6 Steps to Implement Digital Transformation for Your Law Firm

 

Digital transformation isn’t coming.

It’s here.

The vast majority of law firms, 8 out of 10, aren’t ready for the transition. In fact, these firms haven’t even begun to make the transition.

In my last post, we identified the problems surrounding digital transformation.

Most definitions are broad, vague and unhelpful

Here’s the good news. We used Greg Verdino’s definition of digital transformation because it’s specific, measurable and actionable.

Here it is again:

“Digital transformation closes the gap between what digital customers already expect and what analog businesses actually deliver.“

This definition creates questions, sets boundaries and requires change. It’s relatively easy for law firms to look at this definition then figure out what needs to be done.

The first step?

Taking the time to ask some important and uncomfortable questions.

1. What do our clients already expect? This is an important question because it requires firms to look at two distinct areas (1.) The types of clients the firm has (2.) The value these clients provide (3.) Firm longevity if the current types of clients are retained. If you’re dealing with sophisticated clients who have been forced to adapt themselves, your window for change is smaller. If you’re dealing with older legacy clients (e.g. boomers) your firm may need to make some radical changes to survive.
2. Are we in an analog, digital or hybrid firm? This question shows you whether your firm is focused on tradition, change or insecurity. Firms focused on tradition are far more likely to resist the changes dictated by digital transformation. These firms are also far more likely to be laggards. Change-oriented firms tend to align with early adopters. These firms are willing to adjust and adapt to change. Hybrids are firms who have either: (a.) resisted, then initiated change, or (b.) initiated, then suspended change. Hybrids are sensitive to triggers which motivate these firms to action or inaction.
3. What kind of service do we deliver to our clients? It’s important to contrast your self-assessment with your client’s survey/assessment. You can acquire this data in a variety of ways (e.g. group surveys, client interviews, anonymous feedback, etc.). This metric provides you with a clear indication of your firm’s performance/standing. Taking an honest look at these details gives you the clarity you need to create real change. This question provides you with the following answers: (a.) are your (firm) clients satisfied with their service/experience? (b.) what do you need to change? (c.) how do you need to change?
4. What does an analog business provide to clients? This seems like a simple and unhelpful question but it’s actually the opposite. This question helps to prevent a relapse. Firms (e.g. laggards and hybrids) are far more likely to slip back into comfortable roles. When change is difficult or hard, firms may be tempted to take the easy way out. This question shows you which habits and behaviors need to be avoided. It makes the transition a successful and easily identifiable goal.
5. What does a digital business provide clients? Using data from your ideal clients, you’re able to establish clear goals and important success metrics to follow. You’re able to identify important habits, behaviors and roles you’ll need to establish.
6. Did we already know about these changes? If the collective answer is yes, the next obvious question becomes, “Why didn’t we take action sooner?” This helps partners identify potential objections, barriers and If the answer is no, the obvious question becomes, “How did we miss this?” This helps you to identify important causes and blind spots. It also provides you with the clarity you need to identify solutions to future trends and changes.

Most conscientious firms will throw themselves into tactics and buzzwords. The change they achieve is far more likely to be temporary.

Questions create permanence.

The change you achieve is likely to stick because it’s centered around your clients, your experience and your firm. The firms that embrace these changes are far more likely to succeed. The firms that lead with questions are far more likely to win.

Clients will gravitate to these firms.

The majority of law firms aren’t ready for the transition

It’s an incredible opportunity.

Digital transformation closes the gap between what digital customers already expect and what analog businesses actually deliver. This definition creates questions, sets boundaries and requires change.

Change that produces success.

The digital transformation is here. The good news? Most of your competitors are laggards, traditionalists who are resistant to change. Ask the right questions, act on the answers you find and your firm will survive the inevitable aftershocks.

Everything your firm needs to win.

It sounds like an unhelpful and useless cliché.

The term “digital transformation” has become a broad, widespread and seemingly useless term. It’s a mandate law firms are told they need to follow. A rallying cry pundits used to warn law firms that they’re behind the times.

What is it really?

It seems most pundits and firms aren’t clear on the meaning of the term.

What is law firm digital transformation?

There are so many different and conflicting definitions.

• It’s all about going paperless? No
• The changes associated with the application of technology? No, whatever that means
• The third stage of embracing digital technologies? Still no

Okay then, what is it?

Here’s a helpful way to define law firm digital transformation:

“Digital transformation closes the gap between what digital customers already expect and what analog businesses actually deliver.“

This is certainly more helpful than the other definitions I shared earlier. Why should we place our trust and confidence in this definition overall the other unhelpful definitions we saw just now?

