Traditional vs. Modern Law Firm Compensation Models

January 12, 2024 By Dan Bowman Leave a Comment

Law firm compensation models can be complex and difficult to navigate if you’re unfamiliar with them. There is no gold standard and firms typically create their own unique compensation models based on specific formulas and metrics.

Depending on the structure, the topic of a law firm’s compensation model can create an unsettling, competitive environment among partners, lawyers, and associates.

Law firm compensation models don’t have to be a sore spot at your firm. Continue reading to learn more about compensation models at law firms and how to structure them to reward individuals fairly.

What Are Law Firm Compensation Models?

Think of law firm compensation models as a roadmap for lawyers. It helps lawyers understand their compensation, promotions, and bonuses as they advance in their careers in the firm. Traditional law firm compensation models are typically broken into two categories: formula-based and lockstep. Here is the difference between the two models:

Formula-Based Compensation Model

As mentioned earlier, some firms use hard data and plug it into formulas to determine where a lawyer lands in their model. In this particular model, a lawyer’s compensation is determined by their individual performance. This can include metrics such as dollar amount billed to clients or net new clients brought to the firm. Essentially, lawyers are the guides of their own success.

Lockstep Compensation Model

In contrast to the formula-based compensation model, the lockstep model rewards lawyers based on the performance of the entire firm. Compensation is then split based on seniority, rather than individual output.

Challenges with Traditional Law Firm Compensation Models

Compensation can be a touchy subject, but when you throw in rigid compensation models — the pressure is raised. The traditional models of compensation pose several challenges for lawyers.

While the idea of getting what you put in through the formula-based compensation model, it doesn’t reward lawyers for the non-billable tasks that often consume their days. Additionally, lawyers are so focused on their individual success, they can become competitive and even burn themselves out trying to reach a certain compensation number.

The formula-based compensation model often puts lawyers into silos which can impact the success of the law firm as a whole and wreak havoc on the culture of the firm.

Challenges within the lockstep compensation model aren’t so obvious. At face value, this model values equality across the firm. However, it disproportionality awards lawyers. For example, if a top performer is not at a senior level, they won’t get awarded for their hard work. Vice versa, if an underperformer is more senior, they will get a greater incentive than say a subordinate top performer. This model often makes it difficult for law firms to retain top talent.

If you noticed, non-attorney staff aren’t included in either law firm compensation model. This poses other challenges with retention as non-attorney staff are often the backbone for partners and attorneys.

As you can see, traditional compensation models can be a double-edged sword for lawyers and the law firms that implement them.

Restructuring Traditional Compensation Models

Let’s explore how law firms can pivot their traditional compensation models to more modern practices that properly award and recognizes their attorneys and staff.

Stick to your firm’s values

Your firm should have a defined mission, values, and goals. These are the core of your business and everyone in your firm should know them. It’s one thing to document your values, but they should also be felt in how you hire and manage your staff.

Tieing your firm’s values to each staff member’s role allows them to work towards a collective goal across the firm. Your staff wants to know their work matters and having a specific value leading what they achieve day-to-day will flourish a positive work environment.

Consider the client experience

Traditional law firm compensation models don’t account for the client experience which is a large component of a law firm’s day-to-day. It also accounts for hours of non-billable time that can’t be plugged into a formula.

Law firms are client-facing businesses that rely heavily on customer service. It can be difficult to uphold a standard of customer service when your staff is focused on competition or meeting a number. The true value lies in how your staff can retain clients through stellar customer service.

Don’t forget non-attorney staff

Behind every great attorney is a busy paralegal, legal assistant, and the list goes on. Traditional law firm compensation models only account for the achievements of the attorneys while leaving essential staff members out of the pot.

More time than not, non-attorney staff are what keeps the firm running. Whether they’re organizing legal documents for a court appearance, preparing and sending invoices for the firm to get paid, answering client phone calls, or updating attorney calendars — non-attorney staff support the success of the firm’s attorneys.

Outlook on Law Firm Compensation Models

Collaboration keeps firms connected. Competition, as we’ve seen, trains lawyers to behave in ways that are counter-productive to their happiness, client satisfaction, and firm profitability.

With your firm’s values and goals as its guide, you can create compensation models that proportionally award and recognize all members of your firm — attorney and non-attorney.

5 Ways to Optimize Remote Work Time Tracking for Lawyers

December 26, 2023 By Allison Lemasters Leave a Comment

According to a national survey sponsored by the American Bar Association (ABA), remote work options are becoming a must-have for many lawyers. 44% of surveyed individuals expressed a willingness to quit their current job if offered another with better remote work flexibility. Additionally, most participants prefer conducting pretrial hearings, depositions, and court-ordered mediations through remote means.

