Lawyers face a significant challenge in maximizing their revenue due to the burden of administrative tasks, complex billing processes, and productivity barriers. The reality is that many attorneys unknowingly surrender hundreds of thousands of dollars annually due to inefficient time tracking and billing practices. This can result in losses of up to 50% of potential revenue, which can be devastating to a law firm.
Failure to capture every critical minute of work can lead to substantial revenue erosion, undermining the economic model of legal practices. Attorneys should understand the ins and outs of time tracking and billing to achieve efficiency and profitability, as depicted in a lawyer billable hours chart.
This guide will help you understand how your law firm should be managing billable hours to ensure you're maximizing revenue for your legal services.
A billable hour is an hour you spend putting work into a legal project for which you can charge your client.
The hours that are considered ‘billable' are those that generate revenue for the business through work. The monetary rate at which attorney work hours for lawyers are charged is negotiated with the client beforehand.
Some of the most common examples of activities that are billable to clients include:
However, not every hour of work that attorneys do qualifies as billable. This is important since non-billable hours cannot be charged to a specific client. Non-billable hours may include work to build your client base or promote your business.
Some of the most typical tasks that result in non-billable hours for attorneys include:
Law firms must adopt a holistic approach that combines strategic client management, performance optimization, and sophisticated financial practices to increase billable hours. In this section, we will go deeper into the best practices for enhancing lawyer billable hours.
In many law firms, attorneys are expected to bill a certain number of hours daily, weekly, or monthly. One way to increase law firm billable hours is to establish a ‘billable hour' policy.
Under this policy, attorneys would be expected to track their time in increments of 15 minutes (or whatever the firm deems appropriate). They would then bill for those increments, even if they only worked for a few minutes. For example, if an attorney tracked their time and saw that they worked on a particular project for 20 minutes, they would bill for 30 minutes.
Problems arise when legal professionals are hyper-focused on a particular project. This is a normal part of any workflow and is to be expected. However, avoiding these employees flooding their supervisors with questions and requests is important. Too much time spent answering questions can lead to dips in productivity.
One important strategy for minimizing this issue is allowing employees to submit queries and issues early in the workday. Set a specific time for the submission of problems or challenges. Upper-level employees can then address each problem on their own.
Have you noticed that your firm's non-billable hours are too high and your billable hours are too low? If this happens, it is important to investigate how much time you or your employees spend on low-value jobs and tasks.
In addition to unproductive priorities, distractions and procrastination can cost you dearly. It is critical to remove any potential distractions from the workplace. This is especially true during hours that should be billable.
Staying focused on the important activities that bring in revenue is critical. Working in teams can also help reduce procrastination since individuals are much more susceptible to distractions.
Don't try to calculate billable hours after the case has concluded. In other words, track your billable and non-billable hours as they happen.
After time passes, it can become challenging to remember what happened during specific work hours and whether the task was billable to a client—attempting to rely on memory, days or weeks after the fact, can result in inaccuracies. Calculating billable hours becomes nearly impossible.
This may cause incorrect invoices. It may also result in your firm missing out on valuable revenue.
As any law firm knows, billable hours are the bread and butter of the operation. If attorneys aren't billing hours, the firm isn't making money. That's why ensuring every billable hour is documented correctly and accounted for is important.
Go through the documentation for a certain period of time and ensure that all of the hours billed are accurate. If you find that there are discrepancies in the billable hours, you can take steps to correct them. This might involve training attorneys on how to document their time better or changing how the firm tracks billable hours.
Failing to provide clients with a clear description of why they are being charged could result in disputes. Billing and invoice disputes cause your business to waste valuable time and evident frustrations and inconveniences. Ensuring that your billing descriptions are complete and thorough will decrease client complaints.
For example, suppose you spent an hour on a phone call with a client. Many attorneys would include the description of a ‘one-hour phone call' on the client's invoice. Instead, provide a brief description of the content and importance of the call. Detailed legal billing reports also ensure you recover money for all calculated billable hours.
It is important to keep a record of your firm's billable hours. This is how you ensure that your revenue genuinely reflects your employees' work. However, it is also crucial to monitor your non-billable hours. Non-billable activities can drastically decrease your billable work hours.
Tracking these tasks will help you find non-billable activities that can be automated or delegated more productively. As such, monitoring your firm's number of non-billable work hours can ensure you are as profitable as possible.
Increasing the total billable hours each day or week is vital. You should use billable hours for necessary tasks and projects.
Your firm or practice can increase your revenue drastically by automating some non-billable workflows. Tracking lawyers' billable hours and task management are two important elements of automation.
Automating many non-billable jobs in your law practice allows you to increase your total number of billable hours. It is much more useful to spend an hour on a client's case rather than spend that same time manually completing job duties.
Using billing hours calculators is a useful way to decrease your non-billable work and increase the accuracy of your invoices and billing. Many digital timers can be integrated into other business-related software.
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A billable hours chart can provide an overview of all the billable tasks that need to be addressed and how long each should take. This allows attorneys to quickly see how much time they spend on a given case and ensure they stay within their client's budget and are not being overcharged for any services.
You can use a billable hours chart to calculate whether attorneys meet billable hours targets at a glance. However, it might be difficult for rookie attorneys or legal clerks to understand that most law firms bill in six-minute increments (or one-tenth of an hour).