It comes from Greg Verdino.

Greg Verdino is viewed as a leading thinker on digital transformation. He’s the author of microMARKETING: Get Big Results by Thinking and Acting Small. Here’s why his definition is so helpful.

It’s actionable.

It creates questions, sets boundaries and requires change. It’s relatively easy for law firms to look at this definition then figure out what needs to be done.

Here’s why digital transformation matters

Most law firms are fighting change.

According to a recent survey by PwC, found 80 percent of law firms believe digital transformation is vital for future success. This certainly seems reasonable, doesn’t it?

Here’s the problem.

A startling 77 percent of firms haven’t bothered to begin making the transition.

The change has already started.

We’re in an “Innovate or Die” cycle. There is a media emphasis that’s placed on big businesses. The problem here is that businesses large and small are being left behind. Law firm clients place a special emphasis on speed, flexibility, responsiveness and above all value.

It’s happened before.

Alta Vista, Blockbuster, Borders, Kodak, Polaroid, Toys “R” Us and Woolworths. These are recent, well-known and noteworthy examples. Each of these companies saw the writing on the wall. Kodak invented the digital camera in 1975 but their groundbreaking invention never saw the light of day. They filed for bankruptcy in 2012.

Firms today are facing the same problem.

Client expectations have shifted dramatically changing the way clients and firms do business. A growing number of clients expect an “always-on” availability from their firm and the attorneys handling their matters. Today clients expect attorneys to be available via phone, text, email, video conferencing, live chat and even Whatsapp.

Are firms prepared?

Several large firms are. CMS, an international law firm with 73 offices in 4,500 employees, have gone all in on digital transformation. They’ve restructured their firm in a dramatic way to adapt to the current climate.

See for yourself.

Can you see the implications?

Thanks to digital transformation, they’re growing at 10 percent year-over-year. Their profits have skyrocketed and they’ve saved $100 million. As a result, they’ve grown their business, in their core practice areas, at a dramatic rate.

This is what law firm digital transformation is all about

Adaptation.

The speed of business continues to accelerate. Client demands continue to grow, change and adapt to the demands placed on them. It isn’t just the traditional model that’s changing, it’s the rate of change. Change cycles are happening faster, with disruption coming in three to five year waves.

Are you ready?

Most firms aren’t. While “digital transformation” seems like a broad, unhelpful and useless cliché, it’s actually an indispensable term. In my next post, I’ll provide you with actionable tips you can use to get ahead of the curve.

They don’t want you to make partner.

That’s the typical attitude many partners have at a variety of firms large and small. Think about this for a second. Why do most attorneys want to make partner?

For the benefits!

Once you’ve made partner you’re able to reap the financial and reputation rewards of a partnership. You’re no longer an employee, you’re an owner and you’re entitled to the rewards of firm ownership.

Partners will have to share the profits with you

They won’t be happy.

If it’s a sizable amount they’ll dilute their ownership stake, receiving fewer profits as a result. Would you jump at the chance to take that deal?

Probably not.

It makes sense then that partners would prefer to ignore their associates. Yet, there are some partnerships where partners are throwing partnership to a few select associates.

What’s the difference?

It’s all about their tactics. Savvy associates understand their partners. Giving them what they want improves their chances.

It’s about creating the right kind of results

When it comes to results there are two kinds. You’ll need both to become an all-star and both to demonstrate that you’re partnership material.

• Conventional results.Being great at your job, going above and beyond and performing well in general. If you’re a real estate attorney, for example, your work is pristine, thorough and of the highest quality. You know, what your firm pays you to do.
• Transformative results.These are results that make things better for your company, the industry or clients as a whole. It can be as simple as shared knowledge or as comprehensive as advanced rainmaking skills. You produce what Cal Newport calls “Deep work.”

This is the problem.

The vast majority of attorneys (and most employees) focus their attention on “conventional results.” They work very hard.

Here’s why this matters.

Conventional results build trust. It’s easy for partners, managers or shareholders to take a risk on you if you’re trustworthy and your work is above reproach. This trust is currency.

Transformative results create leverage. It gives individual attorneys a strong negotiating position, power, credibility and immense authority – inside and outside their firm. Here are five transformative tactics you can use to (eventually) make partner at your firm.