However, adapting to remote work setups presents unique obstacles, particularly when it comes to time tracking for lawyers. Unlike the structured office or court environment, working from home can blur the boundaries between professional and personal tasks, making it harder to track billable hours accurately.

To address these issues, consider the five following strategies to promote efficiency and precision in remote-working routines.

1. Choose the Best Remote Employee Time Tracking Software

Time tracking software can make a huge difference with remote and hybrid work in your firm, but it’s not all created equal. Be sure to choose a solution with features that suit your team best, such as automated timers that can track hours. This capability is especially handy for lawyers working from different locations, ensuring accurate billing regardless of their work environment.

Additionally, the software should offer detailed time summaries. These reports are invaluable for identifying areas requiring extra support, helping to maintain consistent productivity levels across remote teams.

Billing and invoicing features are also valuable. Compiling hours and creating invoices can be time consuming, but legal software automatically creates and sends branded invoices. This process ensures your firm produces high quality, dependable invoices no matter where they are working.

2. Use a Work-From-Home Time Tracker App

Contemporaneous timekeeping is crucial to accurate, transparent billing. Too often, lawyers rely on memory and estimate hours after the fact, which can lead to over- or underbilling. According to the ABA, contemporaneous timekeeping is a “weak spot” for many lawyers. On average, lawyers lose 10% to 15% of their potential billable time because they can’t estimate accurately. If they wait until the next day, they lose about 25% of the time. By the end of the week, that adds up to about a 50% loss.

In this context, adopting a time tracker app becomes a strategic decision. When your workday includes remote working or court appearances, these apps are particularly useful. They capture every billable moment in real-time, ensuring that each minute of legal expertise is accounted for and billed accurately. High-quality time tracking software will usually come with a corresponding app, so you can easily log your time from the platform on your desktop or from the app on any device.

3. Develop Remote Work Time Tracking Guidelines

Standardized time tracking guidelines are important in any firm, but they are even more vital for hybrid and remote teams. No employee should wonder “how do I track my remote work hours?” and instead know the exact protocol. A remote work time tracking template is a good place to start, but implementing guidelines within time tracking software will offer the most consistency across your bills.

Overall, having clear time tracking guidelines can:

Promote Accuracy: Lawyers and staff may have their own differing methods for tracking time, which can cause inaccuracies. With guidelines, everyone is following the same process and the chances of more accurate time entries increases.
Create Uniform Data: Uniform data is fundamental for accurate reporting to evaluate your firm’s productivity. Standards for timekeeping ensure that your attorneys and staff give you apples-to-apples comparisons for timekeeping.
Build Standards for New Staff Training: When you have a standard in place for timekeeping, it’s much easier to train new staff and set clear expectations to ensure they know what they’re responsible for at the start.
Foster Transparency with Clients: When the details of billable hours are vague, your clients may not trust that they’re getting value out of their legal services. Clear timekeeping guidelines provide more detail about how lawyers should be billing.

4. Provide Training on How to Track Employee Hours Working from Home

Training shouldn’t end at new hires. In addition to guidelines, you should train your staff on why accurate timekeeping is important and best practices. Conduct regular training sessions with your staff — like how to manage time in remote work settings or ethical time tracking considerations — to keep everyone on the same page. If your time tracking reports indicate that you need to improve your processes, training sessions offer an opportunity to update your staff on these changes and explain them.

5. Combine Time Tracking with Practice Management Software

Work-from-home tracking software for time is only one factor in law firm productivity. It should integrate within a broader legal case management platform to streamline your remote workflows and improve your firm’s time tracking accuracy. Here’s how:

Offers a Comprehensive Overview of Cases and Time Spent

Data requires context for interpretation. A comprehensive legal practice management platform is particularly beneficial for remote teams, as it provides a comprehensive overview of all staff activities, cases, and the time allocated to both billable and non-billable tasks. With a broad view like this, you can evaluate areas of good productivity and any opportunities for improvement.

Helps with Resource Allocation

Time tracking data can identify over- or under-utilized resources, allowing you to optimize your firm’s efficiency. With this clear view, you can allocate your resources — remote and in-person — more efficiently according to project timelines and available staff.

Assists with Prioritizing Tasks

For law firms operating remotely, clear visibility into outstanding tasks is particularly valuable. It allows you to prioritize critical projects, like urgent cases needing extensive staff involvement, and effectively plan for other tasks. This clarity is vital for remote teams, where physical distance can sometimes lead to communication gaps or coordination challenges. By having a clear understanding of the priority level of each project, you can develop a more effective course of action for managing the remaining workload.

Enhances Collaboration Across Remote Teams

Collaboration can be a challenge across remote teams. Legal practice management platforms improve collaboration by giving all staff members a view of the shared project and their individual responsibilities. Staff can receive updates on relevant tasks and share questions or insights easily through the software’s messaging and chat features.