The table below shows a chart for calculating billable hours.
We will give two instances of using both billable hours, as shown in the table above:
While identifying billable time is usually straightforward, accurately tracking and invoicing those hours is challenging. Thankfully, many kinds of software can assist you in keeping track of your practice's billable hours.
Excel is a good billable hours law firm tool for tracking and managing billable chart hours. You can easily track how long they spend on specific tasks, such as research, interviews, writing legal documents, and appearing in court. With its easy-to-use spreadsheet format, Excel makes it simple to record and analyze data related to the amount of time spent on each task or project. It is suitable for multiple clients or projects.
Additionally, Excel's graphing capabilities enable users to visualize their data in order to identify trends and uncover insights. You may automatically calculate the sum of all your input with the help of built-in functions, eliminating the need for manual computation.
To get started,
Clio is a comprehensive legal practice management software that helps streamline administrative tasks and increase productivity for attorneys. With Clio, you can efficiently manage your cases, track billable hours, generate invoices, and analyze financial performance. It integrates with other tools, making keeping all your data in one place easy. Clio is recognized for saving attorneys one to two hours daily on administrative work.
Asana is a software application that enables teams to monitor, manage, and organize their tasks. It integrates with various business-related applications, creating a functional hub for your cases. Asana has several features that make it an excellent alternative for lawyers searching for a tool to calculate billable hours.
Some features that make Asana a great choice for attorneys include the ability to create and manage projects, a variety of templates to help you get started, the ability to assign tasks to team members, the ability to track billable hours, and the ability to generate invoices.
QuickBooks Time—previously known as TSheets—is another great option for attorneys. It allows employees to integrate. It is simple to use and offers several features specific to the legal industry. For example, QuickBooks Time can track your time spent in court, on the phone, or in meetings. It can automatically generate invoices based on your time records.
Additionally, QuickBooks Time integrates with several popular accounting software programs to easily track your invoices and payrolls. This makes billing and tracking your time a breeze, so you can focus on what's important—your clients.
Due software was created to help freelancers and firms precisely evaluate how long it takes to execute project work for clients. Additionally, it offers team managers insight into how team members utilize their time and ensures that labor laws are followed.
Time Analytics is an excellent solution for attorneys since it is mainly built to track efficiency. This legal practice management software is simple to use and includes several features that assist attorneys in preparing detailed timesheets. You may also use it to keep track of your lawyer's billable hours and enhance the profitability of your project by reducing unproductive hours using the timesheets.
ClickUp is well-known for its project management abilities but does not limit its capabilities. It allows you to view your billable hours law firm data. The software makes it easy to see how many billable hours an attorney has worked on a case and how much time you have left. This way, you can accurately estimate how much your case will cost.
Most importantly, ClickUp integrates with your existing law practice management software. This way, you can keep all of your data in one place. Plus, you can customize reports to meet your specific billable hour requirements.
In this podcast episode, Joshua Lennon discusses with our host, Sasha Berson, the critical challenge of time management for attorneys, highlighting how lawyers can lose up to 2-3 hours daily to non-billable activities. He emphasizes the importance of leveraging technology and process optimization to reclaim productive time, demonstrating strategies that can increase billable hours and improve overall law firm efficiency for practices of all sizes.
Joshua Lennon
Lawyer in Residence at Clio
Joshua Lennon is the Lawyer in Residence at Clio, bringing unique insights from both legal practice and technology innovation. Admitted to the New York Bar, he bridges the critical gap between legal expertise and technological advancement, educating lawyers on how technology can dramatically enhance law firm efficiency.
In this podcast episode, Sasha and Ryan Kimler discuss the differences between bookkeepers, accountants, and CFOs, emphasizing the importance of hiring a CFO even for small law firms with less than $2 million in revenue. They highlight that many lawyers lack financial knowledge, and Ryan suggests improving profitability by evaluating billing, maintaining payroll expenses at 40% of revenue, and keeping four to six months of expenses in reserve to ensure a high return on investment per attorney.
Ryan Kimler
The owner of Net Profit CFO
Ryan Kimler is a seasoned financial strategist with a knack for optimizing profitability in professional services, particularly within the legal sector. With a background in finance and extensive experience working with law firms of all sizes, Ryan specializes in evaluating billing practices, managing payroll expenses, and implementing strategies to maximize return on investment per attorney. His expertise extends to advising on financial reserves and ensuring sound financial health, making him a trusted resource for law firms seeking to enhance their bottom line. Ryan's dedication to improving financial outcomes for his clients has earned him a reputation as a reliable and insightful CFO within the legal industry.
When choosing billable hours software, you should consider your business type, needs, the app's usability, simplicity, budget, and features.
There are some key features to consider:
Modern law practices must view every minute as a potential revenue generator, meticulously documenting work while simultaneously reducing administrative overhead. This article explored how tools like Clio, Asana, QuickBooks Time, and ClickUp enable efficient time-tracking, billing, and invoicing.
Furthermore, you need to structure your business so that all of your hours are billable and outsource the non-billable hours. Grow Law Firm will handle all aspects of your website optimization, advertising campaigns, and search engine optimization efforts, allowing you to concentrate solely on practicing law and serving your clients.
Contact us today and let our experts turn your marketing initiative into strategic revenue generation.
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