive timekeeping, billing, accounting, and financial management program that does everything in one program. You’ll not only save back-office time by avoiding reinputting numbers again and again from one program to the next; but you’ll also know with certainty that your data is 100% accurate because you’ve removed the opportunity for human error that occurs when rekeying data.

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