Is There an App to Track Work-From-Home Hours?

Bill4Time is the best platform for tracking work-from-home hours. With its corresponding mobile app, automated timekeeping and billing, and convenient integrations, this cloud-based legal case management software gives you all the legal-specific features you need to support and optimize your in-office, remote, or hybrid teams. Sign up for a free demo to see Bill4Time in action!

Best Practices for a Law Firm Invoice Template

December 21, 2023 By Dan Bowman Leave a Comment

Law firm invoices are the foundation of communicating the value of legal services and building brand trust — and they all start with a good template. A well-designed invoice template is a major contributor to a law firm’s reputation and cash flow.

And in the wake of stories like the New Jersey lawyer who was suspended for overcharging clients, so-called “aggressive billers,” and a pervasive belief that lawyers overcharge — lawyers need to do all they can to ensure their invoices are trustworthy.

While these lawyers may give the profession a bad name, there are ways to combat this skepticism. An excellent place to start is with your firm’s invoice template. This blog will examine what goes into a law firm template and how you can utilize legal time tracking software to create consistent, high-quality invoices.

To begin, let’s take a look at the process of recording billable hours and sending invoices to get a better idea of what information you should include.

How Do Lawyers Record Billable Hours and Send Invoices?

Lawyers often record billable hours using manual logs or time tracking software. These records are then compiled to create detailed invoices using a template and sent to clients. Each step of this process contributes to the value an invoice demonstrates and how timely the client pays.

Here’s a breakdown of each step:

1. Record Start and Stop Times for Each Task

You can manually note the start and stop times of a task, or you can use a timer to capture your billable tasks in real-time. For example, you can start the timer before drafting an email to a client and stop it immediately once you hit the send button. If it takes you about 17 minutes to draft the email and you bill in 6-minute increments, you would record 0.3 hours of billable time for that client.

2. Detail Each Task

Detailed descriptions on invoices are vital to client trust. Including details fosters transparency and shows the client how you spent the time for their case, like “reviewing discovery responses from the opposing party” or “preparing partnership agreement contract.” If you have vague descriptions like “discovery” or “prepare documents,” the client has more room to doubt what you did with your time. The more doubt a client has about your invoice, the less likely they are to pay it.

3. Categorize Tasks by Case or Client

If you’re working on multiple cases for one client, it’s important to record which case you’re working on. Be sure to include an area for the client and the corresponding matter on your invoice template.

4. Review and Adjust Billable Hours

Always review and adjust your billable hours to ensure they’re accurate for the final invoice. This prevents overcharging clients and leaving your firm’s money on the table. Plus, it’s a matter of professional ethics to have a detailed time recording system.

To ensure consistency, establish a regular review period in your billing cycle. Encourage attorneys to dedicate a few hours every other week or at the end of the month to review the invoices going out that period.

5. Finalize Hours and Send Invoice

To prepare the final invoice, add up all the hours spent and apply the billing rate. You should also tally and include any applicable expenses. Your invoice template should have a separate area for all of these items so the client can clearly see why they owe the amount you are asking for. Consider sending each invoice with a simple attorney invoice letter that details how the invoice works and guides the client through reading it and making a payment.

Can I Create My Own Invoice Template?

It’s possible to create your own invoice template, though it requires careful design and consideration to ensure you have all the necessary legal and billing details. If you want to create your own invoice templates, here’s how:

1. Gather Necessary Information

Your invoice template may vary according to your clients and practice area, but it should always include:

Your firm’s name, logo, phone number, physical address, and email address.
The client’s details, which may be the client point of contact or a specific billing contact.
The date you’re sending the invoice.
An itemized list of the services you provided.
The billing rate for each service.
A subtotal for all services plus expenses.
The payment due date and late payment consequences.

2. Design the Layout

You can create your own invoice template or use an online invoice template to design your layout. If you’re familiar with Excel, you might wonder, “Does Excel have invoice templates?” While Excel does offer some invoice templates, a legal invoice template that is free typically doesn’t include all the necessary details a law firm needs.

If you want a great example of a law firm invoice template, scroll down to the next section.

3. Add Legal Requirements

Depending on the template you use, you will need to include any additional legal language that needs to be there, such as terms and conditions or compliance statements.

4. Develop a Numbering System

Invoice numbers are one of the most important aspects of invoicing for tax and accounting purposes, tracking payments, organizing your financial documents, and ensuring your law firm looks professional and legitimate. This number should be near the top of the invoice and easy to find.

If you’re not sure where to start, it’s a common practice to begin with 1001 for your first invoice and then increase the number by one each time you issue a new invoice (1002, 1003, and so on). Whatever numbering system you choose, make sure it stays consistent.

