If you can identify and manage your law firm’s profitability variables, you can also find new ways to boost performance and profitability. For example, losing revenue to non-billable work always negatively impacts law firm profitability. You can’t completely eliminate administrative tasks, but you can optimize how your firm gets them done.
Bloomberg Law found that senior billable hour lawyers work nearly 50% more hours than they bill. A recent State of Automation in Legal report by Zero found:
- 41% of fee earners spend 35% or more of their time on non-billable duties.
- About 70% of timekeepers spend at least 20% of their time on work that the firm can’t charge to a client.
Why? The Zero survey also found that:
- 64% of timekeepers say they don’t have the right automation tools and technology to reduce non-billable work.
- 60% stated that they wanted tools for email management and time entry.
Let’s suppose 7 out of 10 lawyers in a 150-lawyer firm each lose1.6 hours of an 8-hour workday on non-billable work. At a $300 hourly rate, that adds up to $50,400 of missed opportunities every single day.
Cutting non-billable time by just half could pave the way to increasing firm revenue by $25,200 per day.
Sound outlandish? It’s far from it. Here are four ways to increase your firm’s efficiency, improve lawyer performance, and boost law firm profitability.
1. Identify Inefficiencies: Review Manual Processes.
What non-billable activities in your firm still require arduous manual efforts to complete?
Can these activities be transitioned to digital processes to reduce the amount of work that needs to be done by your high-value resources?
Can you fully automate any workflows?
For example, many firms continue to:
- Manually email reminders rather than set up automatic alerts
- Require timekeepers to type in time entries while cross-referencing outside counsel billing requirements
- Require lawyers to manually track and enforce outside counsel guidelines
- Print documents and break out red pens to review and revise prebills
- Track information in manually updated spreadsheets and siloed applications
- Manually gather data to plug into templates of financial and performance reports
Legal technology tools can replace, streamline, and accelerate manual processes. Repetitive workflows that you can break down into predictable steps are ideal automation candidates.
2. Improve Law Firm Performance: Adopt Technology Tools That Optimize Workflows.
Legal technology tools can take over your manual processes and optimize existing digital processes. For example: Rather than manually pull data from multiple physical locations, technology can integrate your existing systems and enable them to exchange data without human intervention. You can query your systems at any time. Or an event (such as the arrival of a specific date or when a matter reaches a specific number of hours billed) can trigger your integrated system to automatically collect, analyze and report on relevant data. It can also alert the appropriate individuals when it’s time to act. Custom dashboards keep administrators and lawyers up to date with daily analytics and timely alerts.
3. A Key Law Firm Profitability Boost: Automate Time Entry & Prebill Review and Approvals.
Modern timekeeping software can automatically create a time entry for each activity performed and enforce outside counsel guidelines. Lawyers open their timesheets to find pre-filled entries that include client, matter and task codes, event descriptions, and the time spent on the task. Much of the additional time captured is from smaller tasks — an email here, a phone call there — that is typically overlooked. Capturing these smaller entries adds up quickly to thousands of dollars of additional revenue.
Automated time entries require much less effort to finalize and improve billing accuracy, helping to close the time gap between work-in-progress and payment. You can also digitize prebilling processes in a more efficient, electronic environment for automated routing and faster review and approval.
4. Understand Law Firm Performance: Identify and Track Relevant KPIs.
Your law firm is sitting on mountains of data. The trouble is that most data has been isolated in individual software programs or spreadsheets. Using technology to integrate your systems and digitize your workflows also unifies your data, making data much more useful and enabling you to:
- Measure and manage factors such as matter workloads, staffing ratios, and lawyer performance rates
- Design specific metrics to track progress against business targets
- Auto-generate management reports and charts, in detail, in near real-time
For example, reporting on utilization rates, realization rates, hours billed, and more can help you monitor the effectiveness of your lawyers and move forward with clear goals in mind. You see where to eliminate duplication of effort and know when to send work to a better-suited individual. You can identify the most profitable types of work and better position your firm to beat the competition.
A technology-integrated approach pulls your firm out of the mire of “this is how we’ve always done it” to modernize operations and build transparency and flexibility into your systems. Whether you’re battling non-billable time or branching out into new areas of law, you can always maintain a clear view of your profitability variables.