Tactic #1: Rainmaking on-demand

You have a proven track record landing large or immensely profitable clients. This typically refers to a collection of skills and abilities. If you’re a powerful rainmaker, you’re able to:

• Generate client interest, desire and action
• Identify, build and nurture relationships with decision makers
• Create a compelling value proposition + irresistible offer to draw clients in
• Under-promise and over-deliver to maximize client lifetime value

This is work that’s done on top of the day-to-day work you do as an attorney in your firm. Successful rainmakers have a keen understanding of human psychology, marketing and negotiation.

Tactic #2: Connections everywhere

You’re able to build, cultivate and produce relationships with almost anyone. There’s a science to personal connection. With the right approach, it’s easy for skilled attorneys to develop a relationship with anyone.

Think about it.

Imagine that you’re able to build relationships with important celebrities, entrepreneurs, thought leaders and influencers in the world? How valuable would that kind of clout be to your firm? Successful connectors are able to:

• Identify key relationships that serve their/the firm’s best interests
• Build legitimate win/win relationships with celebrities, key influencers, entrepreneurs and thought leaders
• Maintain that relationship, in the face of setbacks, failures, ups and downs
• Convert relationship capital into financial capital, when needed

Attorneys who are high in extraversion tend to do well as connectors. They’re the social butterflies who just “happen” to know everyone. Better yet, they’re able to provide important introductions and facilitate mutually beneficial connections.

Tactic #3: Information networks

You’ve developed your own information network. You have access to insider information.

Somehow you know.

You’re aware of the comings and goings of your client’s industry and your own. You know the who, what, where, when and why of any social or political situation.

You’re plugged in.

You receive a steady supply of information somehow. It’s an ability partners in your firm are unable to reproduce and the information you provide is unmatched in quality and reliability. As an information broker you should be able to:

• Create, maintain and expand your own information network
• Find answers to difficult-to-answer questions others simply can’t answer
• Provide your firm with a steady supply of information that is not publicly available
• Receive sensitive and private information in a way that’s legal and above board
• Minimize your firm’s exposure to legal action

If you’re able to build/develop your own information network, you become irreplaceable. Your firm will do whatever it takes to keep you with them. They’ll also push you to reveal your secrets and give them your information network. 

Tactic #4: Persuasive influence

You’re able to sell, persuade, sway, convince or entice others to do what you want.

You’re a salesman.

That’s the long and short of it. You’re able to get people to do what you’d like them to do because you understand decision making at a psychological level. As a master persuader you’re able to:

• Act as matchmaker, providing all sides with the favorable conditions they need to support you
• Make a compelling case for clients, partners and your firm to work together
• Approach things free from manipulation, coercion or dishonestly
• Speak with a silver tongue, a charming personality and a listening ear

Persuaders play the role of matchmaker, working to arrange favorable outcomes for all parties involved. They’re convincing, sincere and well-spoken, doing what it takes to maintain good relationships.

Tactic #5: Process mastery

You can create processes that enable you to create bigger, better, faster results using less time, money, resources, people.

You’re a playmaker.

You have an engineering mind. You’re able to make your existing circumstances better. You’re able to use your existing materials to systematically improve your firm’s performance. If you’re a process maker you’ll be able to:

• Find and identify new ways to achieve bigger, better, faster results using less time, money, resources and people
• Provide evidence that your newfound process or methodology works and is superior to the existing system
• Be able to teach, share and develop the skills of others
• Be able to improve, iterate on and scale your process throughout the firm
• Create a process to teach others

Processors are able to create helpful tools, resources, systems, procedures and policies to achieve scale. They’re able to do more with less, accomplish more in less time. They’re able to dramatically outperform their peers simply because they have better systems and procedures.

Seeing a pattern?

None of these have anything to do with the day-to-day work you do as an attorney. Transformative change is just that. Transformative. If you master any of these skills you become immensely valuable to your firm.

Want partners to fight for you?

Do you want them to fight for you to become an equity partner? Focus your attention on developing just one of these skills. Master two or more and you’re permanently irreplaceable.

Why would they fight for you?

Because a rising tide raises all ships. Your skills produce the kind of profits firms need to grow. Firm growth means more revenue. If you’re an associate looking to make partner, invest in yourself. Work to produce the results needed to add value.

Produce that value for the partners in your firm.

Make it clear that you’d like to make partner in exchange for the stellar results you can provide. With the right approach and solid negotiation strategies, you’ll have what you need to motivate partners to act.

And why would they act?

They’ll act because they don’t want to lose you. Give them what they need and you’ll find the partners and shareholders in your firm are eager for you to take your place beside them.

Want your solo firm to grow?