5. Include Payment Terms

You should outline your billing process in your representation agreement before you begin working on a client’s case. Every client should know what they can expect to see on invoices, your billing cycle, their payment options, and penalties for late payments. You can also add this information on the invoice template for client reference — it’s usually included near the bottom.

As you can see, creating a law firm invoice template is a lot of work and prone to error if you’re doing it manually. And while a template can help, you will still be responsible for a lot of manual data entry and upfront time investment. Conversely, law firm software can help you generate invoices quickly and easily.

How Do I Create a Legal Invoice with Software?

Time tracking software allows you to generate legal invoices with just a few clicks. For example, Bill4Time includes options for branded invoices with logos and company details, payment terms, late fees, currency, and much more.

Let’s walk through an example of creating a legal invoice with software:

1. Use Software to Track Time

Bill4Time uses real-time timers to keep track of how much time you spend on a task. It also automatically calculates your billable hours based on time spent and your hourly rate. To ensure you don’t miss a single minute of billable time, Bill4Time lets you generate a variety of reports to check multiple data points in your billing cycle.

2. Generate an Invoice

Once you’ve recorded your time and reviewed it for accuracy, you click the “Create Invoice” button and select the billing time period, service items, and expenses.

3. Review the Invoice

An invoice will then generate automatically from your time entries and billing information, with all the billable hours compiled into a detailed, itemized invoice. You can customize the invoice using an array of layouts and branding details — like your logo and colors — to enhance your law firm’s professionalism.

Here’s a law firm invoice example using Bill4Time invoice templates:

4. Finalize the Invoice

When your invoice is complete, you can finalize it by creating a PDF, printing it on letterhead, or emailing it directly to your client with the click of a button. Your clients then have multiple payment options, including paying through the Bill4Time client portal with an eCheck or paying with a credit card.

5. Easily Follow-Up with Automated Reminders

Bill4Time Payments helps you take control of the invoice process to get your firm paid faster. You can automatically send invoice reminders via email to ensure your clients pay their bills promptly, which also reduces your firm’s administrative burden while improving cash flow.

You didn’t go to law school to create invoices from scratch. Legal time tracking software like Bill4Time saves you time, energy, and frustration by streamlining your timekeeping, billing, and invoice generation. Sign up for a demo or free trial to see for yourself!

How to Use an Attorney Billable Hours Chart

December 15, 2023 By Carole Poster Leave a Comment

Most law firms make money by the billable hour. The target minimum ranges between 1,700 and 2,300, but some firms quote higher numbers. However, lawyers simultaneously face the challenge of balancing billable work with non-billable tasks. They must bill sufficiently to cover the firm’s salaries and overhead expenses while ensuring profitability.

As a lawyer, you want to track time effectively and accurately while wasting as little time on the process of tracking itself. Attorney billable hours charts are a common way to speed up this process. Keep reading to learn more about how to use a billable hours chart, best practices for time tracking for lawyers, and how to use software to make time tracking much more manageable.

How to Convert Hours to Billable Hours with Charts

Lawyers usually round the time spent on a task to the nearest standard billing increment to convert them to billable hours. Standard increments across a law firm ensure client transparency, protect revenue, and provide more convenience than tracking each individual minute.

Here’s a breakdown of the common billing increments:

Billing in 6-Minute Increments Chart

Billing in 6-minute increments is a standard practice for several reasons. Billing by the minute is difficult and time-consuming, while larger increments could lead to vague billing and excessive padding that don’t serve the client.

6-minute increments easily convert into units (10 per hour) and can account for shorter tasks. For example, a 5-minute phone call can be rounded up and billed for 6 minutes rather than billing for each individual minute.

Check out this 6-minute increments chart for reference to see how this works:

Tracing the history of the billable hour and six-minute increments unveils a fascinating evolution in legal billing practices. In the past, legal fees were under state law control and considered various income supplements for lawyers, like retainers and client bonuses. By the early 20th century, billing methods varied, encompassing fixed fees for tasks, retainers, and even contingency fees, recognized by the ABA in 1908.

The 1930s and 1940s saw a shift as state bar associations, aiming to boost attorney incomes, introduced “suggested” minimum fee schedules for common legal services. Although they labeled these fees as voluntary, there were consequences for undercutting them, potentially leading to disciplinary actions.

The Supreme Court Goldfarb v. Virginia State decision in 1975 ruled that minimum fee schedules violated antitrust law, which made the billable hour method the primary standard for the industry. The practice of correlating a lawyer’s hours with service value, a concept recognized well before this shift, lent support to this change. There’s evidence that attorneys were using the billable hour in 6-minute increments as far back as 1913 with attorney Reginald Heber Smith of The Boston Legal Aid Society. Reginald used innovative timesheets and meticulously recorded time in six-minute increments.

