This is part two of a three-part series.
As I mentioned in part one, when I attended law school there was no playbook on how to run a successful law firm. We knew the rules of law, but not the rules of business success. My goal is to show you how your small law firm can be quite profitable and continue to grow with these three simple steps.
As lawyers we tend to put in very long hours because we know that translates into successful cases and happy clients. What we fail to do is accurately record those hours and actually get paid for them. So, in part two let’s address the poisonous seed that grows into a catastrophe for most firms – uncaptured and unpaid time.
Most attorneys will not track their time because it is tedious or they are too busy to do so contemporaneously. Further, while they know their staff are busy, they cannot tell what hours were spent on what case and if that case was actually a profitable use of time.
Without accurate time tracking, it is difficult to keep track of billable hours. For an hourly rate firm, that lost time is lost potential revenue. Even if you bill a flat fee or on contingency, uncaptured time is detrimental to your business. How does not tracking time impact your company?
1. Client Invoicing and Reporting
Accurate client reporting is vital to maintaining satisfied client relationships. If a client does not get an accurate account of their legal representation at each step, such as drafting an important pleading, that client may feel like their attorney is not zealously advocating for them or is incompetent. This can lead to angry clients, which no law firms wants. Show your clients the hours you put in for them and it shows them your value.
2. Staff Performance and Success
Knowing what all team members are contributing and if they are contributing to the right things is the difference between profitability and failure. Well run firms will often review the work their attorneys and paralegals have done the previous day. If time is missing, management may erroneously think certain staff has a light caseload and give them more work they cannot handle. The impending result of this – overburdened staff, erroneous errors and potentially lost cases.
3. Lost Revenue
If you bill on contingency and your overburdened staff is losing cases, you can see the direct correlation of that with your revenue stream. If you bill on a flat fee without realizing that time is underreported, you will likely assign a lower fixed fee. This is not only lost revenue but also a perception of the quality of your work. As the saying goes “you get what you pay for”, and clients may view a lower rate fee as inferior work. Of course, if you bill on a hourly rate, you can see the impact on the bottom line.
Regardless of how you bill, accurately reporting time has a direct impact on the bottom line, yet many firms do not realize the severity of doing it wrong. Multiple studies have shown that fee earners at law firms, on average, only bill for 2 hours of the business day. Think about that as you are approaching your 12th hour of work.
So how do law firms survive when they are only billing 25% of their time? They find a way to make time reporting more efficient and effective with Smokeball’s Activity Intelligence and AutoTime. Any work done within Smokeball is automatically recorded as time spent and on the particular case where it was spent.
Smokeball integrates seamlessly with Word and Outlook, so the time spent drafting a particular letter or reviewing an email will be captured. Activity Intelligence removes the tedium of manual time recording while providing accuracy. Firm owners can use various reports in Smokeball to see what staff members are actually doing and properly manage everyone’s caseload.
Auto:Time, takes Activity Intelligence even further by automatically adding these recorded time activities into client invoices. Auto:Time captures up to 30% more of time spent of cases, so now firms can realize substantially more revenue from these invoices.
As the saying goes, time is in fact money when it comes to growing your law firm. Regardless of how you bill, accurately capturing and invoicing time can result in more satisfied clients, staff success and increased revenue. All of those factors are critical to a thriving legal practice.
In the next segment of this series, we will cover Workflows as Best Practices. You can watch this recorded webinar to learn more about Lead Management and other features that can benefit your firm or schedule a free, personalized demo with our expert sales team.
About Our Author
Mark Petrolis is a Senior Client Success Manager and In-house Counsel at Smokeball. For most of his legal years he has helped lawyers become more organized, productive, and profitable. Mark is a trained litigator and holds a J.D., from the University of Illinois – Chicago, School of Law and a B.S.E. in Engineering Management from Purdue University.