First, you’ll need to figure out what that means. “Growth” means different things to different people, doesn’t it? Some solo attorneys would like to build a firm. Others prefer to build a business that provides them with the opportunity to provide value and a comfortable lifestyle.

Goals aren’t created equal.

If you’d like to create growth, whatever that means, you’ll need to identify the law firm metrics that matter most for your business.

The law firm metrics that matter most

Here’s the problem.

If you’re like most solo attorneys, you don’t know which law firm metrics matter most. You’re not clear on a few variables, such as: (a.) which metrics do you track? (b.) when/how do you track them and (c.) why do these metrics matter?

Google isn’t much help either.

Search through Google and you’ll find there’s a significant amount of variance on the issue.

Should you track…

• Profitability per partner (just you)?
• Your overall utilization rate?
• Billing and collection realization rates?
• Timekeeping performance data?

Attorneys aren’t sure what they should be tracking. Even if they did know, they’re not sure on when to collect the data or why. What’s worse, there’s a significant amount of disagreement from the experts.

What are you supposed to do?

First things first, you’ll need to deal with the hidden assumptions that plague the process of performance improvement.

What am I talking about?

The vast majority of educational pieces that focus on a particular set of metrics begins with a specific set of (hidden) assumptions.

Here’s a quick example.

If firm profitability is your goal, you’ll want to focus your attention on financial metrics:

• Profitability by client
• Profitability by practice area
• Profitability by timekeeper (you)

If you’re interested in tracking profitability, it’s absolutely perfect! You simply dive into the list of metrics you need, iterate on your performance, keep/fire a few unprofitable clients and you’re all set.

What if profitability isn’t your focus?

See what I mean?

Which metrics are best for your law firm?

They all have value.

The vast majority of law firm metrics provide solo attorneys with an incredible amount of value. I’m willing to bet you’re looking for a specific set of metrics, am I right?

Most attorneys are.

Here’s what that means for you. You’ll need to identify the metrics that are most important to you. To do that, you’ll need to focus your attention on a few specific details.

1. Goals
2. Temperament

1. Goals: Clarify what you want

Your goals determine what you want. Your metrics show you whether you’re on track and making progress towards your goal.

• Increasing your profit per client is a goal
• Increasing your profit per client by a minimum of 30 percent is a good goal
• Increasing your profit per client by a minimum of 30 percent in 120 days is an excellent goal

If you don’t have a goal, or you’re focused on the wrong goal, your metrics can’t provide you with the value you need to produce the progress you want.

Goal setting is important because it shows you:

• Where your focus really lies (e.g. financial, productivity, time management, freedom, etc.)
• Whether your current focus is in line with what you want
• What you’ll need to change to get what you really want

It sounds like an unproductive exercise to many, but it isn’t. It’s the foundation you need to produce the results you want in your solo practice.

2. Temperament: A filter for your day-to-day experience

Beverly Flaxington, author of Understanding Other People: The Five Secrets of Human Behaviors, outlines the six major schemas people use to function in the world.

1. Utilitarians: These attorneys are driven by value and ROI. The utilitarian wants to find the most efficient and direct path to their desired goal. They’re driven by one thing and one thing only. Results.
2. Individualists: These attorneys are driven by ego. This sounds bad but it doesn’t have to be. These people are driven by prestige. They want to be recognized. To win awards, to see their names on walls. These attorneys may come across as arrogant but they’re incredibly hard workers who are driven to produce amazing things.
3. Theoreticals: These attorneys love to learn. Their job is one big classroom, an opportunity to learn a significant amount about the legal world around them. They’re curious, fascinated by their work and often scholarly in their approach.
4. Socials: These attorneys want to do good for others. These are the public defenders, the legal aid attorneys and those whose work takes a humanitarian approach. How will this impact/affect my clients? How will this impact those around me? My support staff?
5. Traditionalists: There’s a right way and a wrong way of doing things. These attorneys believe that a specific set of rules exist in their industry for a reason. These rules should be followed to the letter. Everyone (including them) must abide by these rules without question.
6. Aesthetics: These attorneys are searching for beauty. Beauty, aesthetics and perception are important drivers of behavior. These are the attorneys who are focused on image, appearance and They know perception matters, so the optics of a particular situation are incredibly important to them.

Schemas are thought patterns.

A mental framework people use to interpret and organize the information they receive in the world. Think of them as perceptual sunglasses. You put on blue-tinted sunglasses and the world looks blue, etc.

These schemas are easy to dismiss.

