How to Reduce or Eliminate Your Firms Continuous Write-Offs

How to Reduce or Eliminate Your Firms Continuous Write-Offs

How to Reduce or Eliminate Your Firms Continuous Write-Offs

By ALB In Legal On 02 Jul 2019

The decade since the Great Recession of 2008-2009 has seen significant changes for the legal sector as law firms have worked to stay profitable in a time of great unrest and disruption. Clients, facing financial pressures of their own, have become more demanding of their legal counsel and hesitant to pay fees billed by the hour which can be unpredictable and opaque. Law firms have had to devise alternative methods of billing through budgeting and commoditization to address cost pressures from clients. Functions like project management have become more prevalent across the legal sector, as have software tools that assist with practice management.


According to Altman Weil’s 2018 Firm’s in Transition Survey, 62% of law firms reported discounting 20% of their fees and 21% of firms reported discounting 50% or more of their fees. Only 42% of firms that have discounted their fees have reconfigured how they assign work on these matters. In other words, firms have not internalized the changes driven by the changes in the legal services market. Rather, they have simply taken the financial hit to their bottom line adjusting to these changes with a short-term focus by reducing costs, rather than building a firm for the future established around technology and efficiency. With heavy discounts and write-offs as the primary client cost cutting strategy, there should be no surprise that there has been little growth in firm profits across the sector. Many firms have not adjusted how they work to the new realities of the market for legal services.


Inaccurate Budgeting. Modern firms have moved past the point where every matter is considered bespoke and to a more systematic, consistent pricing model. Not to say that every matter is the same; indeed, there will always be some level of variation in the scope of some legal engagements. Where possible, firms should work to standardize process and pricing, as this will allow for accurate budgets and predictable billing outcomes for both the client and the firm. But bad budgeting can be worse than not budgeting at all.


Ineffective or ill-considered budgeting can be fraught with issues that can result in billing write-offs. By using practice management technology, law firms can better understand their work, their people, their clients, and their business. Instead of undervaluing their work, firms can better predict costs and communicate to clients about budget. A robust practice management system can even allow a firm to help clients anticipate possible issues ensuring that there are no surprise budget-busters later in the engagement. Investing in systems that help firms accurately price matters making them more predictable help with client relations and can help boost fee realization.


Any budgeting system designed to price legal work accurately requires a significant amount of quality data to be available. Much of this data already exists in a firm’s timekeeping and billing systems. Capturing a summary of characteristics about individual matters can help attorneys and budget teams to identify comparable matters and use these experiences to create a budget for the new work. A database of comparable matters can help law firms and clients establish fair budgets and can help drive down the amount of time that is written-off because of poor predicting by a law firm.

Client Relations. The Thompson Reuters 2019 Report on the State of the Legal Market found that demand for legal services has remained relatively stagnant for the last several years. Without growth in the market, it has become more important than ever for law firms to retain their clients. Clients, on the other hand, prefer to stay engaged with firms with whom they trust and have established relationships. With these factors in mind, law firms should be looking to technology to help them partner with clients to achieve their objectives. Law firms are in an advantageous position to help clients find solutions to problems and can help in-house law departments by sharing legal technologies and by helping to develop these tools for client use. If firms find ways to utilize technology to reduce the burden of their own loss leaders, they can then market these services as commoditized products. Billable hours written-off as a part of the loss leader can become a profitable product the firm can market to clients. Clients also benefit because they now can keep more of their legal work with a firm with which they have an established relationship. In this way, technology can be used for business and client development purposes while also reducing the burden of billable hours write-offs.


By implementing some mature technological solutions, law firms can better engrain work practices built for the current-state legal market. Firms are now comfortable with discounting legal fees but are far from comfortable determining how those discounts impact their bottom line or what changes should be made to their work processes to help better absorb these changes. Technologies like Accurate Legal Billing (ALB) software, learning modules, and others can help firm become more efficient by better understanding how attorneys are working and by providing better insight into what time is being written-off and by whom. Among these, the need of the hour for battling the prevailing insufficiencies in cash flow is an advanced and intuitive legal billing software. ALB is an AI enabled cloud based legal billing software enhanced with features of automated bill review, preloaded UTBMS codes, invoice preparation, conversion and submission tools that allows law firms to produce bills that are devoid of any non-compliance or error. ALB ensures that all your invoices submitted to bill review vendors before payment by your clients are fully compliant with your individual client’s billing guidelines.

Submitting invoices which are fully compliant with clients billing guidelines will not only foster trust and better relationship with your firms clients, but will also result in less write-offs and hence a definite increase in firm profit margin.


If your firm is looking to improve its profit margin then the ALB ( billing platform will certainly help you to achieve this.