How Timekeeping Can Make or Break Your Law Firm’s Success?

Timekeeping in law firms isn’t just paperwork. It is one of the most important parts of running a successful and trustworthy legal practice. Far from being a back-office task, it directly affects a firm's financial performance, professional ethics, and client satisfaction.

When done right, it ensures that clients are billed fairly, that lawyers are recognized and compensated properly, and that firm leaders can make smart, data-driven decisions. But when it’s done poorly or worse, dishonestly, it can lead to a wide range of problems, from lost revenue and client disputes to serious legal risks and reputational damage.

Why Accurate Timekeeping Matters More Than You Think

Accurate time records are essential not just for client billing, but for overall firm health and strategic planning. When lawyers and staff track their time properly, the firm gains valuable insights that help them:

• Plan budgets more accurately by understanding how much time tasks take,

• Keep cash flow steady by ensuring work is billed and collected on time,

• Evaluate which cases and clients are most profitable, guiding future business decisions.

It also provides the foundation for capacity planning. When leadership has visibility into where time is being spent, they can allocate resources more efficiently and avoid both understaffing and unnecessary hiring.

Moreover, accurate time data plays a huge role in managing people. It helps firm leaders ensure work is distributed fairly, avoiding overloading some attorneys while others are underused, and forms the foundation for fair compensation decisions like bonuses and promotions, which are often tied to billable hours.

It’s also worth noting that clients are increasingly demanding transparency in billing. Having accurate, consistent time data builds trust and reinforces the firm’s professionalism in the eyes of clients.

Common Pitfalls: Padding Time and Miscoding Tasks

Despite best intentions, two major issues frequently cause timekeeping to go off track: time padding and miscoding. These may seem minor in the moment, but over time, they can seriously damage the firm’s financial integrity and reputation.

They also erode the firm’s internal culture by normalizing unethical or careless habits, especially when left unchecked. Over time, these practices can quietly undermine trust not only with clients but also among team members.

What is Time Padding?

Time padding is when someone records more time than they actually spent. Common examples include:

• Rounding a quick call from 5 minutes up to 15,

• Logging the same admin work (like organizing a file) under multiple client matters,

• Or adding extra time at the end of the day or week just to meet internal billable hour goals.

Even when done with the mindset of “balancing out” unbilled work, padding distorts the truth. It inflates client bills, undermines internal performance tracking, and weakens the firm’s ethical standards.

Over time, it also creates a disconnect between the actual effort required for tasks and how the firm measures performance, potentially leading to flawed decision-making at the management level.

What is Miscoding?

Miscoding happens when time is logged to the wrong client, matter, or billing code, sometimes by accident, other times with intent. This could be done to:

• Get around client-imposed billing limits,

• Avoid having time written off as unbillable,

• Or shift billing credit toward a particular lawyer or team.

In large firms where many people work on the same matter, miscoding often slips through the cracks, especially when origination or performance credit is at stake. However, regardless of intent, miscoding causes confusion, leads to inaccurate reporting, and reduces trust with clients and stakeholders.

Misclassification also makes firm-wide analytics less useful, skewing reporting on client profitability, matter efficiency, and resource allocation.

Why These Issues Persist: Understanding the Root Causes of Bad Timekeeping

Even though most lawyers understand the importance of ethical timekeeping, the same mistakes continue to surface. Why? Several underlying pressures and behaviors contribute:

1. Billable Hour Pressure

Attorneys are often expected to meet high billable targets, targets tied directly to bonuses, promotions, and job security. This pressure can tempt even well-meaning lawyers to inflate their hours just to stay competitive. What starts as a one-time occurrence often becomes a habit, especially when there is little oversight or incentive to do otherwise.

2. Delaying Time Entry

Many attorneys wait until the end of the day or week to enter their time. This habit forces them to rely on memory, increasing the chances of errors, time padding, or forgetting tasks altogether. Over time, these inaccuracies compound, leading to billing incronsistencies that affect collections, budgeting, and reporting accuracy.

3. Cultural Normalization

When junior lawyers see their seniors regularly rounding up time or logging estimates, it sends an unspoken message that this behavior is acceptable. Over time, it becomes “just how things are done.” This creates a dangerous precedent. Once these habits are embedded into firm culture, reversing them becomes harder, and efforts to improve timekeeping may be met with resistance.

4. Lack of Oversight

Without consistent audits or accountability, timekeeping rules start to feel optional. If no one is checking entries or correcting them, compliance drops, and mistakes multiply. Even sporadic enforcement can signal that the firm isn’t serious about accuracy, weakening firm-wide standards and leading to systemic issues.

5. Misunderstanding the Rules

Some professionals mistakenly believe ethical billing rules only apply inside the office. In reality, timekeeping accuracy is required no matter where the work happens, whether at home, on the road, or in court. As hybrid and remote work continue to grow, it’s more important than ever to reinforce that professional and ethical standards apply regardless of location.

Are There Any Risks Involved: Financial, Legal, and Reputational Damage?

Poor timekeeping can lead to serious consequences across multiple fronts, such as:

• Lost Revenue:  Research shows that lawyers who don’t record time in real time lose between 10–15% of billable hours. When time is entered in big batches, days or weeks later, losses can climb to 25–30%. This can cost $20,000–$40,000 per lawyer per year, which adds up quickly in larger firms. This doesn’t just affect individual attorneys, it impacts overall firm profitability, partner distributions, and reinvestment capacity.

• Damaged Client Trust:  Clients are more informed and cautious than ever. If they see vague or inflated entries, they may delay payments, demand discounts, or request audits. Over time, trust erodes and so does repeat business.

Trust, once lost, is hard to regain. A single audit request or billing dispute can tarnish years of relationship-building.

• Regulatory and Legal Trouble:  Regulators and bar associations are paying close attention to billing practices. Repeated errors, even if accidental, can trigger ethics complaints, audits, or professional discipline. In highly regulated industries (like healthcare or government), billing mistakes can even result in cancelled contracts or lawsuits under laws like the False Claims Act. Beyond fines or sanctions, these events can damage the firm’s brand and ability to compete for high-value work.

Conclusion

Honest and accurate timekeeping is a key part of a law firm’s overall strength. It fuels better decisions, builds lasting trust with clients, and protects the firm from unnecessary risk. When treated seriously and supported by tools, training, and leadership, timekeeping becomes a reflection of the firm’s commitment to professionalism. It’s a competitive advantage that sets high-performing firms apart.

Whether your firm is large or small, investing in better timekeeping isn’t just about the bottom line, it’s about doing right by your clients, your colleagues, and your profession. Want to learn how to protect your firm and create a culture of integrity? Reach out to us today!