Billing in 10-Minute Increments Chart

If 6-minute increments are too short, a 10-minute increment can offer a balance between increments that are too large and cumbersome minute-by-minute time tracking. However, this method is not as easy to use as 6-minute increments, as dividing an hour into tenths is much cleaner than dividing an hour into sixths.

For example, if a lawyer spends 8 minutes reviewing a court order and they are billing in 10-minute increments, they would round up to 10 minutes, or .17 in billable time. 20 minutes would be .33, 30 minutes would be .5, 40 minutes would be .67, and 50 would be .83.

As you can see, these decimals are a bit messier when compared to their 6-minute increment counterparts above, which could make calculations difficult and bills harder to read for clients.

Billing in 15-Minute Increments Chart

15-minute increments, or a quarter of an hour, are less common than 6-minute increments but a bit easier to calculate than 10-minute increments. A task that takes 15 minutes is billed at .25 hours, 30 minutes is .5 hours, and 45 minutes is .75 hours.

However, clients and fellow lawyers tend to have negative views of larger increments because they suggest that the attorney is drastically rounding their time up and overcharging — especially when many tasks take less than 15 minutes.

For example, it’s common for client phone calls or email responses to take just a few minutes each time. You can either round up to 15 minutes, which would be overcharging, or you can group multiple calls or emails into one 15-minute increment, which is a frowned upon practice called “block billing.” Block billing involves grouping multiple tasks into a single time entry, which can obscure the time spent on each task and make it difficult to assess the value of work done.

Overall, it’s best to use 6-minute increments, as they are small enough to bill accurately for time and easy to calculate.

How Do You Calculate Legal Billable Hours?

If you want to use a billable hours chart to convert your time manually, here’s how:

1. Note the Start Time

Record the time that you started the task. For example, if you’re tracking time spent on a client call, make a note of the time when you dial the phone number.

2. Note the Stop Time

Make a note of the time you stop the task. Using the previous example, write down when your phone call ends. This step can be challenging with tasks involving multiple interruptions, such as case research or reviewing documents. You have to be diligent in tracking the start and stop times. Time tracking software can help with automated start-stop timers and multiple timers for different tasks.

3. Calculate Total Duration

Using the start and stop time, calculate the total duration of the task. For example, your phone call with the client may have been 11 minutes.

4. Convert to the Nearest Billing Increment

Convert the total duration to the nearest increment. For an 11-minute phone call and 6-minute billing increments, you round up to 12 minutes or .2 billable hours. It’s common practice at law firms to round up in most cases.

5. Review and Adjust If Needed

No matter how diligent you are about your time tracking, you should complete a thorough review of billables every week to ensure you haven’t forgotten anything. For example, it’s possible that you didn’t stop or start a timer when you were reviewing a document and got interrupted, so you would need to backtrack and determine the correct time you spent on that task.

It’s best to review weekly or even daily while events are still fresh in your mind. Otherwise, it’s more difficult to estimate your time accurately.

6. Add Up All Hours and Invoice

At the end of a billing period, it’s time to prepare an invoice for your client. You will need to compile all your billable time and corresponding descriptions into an invoice and do a final review. Multiply the billable hours against your hourly rate for a sum total of what the client owes.

How to Track Billable Hours with Software

As you can likely tell from all the steps above, manually tracking billable hours is a tedious and error-prone task, even with a billable hours chart. Law firm time tracking and billing software like Bill4Time can streamline this process with features that automate each step. Think of it as your own automatic attorney billable hours calculator!

Let’s review the same process for recording time spent on a billable task with time tracking software instead of manual methods.

1. Create a New Timer Entry and Start the Timer

Create a new timer entry and start the timer on your laptop, phone, or tablet before you call your client. If interruptions occur, press “pause” to stop the timer until you resume.

2. Stop the Timer When Done

When you finish the call, stop the timer. The software will automatically calculate the exact duration of your call and round up to the nearest increment based on your firm’s increment settings.

3. Review and Adjust If Needed

If you need to adjust your automated time calculations, you can do so manually. For example, let’s say your client call lasted 13 minutes which rounded up to 18 minutes — or .3 billable hours. You can choose to round that time down to 12 minutes, or .2 billable hours, to address that extra minute if you would like.

4. Automatically Generate and Send an Invoice

Time tracking software streamlines every aspect of the timekeeping process, but you’ll notice the biggest difference when it comes time to invoice. Instead of manually calculating all your hours, converting them to billable increments, and recording them on an invoice, all the work is done for you. Your billable increments, with your description and rates, can be automatically generated on an invoice and sent to your client in just a few clicks!

