Lawyer billable hours directly correlate to the revenue and productivity of your law firm. What are billable hours for lawyers, though? And what can you do to track and maximize them? You’ve come to the right place.
We’ll break down the differences between billable and non-billable activities and offer tips on tracking and enhancing them within your law firm. You’ll also discover how InvoiceSherpa not only aids in accurately capturing billable hours but ensures you get paid for every minute of your legal expertise.
Our AR automation software streamlines the process of sending out invoices and subsequent reminders, helping you get paid faster while strengthening relationships with your clients. It integrates with Clio, LawPay, Quickbooks, and more, automatically reconciling captured funds over to your accounting software.
So, learn about law firm billable hours below or find out firshtand what makes InvoiceSherpa the #1 billing software for lawyers today!
First things first - what are billable hours for lawyers? Simply put, these are the increments of time charged to clients for legal work performed on their behalf.
It’s a crucial metric for keeping track of hours lawyers are spending their time - ensuring transparency not just with your clients but across your law firm as a whole. Let’s look at some of the most common billable activities below along with some that wouldn’t fall under the scope.
Legal billable hours encompass any time spent on activities directly related to client work that can be charged to a client.
These hours are usually recorded in six-minute increments, or one-tenth of an hour, aligning with the legal industry's standard billing practices. Accurately tracking these hours ensures that law firms can invoice clients appropriately for the services rendered.
Billable activities can vary widely but generally include:
That being said, understanding what doesn’t fall under the umbrella of billable hours for lawyers is just as important...
Non-billable activities are tasks necessary for running a law firm but not directly chargeable to a client.
For example, you can’t charge your client for the time it takes you to stop and get coffee on the way to a meeting. Or, for general administrative work such as like filing, organizing, or scheduling that is not case-specific. Here are some more non-billable activities:
Yes, these are important activities to keep your law firm running smoothly and foster future growth. But, it’s not fair to charge clients for tasks that aren’t specific to their case.
This is why understanding the distinction between billable and non-billable activities is crucial for lawyers to effectively manage their time and for law firms to accurately forecast revenue and profitability.
So, let’s progress this conversation below by showing you why lawyer billable hours are not something you should gloss over as part of your time-tracking efforts.
There are two main reasons you need an efficient, accurate means of tracking billable hours for lawyers. It influences the financial health of your firm and speaks to how productive your team is.
Law firms can ensure they bill appropriately and maximize their income by accurately tracking the time spent on client work. This helps in forecasting accounts receivable, budgeting, and financial planning, which are crucial for the firm's long-term sustainability.
It also aids in identifying profitable areas of practice and allocating resources efficiently, ensuring the firm focuses on work that enhances its financial stability. This is where the connection to your firm’s productivity must be discussed…
Law firm billable hours speak to lawyer performance and overall productivity. They provide a quantifiable measure of individual and collective output, informing performance reviews, compensation decisions, and promotions.
Tracking billable hours helps law firms assess workload distribution and identify areas where processes can be optimized to improve efficiency.
Knowing how much time is devoted to billable activities compared to non-billable tasks allows you to make informed decisions about staffing, training, and operational improvements.
This balance is crucial for maintaining a productive workforce that can meet client needs effectively while ensuring the firm operates profitably. That being said, let’s talk about how to calculate and track billable hours for lawyers below.
From setting a target for billable hours law firms should aim for to choosing the right tracking methodology for accuracy and efficiency, here is everything you need to know about tracking lawyer billable hours.
Establishing a billable hour law firm target is step one towards effective time management. This target is typically set annually or monthly.
Whatever the case, it’s a benchmark for lawyers to gauge their productivity and manage their workload. It aligns individual efforts with the firm's financial goals and provides a clear expectation for performance.
Law firms typically determine these targets based on historical data, practice area demands, and market standards, aiming to balance ambitious revenue goals with achievable workloads for their attorneys.
Law firm billable hours have traditionally been tracked manually, recording time spent on various tasks throughout the day. This can be done using timesheets, logs, or even diary entries, detailing each activity's duration and nature.
While manual logging is straightforward, it requires discipline and consistency to ensure all billable activities are accurately captured. Lawyers need to be diligent in noting time spent on client work. This is often done in real-time or at regular intervals throughout the day to prevent underreporting and revenue loss.
