Most solo and small law practices have a significant gap between hours worked and hours billed. In fact, a study from LexisNexis found that solo and two-attorney firms are not billing as much as 39 percent of time worked. Why? The culprit is poor time tracking practices which are often the result of a business or ethical dilemma.
The Business Dilemma
Science shows that memory fades with time. The famous Ebbinghaus experiment conducted by the German psychologist Hermann Ebbinghaus taught us that after 31 days without relearning or memory reinforcement, we forget 78 percent of what we learned. From a business perspective, the longer you wait to track your time, the more it turns into guesswork rather than an accurate, detailed account of billable activity. So, if you wait until the end of the month, or even week, it’s nearly impossible to remember all of the work completed. Instead of monitoring your time, you’re forced to recreate it.
The natural instinct is to be conservative. You don’t want to overbill your clients, and you certainly don’t want your clients to dispute your bill, so many firms will underbill to “play it safe.” This can have a dramatic impact on your bottom line.
Hypothetically speaking, suppose sloppy time tracking causes you to underbill by 15 minutes per day – an extremely conservative figure based on the LexisNexis data mentioned previously. Fifteen minutes per day probably doesn’t seem significant, but if you charge $250 per hour and work 48 weeks per year, those 15 lost minutes each day will cost you $15,000 over the course of a year – per attorney. If you bill at a higher rate, do the math. The cost is staggering.
The Ethical Dilemma
Attorneys are prohibited from charging unreasonable fees. One of the key factors in determining if a fee is reasonable is the amount of time and labor required to provide services. People expect accountability from their attorney, and every client deserves a detailed, accurate report of services provided.
Poor time-tracking practices result in generic, somewhat vague, and often inconsistent descriptions of your time. This not only leaves the door open to ethics violations and client disputes, but the lack of detail makes you less prepared to defend yourself. It only takes one incident to permanently damage a client relationship and your reputation.
Some firms prefer handwritten forms or dictation. Of course, there are a number of apps that automate the process of tracking time and integrating this data into your accounting system. However, technology only works if you choose the right tool, configure it to do what you need it to do, and commit to using it every day. This is easier said than done.
Perhaps the simplest time-tracking method is to outsource these tasks to a service provider that can receive information by phone, email or a web-based interface. Descriptions are then reviewed to ensure accuracy, consistency and correct grammar so they are invoice-ready when entered into the accounting system.
Are you ready to take the guesswork out of time tracking? Are you ready to take this task off your to-do list? Are you ready to improve your revenue and cash flow? Are you ready to reduce your risk?
Virtual Paralegal Services helps solo and small law firms improve the accuracy, consistency and reliability of time tracking, using the client firm’s communications platform of choice – phone, email, dictation, web or other means. Contact us to learn how we can help you cost effectively manage your financial operations.