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March 16, 2022 Mind Your Business

Tips for Better Billing: Why practice management software is critical to business success

By Ruchie Chadha
While some small law firms have been slow to adopt dedicated time-tracking tools and billing software, the benefits outweigh the costs.

While some small law firms have been slow to adopt dedicated time-tracking tools and billing software, the benefits outweigh the costs.

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When the COVID-19 pandemic stormed into our lives in 2020, many U.S. law firms saw increased demand for their services and a greater need for efficient operations.

Some firms creatively adapted to the new normal, launching coronavirus task forces and other initiatives to address what Amy Traub, partner at BakerHostetler, called “an immediate need by our clients for information on how to address … these very unusual circumstances [in real time].”

COVID-19’s impact was just as inescapable in 2021. For lawyers, that’s meant a higher demand for services and opportunity for significant revenue growth. According to Wells Fargo Private Bank’s Legal Specialty Group, U.S. law firm revenue climbed 14% in the first nine months of 2021. Additionally, Citi Hildebrandt found a similar average revenue increase (14.7%) and a demand increase of 6.6% during 2021.

Along with this recent revenue growth, lawyers are also experiencing a surge in demand for legal services as the U.S. continues to grapple with COVID-19-related litigation. According to the 2021 State of U.S. Small Law Firms Report, 54% of small firm leaders anticipate moderate to high demand for services to continue in the next year; 59% expect that growth to continue over the next three years.

These changes mean firms must have efficient systems to manage their businesses. While some small law firms have been slow to adopt dedicated time-tracking tools and billing software, the benefits of proposal management software often outweigh the costs. With such software, firms can automatically capture every minute they’re working in real-time. Legal professionals, whether working in-office or remotely, can remain laser-focused on actual work without worrying about billing later down the line.

As the influx in legal services demand continues, here are five ways legal practice management software can improve operations within your firm, illustrating why you should prioritize this software in 2022:

  • Improved time-tracking and billing: According to Smokeball’s research, 30% or more of law firm work is not billed either by mistake or deliberately, with some small law firms purposefully not tracking hours as a way of reducing legal fees for struggling clients. The best legal practice management software offers automatic time-tracking tools to help stay on top of your time by capturing how long you spend working. This software also streamlines the invoice process and boosts client confidence, thanks to detailed reporting of the time you spend on their cases. There’s also evidence of the financial benefits of leveraging software for time-tracking and billing. Law firms using legal practice management software are more efficient and often gain an additional $5,000 to $22,000 annually, according to a 2015 Blue Hill Research study.
  • Better use of time: Practice management software helps law firms sharpen their accounting and reporting skills, improving their capability to analyze where they spend time and how productivity affects the bottom line. Law firms should look for software adept at timekeeping, case management and client contacts, with a solid document-creation capability and granular reporting features that help firms determine which cases and staff maximize profits.
  • An end to billing bottlenecks:  A 2019 study conducted by Thomson Reuters Legal Executive Institute found 61% of small law firms reported getting paid by clients as a significant challenge. The best legal practice management software, however, offers clients multiple payment methods to help eliminate billing obstacles. It lets partners create reminders that alert clients to pay promptly, ensuring fewer late-invoice payments. Staying abreast of account receivables is vital for generating revenue and managing profitability. An ideal legal practice management system can also fully integrate with a firm’s existing billing system. 
  • The power of automation: Setting and maintaining regular billing cycles establishes a reliable precedent with clients. The best legal practice management software automates a process that shouldn’t depend on guesswork and hunches, spur-of-the-moment recollections, handwritten notes or manual spreadsheets. Attorneys who use software that employs automation tend to bill more often and more accurately than those who don’t. 
  • Better overall operations: The right software should also recognize that billing and time-tracking are only part of the story. The operative phrase isn’t “billing management software.” Successfully managing a law practice goes beyond billing alone. With the correct legal practice management software, firms can improve functionality and accessibility to information. The software can be leveraged in hybrid work environments and support remote workforces and clients. Additionally, the right software can enable more efficient operations, streamlined workflows and improved collaboration.

The market is crowded with legal practice management software solutions. Making the right choice is critical to business success, so you’ll want to consider your practice size, monthly caseload, accounting and reporting needs and budget. When evaluating software, it’s also essential to consider three main value points—usefulness, cost-effectiveness and psychological benefits—and ask these critical questions:

  • Who will use this software and how long will it take them to learn it? 
  • How much time and effort can we save by using this software? 
  • Does this software address multiple billing types to meet both your current and potential future needs?
  • Will the software help all employees do their jobs more efficiently?
  • Will the software enable employees to report their output and worth to the firm?

Taking part in free trials, consulting with other legal professionals on their software usage and conducting thorough research are just a few ways to find a legal practice management software that best suits your firm’s needs.

Making a sound choice for your practice may also depend on the degree of buy-in you’ll need from partners and employees. Some systems are more complex than others, making it challenging to adopt for those reluctant to embrace new technology. The best legal practice management software offers an intuitive, user-friendly approach, helping turn skeptics into believers.

Your modern law practice confronts various challenges—data security, compliance requirements, infrastructure, evolving technology, changing digital usage and the COVID-19-related impact of remote work. Your firm’s software shouldn’t appear on that list; it should lighten your firm’s load and simultaneously manage a multitude of tasks, enabling your firm to work more efficiently than ever before.

Ruchie Chadha is president of Smokeball, a company that offers legal practice management software to small law firms. In her role, she oversees the product, marketing, sales and client teams. Before joining Smokeball, Chadha was a family law attorney serving in the Chicago area. She now focuses her career on delivering innovative solutions to lawyers, so they can better serve their clients and build healthier businesses.

Mind Your Business is a series of columns written by lawyers, legal professionals and others within the legal industry. The purpose of these columns is to offer practical guidance for attorneys on how to run their practices, provide information about the latest trends in legal technology and how it can help lawyers work more efficiently and strategies for building a thriving business.

Interested in contributing a column? Send a query to [email protected].

This column reflects the opinions of the author and not necessarily the views of the ABA Journal—or the American Bar Association.