04 Feb Timekeeping Best Practices to Build a Stronger Law Firm
The old adage “time is money” certainly rings true in the legal industry as law firms tend to live and die by the billable hour. Good timekeeping is vital for any professional who bills by the hour. Bottom line: that’s how revenue is generated.
So it’s all the more confusing that tracking time is essentially an afterthought for many law firms. In this article, we explore why timekeeping tends to be a thorn in the side of many firms and explain the consequences of inaccurate tracking, provide some tips for improving how your law firm tracks time, and explain how more accurate timekeeping can really help your firm level up.
Why Is Timekeeping so Hard?
On the surface, it does not seem like timetracking should be much of a headache for attorneys, but accurately entering time is a battle law firms face no matter the practice area.
The reason it is so difficult comes down to the fact attorneys often work on multiple matters for several different clients throughout the typical day. So going back at the end of the day or week and trying to reconstruct their work inevitably leads to some inaccuracies. As you’ll see, even small inaccuracies can be major costs.
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The Cost of Poor Timetracking
Attorneys tend to not track their work in real-time, which can result in overbilling or underbilling by up to 20% and can also result in a 30-40% rate of time-tracking inaccuracy. The longer attorneys wait to track time, the less accurate their memories tend to be.
The American Bar Association estimates that waiting a week or more to record time can lead up to a 50% loss of revenue. Even waiting just 24 hours can still lead to a 25% revenue loss. In addition to lost revenue, failing to track in real-time can lead to:
- Inaccurate read on firm health
- Poor business decisions
- Unhappy clients and disputes
The impact on the business of your law firm is the most obvious reason you should strive for accurate timekeeping, but there are ethical considerations to keep in mind as well.
Beyond its impact on revenue, there are additional benefits to instilling a good timekeeping culture that law firms shouldn’t ignore.
Accurate timekeeping is a matter of professional ethics. The American Bar Association’s Model Rule 1.5 lays out guidelines for the fee structure between a lawyer and client. That includes proper consideration of “the time and labor required” for a matter. You need detailed and systematic time recording to ensure you are abiding by this rule.
Additionally, a comprehensive record of time automatically creates an audit trail you can depend on in the event of questions or discrepancies. A more granular and specific approach to tracking time makes it much easier for clients to understand the breakdown of costs compared to block billing.
Accurate timekeeping reinforces ethical transparency in your billing that benefits both your firm and your clients.
Tips for Improving Timetracking
If you’ve identified timekeeping as an area your law firm could improve in, here are some tips that will help you get moving in the right direction:
Track in real-time. This is hands down the most effective way for law firms to ensure they are accurately tracking time and avoid underbilling or overbilling. Make sure you document time and labor required to perform the service properly through a good timetracking software, inclusive of timers.
The closer to real-time tracking you get, the more accurate your bills will be. Ideally, whatever practice management software you utilize enables timetracking with a timer and prompts you to allocate time into smaller increments rather than large blocks.
Track fixed-fee matters. It is very common for attorneys with fixed-fee practice areas to stop tracking time all together most likely due to the administrative burden. Unfortunately, that decision often results in money left on the table.
Tracking fixed-fee matters enables law firms to get a much better read on profitability. This could be a practice area where you are either overpriced or underpriced, but there is no way for you to truly know without tracking that time. By tracking, you will know whether you are underpriced or if you can lower your price and hopefully increase demand thus driving additional revenue.
Track write-offs and write-downs. Even if not directly billable to the client, you want to make sure you keep a full and complete picture of your financials for every matter and client. The only way to do that is via accurate timekeeping and making sure you keep track of every write-off and write-down and allocate them back to the appropriate matter and client.
How Can Lexicon Help With Timetracking?
Timekeeping is fully integrated in Lexicon’s practice management software so it’s simple to record and categorize time worked. The software allows users to easily use timer, set time-entry reminders, time-entry grace periods, time-rounding intervals, access real-time reports and keep notes on every action within a matter. The platform also provides a high-level look at time spent by matter and client to further optimize your time and revenue.
Learn more about all the timekeeping features included in Lexicon’s software. If you are interested in seeing how our software can revolutionize the way you practice law, contact us to schedule a demo.