But, they control the way you, as an attorney, view and interpret the world.

• Utilitarian attorneys are far more likely to focus on specific metrics like profitability, realization and
• Social attorneys would focus their attention on finding good people to work with, on turnover rates for their support team (e.g. receptionist, paralegal).
• Theoretical attorneys would focus on all of it, taking in a massive amount of information that would overwhelm every other attorney.
• Individualist attorneys would gravitate towards (and obsess over) the metrics that make them look good (e.g. awards won, media mentions and their overall win rate).
• Traditionalist attorneys would carefully identify and choose a set of metrics they feel are important to them, then hang on for dear life. Change would be more difficult for them as any change is a violation of their traditional (unchanging values).
• Aesthetic attorneys would prefer to focus on metrics that improve public/client perception (e.g. appeal, win rates, prestige, attractive office, connections, etc.), but would begrudgingly focus on core metrics (like profit).

See what I mean?

These schemas control your focus. There is, however, a significant upside. Your awareness of these schemas gives you a choice. You’re able to objectively look at your preferences and make a choice about the metrics that objectively matter most to you.

You’ll want to identify your primary, secondary and tertiary metrics.

• Primary metrics are about survival, these are the metrics you check regularly
• Secondary metrics are about growth, the ones you monitor on a semi-regular basis
• Tertiary metrics are concerned with expansion, those you monitor less often

This needs to be defined by you.

Your goals and temperament will dictate whether you monitor these metrics or not. You’ll want to monitor the important metrics daily without fail.

Why did I take so long to get to these metrics?

Because you’re going to need a system to divide up the list of metrics below. Most people who look at the list below are overwhelmed. They don’t know they can pick and choose or how to start.

The framework above tells you.

Go through these metrics, using your goals and temperament as a guide. Identify the metrics that are survival, growth and expansion-oriented.

The list of metrics solo attorneys need to monitor

Survival metrics
Client satisfaction rating (	Current run rate
Breakeven cost (min. needed to cover all expenses)	Current expenses (monthly)
Balance in your operating account(s)	Current anticipated expenses (expenses from run rate)
Balance in your trust accounts (unbilled only)	Number of new clients per mo.
Amount of accounts receivables	Number of new cases/matters opened in last full month
Amount of outstanding accounts receivables	The value of these new cases/matters
Age of accounts receivables	Number of closed cases/matters
Firm debt (credit cards, line of credit, loans, etc.)	The value of these closed cases/matters
Number of marketing actions taken in last 30 days	Number of new appointments/consults set
List of marketing actions taken	Number of prospects (consults who showed up)
Number of consults generated from each	Number of prospects who became clients
Recommendation index (a 1 – 5 “likely to refer” scale)	Marketing expense as a % of revenue
Productivity metrics
Cycle time (number of days a matter is open)	Performance to budget (how close fee is to budget +/-)
Results to predicted outcome (accurate prediction of outcomes)	Work completion deadlines met
Re-engagement percentage (# of clients who retain firm for new matters)	Re-use index (a 1 -5 scale measuring a client’s willingness to reuse the attorney/firm)
Creativity index (clients rate attorney’s ability to solve legal challenges)	Quality of outcomes
Quality of advice	Quality of written product
Wins vs. losses	Transparency index (how transparent is work to client)
Firm utilization	Utilization per timekeeper (Includes support teams)
Profitability metrics
Firm profitability overall	Profitability by practice area
Profitability by client	Profitability by case/matter
Profitability by timekeeper (including support staff)	Profit per employee
Income per employee	Effective billable rate (firm + employees)
Realization rates overall	Billing realization rates
Collection realization rates	Lifecycle of realization (time between service performed and payment received)
Discounts and write-downs before billing	Discounts and write-downs after billing
Revenue collected per client/matter	# Clients sent to collections
Revenue collected per mo.	Amount billed per mo.
Customer lifetime value

At first glance, this is overwhelming.

I’ve just listed 58 metrics you’re supposed to track to ensure your firm is on the right track.

That’s right.

And this isn’t even everything. There’s a massive list of metrics you can use to track performance as your firm grows. You don’t have to track everything.

Survival matters most.

The metrics in that category matter most for obvious reasons. But there’s a significant upside to all of this. The vast majority of these metrics can be automated. You can and should use practice management tools to monitor this information for you.

Still overwhelmed?

You can outsource a majority of this work to reliable and trustworthy parties. Here’s a step-by-step process you can use to make that happen. Use software + people to manage this effortlessly.

