Author: Gloria Qiao, Founder & CEO of Trusli
Lately, we have been writing a lot about legal practice management software for law firms. Among the important pieces of the puzzle for a law firm to effectively practice, law firm billing is a pillar that cannot be overlooked. Why does legal billing matter so much?
1. Legal bills are ultimately the foundation for a legal practice
Law firms are, after all, a business. And attorney billing is what prices the business. The same as if you were to sell hardware, the pricing list, or if you were to sell software, the subscription pricing. Even lawyers may or may not want to acknowledge that lawyer billing plays a fundamental role in a law firm’s business. Ultimately, clients, as paying customers, will zero in on how the legal bills are sent to them, the details contained in them, and whether they think the billable hours that law firms send them are reasonable, among other things.
2. How to evaluate the law firm's legal billing system
Attorney billing is known for being opaque, expensive, and hard to predict and understand. So to have a billing system that clients appreciate, the legal billing system needs to have these characteristics.
To qualify for a high-quality legal billing system, the firm must produce bills that are easy to understand for clients. How are the clients charged? By the hour or by the project? Either way, what are the details for the hours or projects that clients are being charged for?
No one likes to overpay for things, especially expensive legal billable hours. So to ensure client satisfaction, accuracy is one thing that legal bills must achieve. On the flip side, law firms also don’t want to leave money on the table. So if attorneys are underbilling the clients, the firm’s bottom line will suffer soon.
When clients like startups plan for their legal spending, what they fear the most is a bottomless black hole. Law firms are increasingly offering fixed fee structures to clients to incentivize larger spending or economy of scale. This new approach creates the right motivations for law firms to work as efficiently as possible, as opposed to prolonging the billable hours. On the client-side, this new approach helps with planning and budgeting for projects and assures that law firms will complete the projects as efficiently as possible.
3. How to optimize law firm billing for clients
To achieve the above-mentioned goals, law firms must implement policies and systems to ensure and improve transparency, accuracy, and predictability.
The first step is to draft and publish clear policies.
This is to inform associates and partners about a firm’s attorney billing guidelines and objectives. The policies need to be as detailed as possible, such as how many details a billable hour entry needs to contain. It should also include guidelines such as how long a lawyer has to bill and what kind of time increments should be used.
The second step is to adopt an agile system to manage the clients, matters, and corresponding legal billing.
Some law firms still manage their billing on scattered paperwork without a centralized and organized system. This leads to inconsistencies and errors, not to mention that it is hard to manage and create overviews for both clients and firms’ managers internally. Having everything in a neat dashboard where clients can review all the matters and corresponding legal bills will go a long way to help clients understand their legal bills and track their legal spending. More importantly, this gives law firm managers a way to track billable hours by client, matter, and associates and measure their performance and productivity.
4. How to automate legal billing to save time, make lawyers happier, and measure everything
When we talk to law firm partners and associates, one of their biggest challenges and complaints relates to legal billing. The billing attorney often spends a significant amount of time keeping track of their time entries, writing up billing descriptions, inputting the time entries manually, having their supervising attorneys review and approve them, and so on.
The ideal system should be intelligent enough to detect the billing entries automatically. More significantly, if the system automatically suggests the time entries to be created under which client and matter, it will save the billing attorney a huge amount of time and headspace to focus on legal work. Finally, because the attorneys don’t need to rely on a billing cheatsheet or billing guidelines but have time entries automatically created for them, they will save a lot of time by not having to track down the time they spent on what matters manually. Eliminating manual processes from the legal billing system will not only reduce time spent on non-billable hours but also hugely improve the happiness of the attorneys. Now that they don’t have to spend time doing this chore, they will have more free time to do actual legal work or go home early after a busy day, as opposed to staying in the office to finish the billing.
Finally, as discussed in this article, the law firms have an automated, accurate, and agile billing system that enables the law firm managers to measure everything. Ideally, you want to be able to analyze total hours and dollars billed on a per client, per matter basis. You would want to know how long it takes for associates to accomplish certain tasks and how long and/or how much they bill for them. You would want to know who is the most productive billing attorney. You would want to know which one is the highest value client. Measure everything; that’s how you can manage everything.
As we mentioned at the beginning of this article, law firms are ultimately businesses, so how much they charge, how they charge, and how they get paid is of key importance. Law firms must innovate the way they work, as well as the way they bill. The good old times of billing every six minutes and getting paid without question are behind us. Modern companies and in-house departments are looking for billing with data analytics, bundled deals, and reduced legal spending, to name a few. Law firms must adopt modern technology, especially a modern legal billing system, to work more efficiently and effectively with tech companies and all other companies.