Tracking hours accurately is important, but you have to do so efficiently to make sure you’re not losing money to non-billable time. With a time tracking software solution like Bill4Time, you can record your time conveniently and precisely to meet your targets, maximize your billable time, and ensure you’re doing the best for your clients. Try out Bill4Time with a free demo today to see the difference it can make!

10 Ways Billing Software Can Increase Your Law Firm Productivity

December 14, 2023 By Nina Lee Leave a Comment

According to recent law firm productivity statistics, the top-cited challenge for law firms worldwide is operational efficiency. Technology, including legal time tracking software, is one of the best solutions to operational issues, offering capabilities like automated timekeeping and billing that can relieve stressful workloads.

Wondering how legal time tracking software can help your law firm? Here are 10 ways the right software solution can boost productivity and operational efficiency.

Ways to Increase Your Law Firm Productivity

1. Improves Law Firm Organization

With multiple clients, cases, and financial records, it’s difficult for law firms to stay organized — especially when firms start to grow. Billing software streamlines all your data to make managing client relationships easier. You can find specific data with comprehensive search functions, set default billing rates, view balances, track deadlines, and more, all from a centralized platform.

2. Saves Time

Lawyers who bill by the hour must balance the time they can charge for with the time they can’t. However, simply tracking billable hours using manual methods like spreadsheets can take up a lot of time — time that can be better spent on casework or activities that support the firm.

Legal time tracking software like Bill4Time ensures you track your billable time quickly and accurately. For example, the enhanced Statements feature can generate detailed and tailored client statements with customization options and multiple delivery methods. This feature provides a superior client experience in a fraction of the time it would take to do the same things manually.

3. Reduces Lawyer Stress Statistics

The legal industry has always been fast-paced, but the rising demands on lawyers have led to an increase in lawyer stress and mental health concerns. According to a study of 12,825 licensed working attorneys, 28% experience symptoms of depression, 19% experience symptoms of anxiety, and 23% experience symptoms of stress.

While challenges with cases or clients and the pressure to achieve contribute to these mental health issues, long hours and chaotic work environments are also factors. Using billing software to become more organized and efficient can improve work-life balance and limit overworking, leading to better overall mental health.

4. Minimizes Disputes and Human Errors

Manual methods of time tracking are time-consuming and prone to error. Lawyers may estimate hours or miss valuable billable time, and there’s no accountability for how they spend their time on cases. These manual practices can leave your law firm vulnerable to disputes that can delay payment or harm your firm’s reputation.

Timekeeping software uses automated timers with advanced features that minimize these errors. You can record multiple entries, run a timer to track the exact time spent on a task, and even automatically convert appointments to billable hours. When you send your invoices to clients, you can send them confidently, knowing they are transparent, detailed, and accurate.

5. Boosts Law Firm Revenue Per Lawyer

Losing billable time to timekeeping errors or omissions and bill write-offs can significantly harm gross profit margin in law firms. What is the profit margin of a law firm on average? For perspective, the University of Pennsylvania’s Penn Carey Law School reports that the profit margin of Am Law 100 firms varied between 35% and 45% from 1986 to 2021. Achieving such profit margins might be challenging for smaller firms, but it’s a worthwhile target.

Billing software safeguards your firm’s profits, even in fluctuating economic conditions, by ensuring precise hour tracking and minimizing lost time. This precision in timekeeping directly contributes to optimizing the revenue generated per lawyer in your firm.

6. Provides Security

ABA Formal Opinion 477R, focusing on the ethical use of virtual tools under the Model Rules of Professional Conduct, underscores the necessity for lawyers to protect client confidentiality in digital spaces. This need includes exercising diligence in handling client data and securely using virtual meeting platforms and videoconferencing tools.

Cloud-based timekeeping software like Bill4Time aligns with these requirements by offering robust data security features. These include user access permissions, multi-factor authentication, and encryption of sensitive data. Additionally, Bill4Time goes through frequent and regular updates, addressing potential vulnerabilities and reducing the risk of cyber threats. For secure client interactions, Bill4Time provides a client portal, accessible through individual credentials, ensuring protected communication and file sharing.

7. Automates Accounting and Payment Reminders

Administrative tasks like accounting and tracking down client payments and outstanding balances waste significant time for your firm. Billing and invoicing features with time tracking software allow you to create detailed invoices, offer flat rates and percentage discounts, set up recurring payments, and more. You can also set up automated reminders about upcoming and past-due invoices to stay on top of your clients’ billing.

8. Establishes Brand Identity

Setting your law firm’s brand apart contributes to long-term recognition and growth. Instead of generic invoices, Bill4Time helps you create professional, branded invoices with your logo, fonts, color schemes, and firm details. You can add these personalized brand touches to your client portal, client invites, and invoice emails, creating a cohesive brand across all platforms and keeping your firm top of mind.