You’ll want to make sure you:

1. Set up alerts: These alerts are automatic, alerting you to any potentially dangerous or problematic issues before they hit the point of no return.
2. Schedule software: If you’re relying on practice management software, you’ll want to schedule reports so they’re run automatically, on a schedule, all the time. Get everything out of your head and into a trusted software system.
3. Schedule people: Build a team of trusted, freelance/outsourced providers who can help you with the above list of metrics. If you’re doing amazing work (and I assume that you are), you won’t have the time you need to track all of this consistently. Surround yourself with software and people who can.
4. Focus on accuracy: You’ll want to provide your people and software with the information and resources they need to perform. This means you’ll need to track your time accurately, record data in your software tools judiciously and focus on doing this consistently. Skip this step and your metrics won’t be accurate.

Here’s why you need this.

Many of these metrics have important sub-metrics you’ll want to drill down into. These sub-metrics give you context about the metric itself.

Here’s an easy example.

Take a look at these three metrics.

1. Number of new appointments/consults set
2. Number of prospects (consults who showed up)
3. Number of prospects who became clients

If you’re generating a very high number of #2 but a very low number of #3, you’ll need to look at sub-metrics for clarity. You’ll want to look at (a.) the sources sending these prospects to you (b.) the messages that drew these prospects in and (c.) the problems and expectations they came to you with.

This requires thinking.

It’s hard work and it takes a sophisticated and experienced marketer’s help to uncover the details. A top tier marketer from a site like Toptal would be able to help you identify the story underneath these metrics.

They’d discover that:

• Your ad source (Facebook Ads) drives highly qualified traffic to your site
• Your marketing messages are resonating with your audience but…
• Prospects are leaving because they’ve found a different firm/attorney with a tremendous amount of positive reviews

Even if it’s bad news, it’s good news to know.

These metrics have just given you the actionable data you need to make some significant changes.

See what I mean?

Which law firm metrics matter most?

You now know the answer.

The right mix of metrics depends on your goals, temperament and priorities. If you’re focused on value and a significant return on investment, you’ll focus on a specific set of goals. If your temperament is different, so are your priorities.

Choose the priorities that matter most for your firm.

“Growth” means different things to different attorneys. Some solo attorneys want to build a large firm. Others prefer to build a lifestyle business, one that provides them with the freedom, opportunities and comfortable lifestyle they want.

It’s up to you.

Prioritize your metrics. Choose your primary, secondary and tertiary metrics.

Choose carefully.

With the right metrics, you’ll have the roadmap you need to produce the positive “growth” you’re looking for, no confusion or doubts necessary.

It’s a common problem.

You’ve sent invoices to your clients, but you haven’t received payment. You’re a professional, so you pick up the phone and call your client.

You’re hit with the news.

Your client states they haven’t received your invoice. You look into the problem and you discover that the invoice was automatically rejected due to the missing budget for a matter on the invoice.

Are you compiling and guiding your invoices?

You know invoicing is complicated.

The billing workflow in many law firms is a multi-step process.

1. Timekeepers track/reconstruct their time (if reconstructed, firms lose as much as 70 percent of their income if they wait one week to record their time)
2. Accounting creates pre-bills for managers/partners to review. These invoices then are submitted to clients
3. Accounting runs into errors with their eBilling systems and has to document them. Managers/partners have no idea that clients haven’t received their bills. Collection with accounts receivables is delayed
4. Accounting reaches out to timekeepers to resolve the issue
5. Collection teams attempt to collect on an invoice the client (a.) has never received (b.) is completely unaware of. Collection activity stops temporarily as teams work to resolve the issue.
6. If they’re lucky, managers/partners in the firm are aware of the problem at this stage, they’re unhappy. Clients may feel they’re treated unreasonably or that the firm has acted unprofessionally.

Several issues stand out here:

• Firms have lost 70 percent of their income due to attorneys reconstructing their time after just one week (many wait a month pushing losses further)
• Accounting runs into billing issues but the appropriate parties aren’t notified. Without appropriate reconciliation procedures, firm leadership may not identify the problem quickly
• Accounts receivables are delayed, disrupting cash flow. Multiply this scenario by 25 to 100 invoices and cash flow is severely disrupted
• The client/firm relationship is harmed. This leads to a breakdown in the relationship, adding yet another barrier to client retention.

Are you seeing this?

This is a common problem for many law firms. There’s a disconnect that exists at each stage of the workflow.

Compile Invoices accurately, shepherd carefully

The success of your billing workflow depends on both. There are simple strategies you can use to eliminate unnecessary disruption.