These days, though, manually logging hours sets you up for human error and inaccuracies. It’s also more of a headache than it’s worth. Just as automated invoicing, you’re often better off leveraging technology.
Most law firms rely on software specifically designed for recording billable hours for lawyers to streamline the tracking process - such as Clio or Clockify.
These tools often feature start-stop timers, automatic tracking, and the ability to categorize time by client or project. They can significantly reduce the time spent on logging hours and improve accuracy by capturing billable activities more comprehensively.
Moreover, software solutions often allow for easy editing and review, ensuring that records are precise before billing clients. We’ll talk more about this later on, but you can even integrate tools like Clio with InvoiceSherpa, the best accounts receivable automation software. This helps you further automate your financial management.
Integrated case management systems offer a seamless solution for tracking billable hours alongside managing other aspects of legal practice.
These systems provide a centralized platform where time tracking, case documentation, client communication, and billing can be managed cohesively. Think of them as an all-in-one solution to handle billable hours and getting paid for them.
The key benefit here is that you can ensure that every billable minute spent on case-related activities is accurately recorded and attributed to the appropriate client or matter. No need to log in to separate software or integrate with other technologies - one solution does it all.
Once you have a baseline for how many billable hours your law firm is recording compared to nonbillable hours, you can take steps to improve internal processes and become more productive as a firm. Here are some tips to get you started on the path of optimizing the use of time…
Lawyers should prioritize tasks that directly contribute to billable work and delegate or minimize non-billable activities to an assistant or intern.
Planning the day with a focus on high-priority, billable tasks and setting realistic, achievable goals for each day can help in maximizing time spent on client work.
Using techniques like time blocking to allocate specific periods for different cases or tasks ensures that lawyers can work more efficiently, minimizing downtime and distractions.
Maximizing law firm billable hours just for the sake of earning more income is not the goal. It’s imperative that your time spent delivers real value to clients.
Lawyers should focus on activities that directly benefit the client's case or legal position, enhancing the perceived value of the services provided. This helps justify the hours billed and strengthens the client-lawyer relationship.
Effective communication with clients can also lead to more billable opportunities. Regular updates, clear explanations of the work being done, and timely responses to client inquiries can increase client satisfaction and lead to additional work or referrals.
It’s worth working to foster a culture that values accurate time tracking and efficient work practices, as hard as it may be.
Training programs should emphasize the importance of lawyer billable hours to the firm’s success and teach effective time management and recording techniques.
Encouraging an environment where billable work is prioritized and valued, and where lawyers are recognized and rewarded for efficient time management, can motivate the team to focus on maximizing billable hours.
Don’t forget to balance work demands with the well-being of the legal team to prevent burnout, though. A supportive environment that promotes work-life balance can lead to more productive and engaged lawyers, ultimately benefiting the firm's billable hours output.
So, what are billable hours for lawyers? In closing, these are the tasks that contribute to your bottom line, as they’re what you’re actually billing your clients for.
Efficiently managing billable hours for law firms is crucial for profitability and sustainability. You can now take what you’ve learned and maximize legal billable hours by prioritizing billable tasks, fostering a culture of accurate time tracking, and implementing effective time management strategies.
Our blog has more small business accounting tips and tricks for your firm like how to calculate accounts receivable, what can a lawyer do to get clients to pay invoices, charging interest on legal invoices, accounts receivable management services, demand letter for payment, accounts receivable outsourcing, or how to send a bill to collections.
Before we wrap our guide up, though, we want to offer one more piece of advice on how to do billing for lawyers - discover the AR automation benefits that await you in InvoiceSherpa.
Our software integrates with your accounting software and helps you send out custom invoices, schedule payment reminders, and then, reconcile payments directly into your accounting software.
It offers you unparalleled financial clarity while helping you get paid faster - eliminating the stress and turmoil associated with unbilled revenue or uncollectable receivables. You can offer your clients a number of ways to pay through their own personalized portal, which reduces friction and strengthens relations.
From applying invoice late fees and customizing your invoice late fee wording to accounts receivable reconciliation, InvoiceSherpa does it all. So, as you optimize your lawyer billable hours tracking methods, consider investing in InvoiceSherpa as well.
It’s time to take control of your firm’s finances and productivity once and for all!
April 4, 2024