9. Simplifies Reporting

How do you measure success in a law firm? You can’t manage your firm’s profitability and productivity if you don’t know where you stand. Bill4Time offers comprehensive reporting to view the payment history, balances due, collections, firm expenses, and productivity reports to gain full financial visibility. You can also see your firm’s productivity month over month or year over year to see what projects consume the most time. If you want to know how to measure lawyer performance, productivity reports reveal which team members contribute positively to your firm’s revenue and growth.

Some of the reports you can create with Bill4Time include:

Accounting reports: Accounting reports include information like AR aging, trust, and payments received to understand your outstanding balances.
Entry and user reports: These reports show monthly billable and nonbillable hours per user, the clients and projects created within a given time frame, and more.
Summary reports: Summary reports show you broad information or granular details as you choose. For example, you can see all time or expenses within a time frame or group the results by user, client, or project as needed.

10. Supports 24/7 Service

The client experience is a big part of your law firm’s success. The Bill4Time client portal gives your clients 24/7 self-service options to review their invoices and make partial or full payments from anywhere and on any device. This feature improves your client service and reduces the burden on your support staff with billing or invoicing inquiries from clients.

Ready to see what Bill4Time could do for your law firm’s productivity? Sign up for your free Bill4Time demo today!

Law Firm Billing: How to Motivate Timely and Full Client Payments

December 8, 2023 By Dan Bowman Leave a Comment

Billing can often be a challenging aspect of law firm management. Along with being a time-consuming process, outstanding bills and poor cash flow can have a negative effect on law firm profitability. Some law firms wait 60 or 90 days for payment after an invoice is sent, and if it’s still not paid in 120 days, they may write off the debt or offer a steep discount.

No business can function if bills aren’t paid – including law firms. Legal time tracking software and a uniform billing process ensure your law firm gets paid on time – and it all begins before you even take on the client.

Why Does Billing Matter to a Law Firm?

Precise and timely billing has a direct impact on a firm’s financial stability, client trust, ethical compliance, and long-term growth.

Here are the ways that billing impacts your law firm, both positively and negatively.

Cash Flow

Accurate and timely billing provides cash flow for your firm, which you need to cover your overhead costs, pay your team’s salary, and reinvest in your firm to capitalize on growth opportunities. If you don’t have that cash flow because of slow or error-filled billing, you may not be able to operate efficiently and won’t be able to reinvest in your staff.

For example, with adequate cash flow, you can cover your regular operating expenses and have full visibility into your firm’s financial picture. You know where you stand so you can allocate resources to training, technology upgrades, expansions, or other opportunities.

Client Relationships

Transparency in billing plays a key role in client satisfaction and retention. When clients know what to expect from the billing process and see a detailed breakdown of the legal services they receive, they understand the value and feel more trust in the firm. Conversely, if you have vague bills or inaccuracies, they may think they’re being overcharged or the bill is “padded.” This affects both the client relationship and your firm’s reputation.

For example, itemized invoices and accurate timekeeping – which you can reference to address client billing questions – give clients confidence that you performed the work you billed.

Resource Allocation

Efficient billing practices ensure your firm can allocate resources effectively. You have full visibility to assign your team to projects based on their current workload or productivity, optimizing your firm’s time management. If your billing processes are inaccurate or inefficient, you could end up devoting resources that would be better spent elsewhere.

For example, you could be consistently undercharging for a service or failing to record time that you spend on casework. Regularly reviewing your billing reports allows you to view the trends and evaluate your profitability to find areas for improvement.

Legal Compliance

Accurately tracking billable hours is crucial to complying with lawyer billing ethics. Billing errors or unethical billing practices, such as upbilling, can have devastating consequences for your firm’s reputation and your practice, including fines or disciplinary action.

For example, submitting an invoice with incomplete summaries or non-standard descriptions of services – such as “email client” – isn’t unethical, but it may be suspicious to clients. However, padding expenses is an unethical practice that defrauds clients.

What Are the Three Methods of Billing Clients in a Law Firm?

Law firms are increasingly offering alternate methods of billing, but the three most common methods of billing law firm clients are hourly billing, flat fee billing, and contingency fees. The way you use and implement each will greatly affect how and when clients pay their bills. Here’s how these billing methods are structured in law firms:

Hourly Billing

Hourly billing is the most traditional billing method that involves charging clients based on the number of hours spent on casework. Lawyers record the time spent with a detailed description of the tasks performed, typically in 6-minute increments, and charge an agreed-upon hourly rate. However, this rate can vary based on the type of law, geographic location, and the lawyer’s experience level.

This method of billing offers several advantages, including transparency for the client, cost control, and flexibility. For example, if the case proves more complex than the lawyer initially thought, they’ll be able to bill for the extra work – which isn’t an option with some other types of billing.

