An extremely important aspect to the life of any law firm is the unavoidable billable hour. Profitability comes when enough money is generated from billable hours to cover overhead and salary costs and bring in revenue.
With this in mind, it is obvious that the more hours your law firm bills, the more revenue you can bring in.
Keeping Track of Time
Tracking time is often considered the most onerous obligation in a firm. While attorney timekeeping software does not eliminate what can feel like misery for some, it does automate part of this important process.
Essentially, time entries are entered into a timekeeping system that lists:
- Client name
- Type of activity or expense
- Start and end dates of work activity
- Description of client work performed
- Amount of hours worked
- Hourly rate
These details provide valuable information that not only allows your law firm to bill clients, but you can also measure how much time is spent on a specific task.
Ineffective time tracking systems may cause a loss of 30% or more in billables. This translates into lost revenues for your firm. To alleviate the burdensome task of entering this type of data, it helps to think more like business owners.
Continued success also requires employing metrics to improve time productivity and business practices that increase the bottom line.
Billable Hours and Utilization Rates
Evaluation of billable hours is done in the context of utilization rates. This serves to compare employees, clients and your firm’s overall performance.
For some firms, there are at least two main causes of low utilization rates: administrative and practice management tasks. These two activities make up the bulk of non-billable hours. Another culprit could be attorneys that inadequately capture and record their time.
Yet, many attorneys grip about entering their time, whether on timesheets or in a system that keeps track of billable and non-billable hours. For those who do not understand the full impact of effective timekeeping, education and manageable tools can help to resolve the wedge.
Make Timekeeping a Relevant and Consistent Practice
Essential to improving billable hours tracking is ensuring all attorneys participate in entering their time accurately. Even top-of-the-line systems are limited to data input. Therefore, if attorneys are not inputting hours worked on a particular client file, no data exists.
If your law firm is like most, the compensation structure is linked to revenues, which means more billable hours are crucial. Changing outcomes requires looking closely at the costs of working on specific client cases.
This goes beyond simply billing by the hour; everyone involved should be productive. Keeping the focus solely on billing by the hour only fulfills one part of the equation. Effectively tracking all time is the best way to understand how much one client case really costs.
For example, if an attorney spends 100 hours on one client but only bills 15 hours, you must evaluate whether the firm’s time is being used appropriately. A closer look at how the other 85 hours were spent is crucial to understanding what may need to change.
Was the time spent on business development? Or, was it something else that got lost because it was deemed unimportant?
It is necessary for all attorneys in your firm to understand the value that keeping time has for revenues and costs. Detailed information can directly impact their compensation.
Timekeeping Helps in Making Smart Decisions for the Firm
Time data also aids in making smarter business decisions. An attorney timekeeping software solution becomes a useful tool during a critical point in the legal business.
Taking on too many cases before making hiring decisions is not the best way to conduct business. Data gleaned from keeping time is an invaluable tool or analyzing this aspect of the law firm.
This explains the importance of having accurate utilization rates. You will know whose time is written off more frequently than others. Members of the administrative staff may not have enough work, so hiring another assistant is not the answer.
Additionally, collection of this type of data can help when assessing job performance. Analyzing from a profit-level standpoint can provide answers. You can evaluate whether more people are needed or if better efficiency from current employees is required.
Other possibilities could be to raise rates or get rid of unprofitable clients. Analyzing records of time billing will also help you strategically decide if charging flat fees for certain transactions or routine tasks is a viable option.
Perhaps your legal clients are not asking for alternate fee agreements. However, fixed fees for routine services may prove more profitable. This is the type of decision accurate time tracking can help you make for the firm.
Stressing the need to enter time spent on each client is crucial for the business of running a legal firm. This will also take the guesswork out of what is working and more importantly, what is not working for your firm.
The right solution is one that fully integrates every aspect that is affected to ensure billing is accurate. Client meetings, research, court dates and other events that occur to build a case are captured.