Compile invoices accurately

1. Verify and monitor contemporaneous (as-it-happens) billing in your firm. Timekeepers should track their time automatically, as-it-happens. Your practice management software should provide you with the reporting you need to audit timekeepers in your firm. Provide your accounting team with the access they need to verify compliance.
2. Provide managers/partners with timekeeping reports at specific intervals (e.g. daily, weekly, monthly, etc.).
3. Verify billing guidelines are met and that invoices are prepared per client guidelines. Work to minimize/eliminate eBilling errors and mistakes. Use a task management system to notify involved parties (e.g. managers, partners and timekeepers).

Shepherd carefully

1. Create a map of client billing expectations. Identify, ahead of time, what’s allowed, what requires client approval, and what’s forbidden. Identify the stop words and hidden rules that immediately flag your pre-bill for review. Then revise them.
2. Treat timesheets like precious cargo. Think of your time as products in a store. Each and every shred of time generates revenue. Each line item is a unit of revenue. Every improvement timekeepers and accounting teams make to timesheets/invoices increases firm realization rates and revenue.
3. Deliver unexpected news to clients before they receive their invoice. Have timekeepers and accounting review pre-bills before clients are invoiced. Verify that invoices are accurate, confirm to billing guidelines and are received by clients.
4. Use a task management system to maintain swift communication with accounting teams and timekeepers.

Is this really necessary?

Aren’t timekeepers supposed to stay focused on billable work? It seems like timekeepers are being punished with more non-billable work. They’re already overloaded is this necessary?

Absolutely.

These issues crop up at specific times in the attorney/client relationship.

1. With new clients
2. Changes to existing client relationships

In the beginning, you’ll need to pay close attention to the requirements and guidelines your clients have laid out. It requires careful attention until everyone on a client’s matter is acclimated to the way things need to be done.

Paying close attention in the beginning reduces the amount of work you’ll have to do in the end.

It’s a win for everyone.

Your invoices should be compiled accurately and shepherded carefully

It’s never a set and forget ordeal.

If you’re like most law firms, your billing workflow is a complicated, multi-step process. Give your invoices the attention they deserve.

All it takes is a little bit of your attention.

Give your invoices the upfront attention they need and you’ll reap the rewards. A 50 to 70 percent increase in revenue, a decrease in non-billable work (over time) and higher realization rates.

It’s another way to stand out.

You’re a professional. If you’re focused on serving your clients and serving your firm, you’ll do what it takes to compile invoices accurately and shepherd them carefully. With some upfront attention and a bit of effort, you’ll have everything you need to achieve sky high realization rates.

Are you overpaid? It’s an assumption your clients frequently make. They see your hourly rates, the large dollar amounts on their invoices and they pause.

It’s an easy assumption to make.

In reality, it’s actually the opposite. A large majority of attorneys are overworked and underpaid. Many simply aren’t receiving the revenue they actually deserve.

Your clients don’t see the full picture

They don’t see the large amounts of time, effort and resources you pour into their matter. They’re largely indifferent to the heavy losses you endure on a regular basis.

Your effective billing rate is partially to blame.

Attorneys are working for less than they deserve because they’re in the dark. When I use the term effective billing rate you know what I mean. I still want to make sure we’re all on the same page.

Here’s the formula.

Total annual revenue ÷ Total number of hours invested = effective billing rate

See what I mean?

When you use this formula to calculate the amount of time (billable + non-billable) you spend on a client’s matter, the results are less than ideal.

Why is that?

You’re spending (losing) a significant amount of time to a variety of sources/causes. Address these causes and you increase your effective billing rate, it’s that simple.

Here are two ways to do it.

Strategy #1: Minimize and optimize incentives

Discounts, write-downs and write-offs are a common part of attorney life. Clients use a variety of excuses to maximize their incentives.

• I shouldn’t have to pay for justice! These clients feel they’re innocent of wrongdoing. In their head, that means someone else (you, adversaries, anyone but them) should be forced to pay your fees for representation.
• “I’ll return the favor and refer additional clients your way.” This sounds like a fantastic deal, it really isn’t. It could be true but that isn’t the point. The referrals you receive are likely to be more thrifty clients who are looking to minimize your fees and maximize the amount representation they receive.
• “We’re part of the same [club/group/ethnicity, etc.]” This can work if there’s a quid pro quo arrangement. Typically what ends up happening is the opposite. You’re expected to provide a significant amount of representation in exchange for little to no money. Kneel down to accept this arrangement and these “clients” will never let you stand up again.
• “I simply can’t afford you.” This manipulates social norms in a way that solely benefits the “client.” With a little bit of implicit nudging and a lot of social pressure, attorneys are maneuvered into a position to offer their services at a (heavily) discounted rate. If this objection works once it’s used repeatedly to extract incentives and value from the firm.
• “Why is my bill so high? I’m not paying that.” Clients either haven’t received the appropriate level of communication or they’re simply unwilling to pay more than they expected for legal services. These clients know firms are afraid of losing them so they use this to squeeze more value out of the attorneys handling their matter.