Flat Fee Billing

Flat fee billing is a method of billing in which clients are billed a fixed, established amount for a specific legal service. The scope of work is clearly defined at the start, with the flat fee, so the client is prepared. Often, clients pay the full amount of the fee upfront, or they pay a portion upfront with the remainder due when the case or services are complete. This is often helpful for clients because they’re prepared for the total costs in advance, and the lawyer doesn’t have to concern themselves with detailed timekeeping.

Typically, flat fee billing is used for routine casework, such as drafting a will, in which the lawyer has an expectation of the work involved. Otherwise, the case could extend beyond the scope or have a lengthier process, which eats into profits.

Contingency Fees

Contingency fee billing is a method in which the attorney’s fee depends on the successful outcome of the case. This is determined on a percentage basis, which is typically 30 to 40% of the client’s settlement. The fee is determined in advance and should follow the guidelines outlined in ABA Rule 1.5. If the case is unsuccessful, the lawyer doesn’t receive a fee but may charge other costs associated with the case.

This method of billing is often used in personal injury, medical practice, and other civil litigation cases. It provides equal access to justice for clients who may lack financial resources, and the lawyer has a strong incentive for success with the case. However, the risk falls primarily on the lawyer, which is why it’s not used for cases like criminal defense.

What Are Legal Billing Duties That Promote Timely Payments?

Legal billing duties cover a wide range of activities, from tracking time to drafting invoices to sending them to clients at regular intervals. Having a standardized legal billing process is the best way to promote timely payments, even before your firm takes a case. Some of these duties include:

Tracking Time Accurately

Accurate timekeeping is the foundation of a robust billing process. This ensures that all work performed for a client is accurately recorded – neither under- nor overinflated – and can be included in the bill. This also provides a reference for client questions or disputes.

For example, the best law firm billing software should allow you to log your hours with automated timers to track every moment spent on a client case, including phone calls, email responses, or court appearances.

Creating Transparent and Detailed Invoices

As mentioned, detailed and transparent invoices about the services rendered and the time spent on each task help clients understand what they’re paying for and the value they’re receiving. All of your invoices should have a breakdown of the specific tasks, time spent, agreed-upon rate, and any applicable expenses.

For example, don’t use block billing. What is block billing? It’s when you group a bunch of individual billable tasks into one collective billing entry with a total time, making it difficult for clients to fully understand how you spent your time. Some sample attorney billing entries of block billing are “drafted pleadings, sent email to client, phone call with client (1 hour)” or “prepared for court hearing, filed pleadings, met with client (3 hours).” Instead, it’s best to break these down with detailed descriptions, including time spent on each individual task for clarity and transparency.

To illustrate, a better example would be “Prepared motion for temporary orders and proposed order (.5 hours); emailed same motion and proposed order to client for review (.1 hours); received call from client to discuss edits to same motion and proposed order (.3 hours); implemented requested edits from client per phone discussion (.1 hours).” This example demonstrates more value to the client and gives a clear picture of how you spent that entire hour.

Following Regular Billing Cycles

Regular billing cycles give clients reliable billing expectations and help your law firm ensure steady cash flow. The schedule you set depends on your firm, but they’re typically monthly, bi-monthly, or based on milestones in the case, allowing clients to budget for their expenses – and pay on time.

Upon your initial consultation with the client, you should go over the billing process and the billing cycle. For example, if you’re billing according to case milestones, you can prepare the client that they will receive a bill after the serving of a suit, court filing, deposition, date of trial, or after the conclusion of the trial.

Distributing Invoices Efficiently

A big part of an efficient billing process is sending out invoices according to the schedule you set. If you delay your invoices, you’re delaying your payments. Automation and a law firm invoice generator with software like Bill4Time allow you to create professional, branded invoices in minutes to distribute to your clients. With the secure client portal, you can send invoices automatically, saving you time and energy in the billing lifecycle.

Offering Multiple Payment Methods

Giving clients multiple payment options increases the likelihood of on-time payments. Clients want to be able to pay their invoices online, from any device or location, without the hassle of mailing checks, making phone calls, or using third-party services and integrations. With Bill4Time’s secure and compliant online payment portal, you can customize your payment options and send clients invoices that can be paid with an eCheck, ACH, debit card, or credit card at their convenience.

Proactively Communicating and Following Up

You should have open lines of communication with clients and follow up on outstanding invoices to address any concerns or issues. Include payment reminders and receipt of payment in your billing process, and make sure you’re available to address any client questions about their bills to encourage timely payments.

Timely client payments start within your law firm billing practices. Bill4Time can help you create a streamlined and standardized billing process – from start to finish – that fosters trust, improves organization and cash flow, and promotes on-time payments from your clients. Sign up for a demo today!