Law firms working with insurance companies know just too well how meticulously thorough and updated they are on existing billing practices and standards. To say that each billable hour matters is a gross understatement. From covering one’s own pay and overhead to generating proper revenue for the firm, tracking billable hours is an extremely vital part of a lawyer’s responsibilities.
The constantly increasing legal fee has driven clients to be extremely cost conscious and verify invoices thoroughly. For this very purpose, a variety of legal bill review platforms have surfaced and each legal invoice is now subjected to plenty of scrutinies that often results in hours being spent disputing the entries.
To understand just how important, it is to capture billable hours without losing even a single minute, take the example of the Am Law 200 firm Sedgwick LLP that went bust. The end of the year 2017 saw the fall of an 80-year-old law firm that completely collapsed under the weight of the capital pay-out obligations towards a large number of partners who left the firm. Prior to the recession, it seemed sufficient for Sedgwick to charge the top tier insurance companies for countless billable hours such that the loss caused due to defaulters seemed really meager. Given the extremely large client base of Sedgwick, it is actually possible that if Sedgwick had refrained from overlooking the plenty of billable hours that they did, the firm would have stood a chance.
According to a recent study as mentioned in the Texas Lawyer, lawyers have been noticed to spend only about 30% of their daily work time on billable hours, i.e. about just over 2.3 hours out of 8. This study further shows that out of the 2.3 hours, clients are usually billed for only 1.9 hours. Now, after the clients’ bill review vendors work on these invoices, the average amount of billed time comes down to about 1.6 hours.
The increased revenue of a law firm is an important factor when accounting for the ‘success’ of the firm. While increasing the efficiency of the law firm is the obvious solution to increase billable hours and generate more revenue, the billable hours that remain unaccountable for should be a priority.
Here are 5 things law firms can do to prevent loss of billable hours:
Stricter Time Policies: The time to be spent on work and otherwise by everyone working in the law firm must be documented and dictated clearly. The fact that every single minute can bring in money for the firm must be impressed upon and productive work strategies encouraged. This ensures that a significant part of the eight hours spent is actually billable.
Proper Time Capturing: If the timekeeper is unsure as to what exactly constitutes billable time, capture every minute. These hours, even if not billable can be used to strategize towards increased efficiency of the law firms. Many timekeepers still use old practices for capturing time: spreadsheets, pen, and paper, etc which actually require increased effort.
The easiest and most efficient way to capture billable hours is to use an electronic legal billing platform that allows timekeepers to easily capture their activities, minute by minute such that no billable time is left out.
Confirm that all the billable hours have been entered then and there. The end of the month hassle of confirmations and rechecking time can be avoided completely if the billable hours are noted at the latest by the end of the day. This also saves the timekeepers from a lot of guess-work and from losing out on many hours due to not being able to recollect them properly. A systematic time capturing routine is therefore highly ideal.
Ensure that you do not miss out on commonly overlooked billable hours. These include the time that you spend on calls with clients outside of work, time spent traveling for meetings with clients or for the case, the time spent answering emails regarding the case and so on.
Offer incentives on commissions to timekeepers based on the amount received after submitting the invoice rather than the amount that they bill for. This is a sure shot way to boost efficiency as well as encourage accurate invoice preparation.
Let us know if you have any ideas on maximizing billable hours that has worked out for your firm.