Minimize discounts, write-downs and write-offs by using:

• Developing a strong value proposition: Provide clients with a proposition that is: (a.) something they want (b.) something they can only get from you (c.) something they believe you can provide (d.) something they understand. This typically requires two things: (1.) doing what other firms can’t (2.) doing what other firms won’t
• Offering bonuses, incentives and rewards instead of discounts, write-downs and write-offs. Bonuses, incentives, urgency and psychological triggers motivate clients to take action. discounts, write-downs and write-offs enable and reward poor behavior (e.g. non-payment).
• Choosing clients very carefully. Attorneys accept poor behavior from bad clients. These clients are accepted by firms because there isn’t enough business to go around. These poor quality clients wouldn’t be tolerated if attorneys and firms were filled to the brim with high-quality leads from outstanding clients. Outstanding business development gives firms the ability to say ‘No’ to bad clients.

Strategy #2: Optimize or eliminate costs and expenses

Clients today are demanding more.

They don’t want to pay for research, costs and fees. They’re unwilling to pay for first-year/junior associates. They’re using AI to reduce their need for outside counsel. They negotiate for (dramatically) reduced rates.

Here’s the problem.

You still have to pay your employees for the research. You still have to cover your expenses/fees and the licensing arrangements for the software you use. Clients continue to demand discounts.

Your margins are growing slimmer.

Reduce the amount you’re spending on research and your margins go up. Find a way to provide clients with the value they need at a reasonable price they’re willing to pay.

• Renegotiate with vendors. Request volume discounts or reduced licensing fees with your vendors and technology providers (e.g. a reduced rate in exchange for an extended contract).
• Use alternative fee arrangements to increase your rate at a price that’s affordable but repositions your client’s
• Improve attorney productivity. There are simple strategies you can use to achieve big wins in a short amount of time. Here are three easy ideas: (1.) Firms lose 50 to 70 of their revenue to time leaks. Research shows switching to contemporaneous (as-it-happens) time tracking boosts law firm cash flow and recovers previously lost revenue. (2.) Use practice management software to track and optimize attorney performance. (3.) Firm employees waste 11.2 hours per week dealing with document management issues. A document management system eliminates these challenges.
• Counter their offer. Your prospects and clients are going to push for discounts and write-downs. Counter with a better offer you’re sure they’re willing to accept. How do you do that? You use a client intake questionnaire to identify your client’s primary, secondary and tertiary problems. Then provide an innovative and cost effective solution to their secondary and tertiary problems. It’s difficult, but it’s worth it.

Eliminate your productivity challenges, optimize the performance of your legal practice and your effective billing rate goes up. Your employees are able to spend more time on billable work and are able to complete work in an efficient manner.

Effective billing rate improvement bonus strategies

• Bonus strategy #3: Improve your firm’s utilization rate: Several studies show an unpleasant truth. Attorneys are paid for less than 30 percent of their day. Optimizing your firm’s utilization rate goes a long way towards boosting firm earnings.
• Bonus strategy #4: Improve your firm realization rates: You can do this by following billing guidelines, follow billing best practices and implement excellent systems and procedures to minimize disputes.
• Bonus strategy #5: Outsource work to freelancers and AI, further reducing expenses and overhead. Here are a detailed set of instructions you can use to outsource and automate huge segments of your billable and non-billable work.

Your clients can’t see the full picture

They’re not seeing the large amounts of time, effort and resources you’ve poured into their matter. Their indifference isn’t malicious, they’re simply unaware.

You’ll need to train your clients.

Create a strong value proposition. Focus your attention on optimizing your firm. There are easy strategies you can use to create big wins for your firm. Don’t rely on your client’s faulty assumptions. Ignore naysayers who state inflated costs are part of running a firm.

You can do better.

With the right approach and a clear set of strategies to follow, you’ll have the tools and resources you need to boost your effective billing rate dramatically, no billing complaints necessary.