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Tips to Improve Law Firm Billing Productivity
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By Loretta Ruppert, Senior Director-Marketing LexisNexis

Billing productivity is central to any law firm’s business model and viability. Whether you are an attorney or paralegal with billable requirements, or you work in an administrative or operational field like accounting or IT, the key to maximizing productivity boils down to enabling those with billable hour requirements to spend their time doing billable work.

A July 2012 LexisNexis survey on billable hours showed that the majority of non-billable hours were clearly linked to either practice management or administrative tasks. The findings were consistent across firms of all sizes and geographies.

With a few calculations, it is clear why billing productivity has such a big impact. For example, if an attorney’s time is valued at $300 per hour and he or she spends six minutes sifting through email or looking for a document, that action effectively costs the firm $30. Repeating this action six times over the course of a day equates to $150 in lost billable time. Assuming 240 workdays per year, the total lost billable time is valued at $36,000 annually–a tidy sum.

While less of a strain on the bottom line, a paralegal spending the same amount of time looking for documents can also add up. Billing at $120 per hour, the lost billable time will equal $17,280 per year. With these numbers in mind, the mission is clear: help the personnel who are responsible for billing to bill more efficiently.

According to the survey, the average legal employee bills 6.9 hours per day. Assuming a $300 per hour rate, the potential impact is significant, with the average loss per firm valued at $180,000 annually.

Size matters too. Some law firms are simply more efficient than others. For example, the multi-hatted practitioners at solo law firms spend 40 percent of their time on non-billable tasks, while larger firms with 20 or more attorneys spend 27 percent of their time on non-billable work. The firms in between seem to have found the sweet spot, as those with 11-20 attorneys managed to keep unbillable time to just 8 percent.

Strategic Considerations for Legal Billing and Accounting

Technological product innovations for the legal market have come a long way. Tools for matter management, document collaboration, billing, and accounting have matured greatly over the last decade. Cloud-based offerings provide simplicity and ease of use.

When it comes to adopting billing and accounting technologies, here are three important considerations:

  • Consider tools that integrate accounting and billing. Who would not want to reduce the time between sending a bill and getting paid? That is exactly what integrated systems should do for a law firm because the system shows client-related checks and trust account disbursements in one system. This mitigates concerns with reconciling accounting and billing data, reduces duplicate data entry, and cuts human-prone errors.
    Standardize on LEDES and E-billing. The Legal Electronic Data Exchange Standard (LEDES) format is an industry standard for submitting electronic bills. Increasingly, corporate clients are requiring e-billing services, and while setting up electronic billing can be challenging, it is important to do so properly the first time to avoid the risk of bill rejection and resubmission. Look for tools that support LEDES and offer the ability to customize client-specific codes. Once implemented, the technology makes billing a breeze, ensures faster payments, and leads to far fewer headaches.
  • Be wary of generic tools. There are a plethora of tools for billing, accounting, and time-keeping designed for the broader business category. However, lawyers have specific needs due to the confidential nature of their work, so look for tools that support those needs and are designed to work as you do. Generic tools may not do what attorneys need them to do.

Future-Proof Technology Acquisitions

Using tools designed for lawyers is especially important given the strong pressure law firms are facing from their clients to restructure fees. Two additional trends to consider are mobile work and alternative fee arrangements (AFAs).

Increasingly, attorneys live the same kind of mobile work style as their clients. This means meetings can take place just about anywhere—like a coffee shop or hotel lobby—rather than just in an attorney’s office. In this environment, mobile solutions are increasingly important, not only for access to a given client’s matters, but also to use the “in-between” moments to bill for time.

AFAs are another significant trend. Whether you operate a solo shop or serve corporate clients, the reality of AFAs is beginning to take hold. While survey research shows that AFA adoption is all over the map, LexisNexis research indicates that the move toward AFAs is real and now accounts for roughly 10 percent of overall billing in the U.S. When we consider that revenue in the AmLaw 200 is about $100 billion annually, 10 percent is a sizable figure.

Moreover, the ability to offer alternative fee arrangements may prove to be a competitive advantage, since even small firms now face competition from any firm with an Internet connection, let alone the rival down the street. If you are looking to increase billing productivity with technology—even if you are a critic of AFAs—it is a safer bet to ensure the software you invest in leaves that option open . . . just in case.

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Loretta Ruppert is the senior director with LexisNexis Law Firm Practice Management. Loretta brings experience as a previous business owner and legal technology consultant, a manager of professional services for a CPA firm, an accountant, and a subject matter expert for developing back-office software. Probably most relevant, she is a former law firm employee and user of law firm practice management and financial systems. Follow her on Twitter @LorettaRuppert.

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