Firms are increasingly being put under pressure to deliver alternate engagement models, such as fixed fee arrangements or discounted rates, to win new business. In addition to this clients are demanding more transparency in the on-going handling of their matters so they can see for themselves the progress being made and the justification for work undertake.

Before we start to describe the Matter Planning process let examine some benefits firms should experience by using Matter Planning software.

1. Improve forecasting accurately by leverage historic data on like matters or tasks.
2. Reduce the risk of taking on matters that will result in lower margins than expected.
3. Introduce a repeatable process that provides control and discipline in the business development process.
4.  Reduce the costs and time to respond to prepare an RFP or Alternative Fee Arrangement (AFA).
5. Drive more new business at a known level of profit.

 Firms can attempt to do matter planning with crude tools such as a spreadsheet or Microsoft Project. This sort of planning can handle the scheduling component of any plan but completely misses the financial analysis requirements. A spreadsheet could be used along with normal time and billing software that offers matter level budgets, however this becomes the start-from-scratch method and it may take years to develop a profitability model that can be manually maneuvered to do a forecast.

 Matter Planning software provides the ability to go back in time and search for similar matters that can then link to provide an immediate historic prospective for a future matter. Convenient links include such items as:

• Phase and Tasks
• Specific attorneys and attorney levels
• Matter rates and actual internal costs
• Hours recorder and actually billed
• Disbursements

 After using the Matter Planning software tools the firm can easily develop a “roadmap” of revenue, hours, rates, costs and expected profit for a potential new matter. The firm can now present the client with a comprehensive financial matter plan.

 This however is just the beginning, in How Matter Planning Actually Works – Part 2, we’ll look at how to manage the matters and track budgeted vs. actual performance statistics to then better forecast future matters.

Quite often insurance carriers require law firms to split a bill among two or more parties, this is normally referred to as Split-party Billing. Many times there are complexities that make a seemingly simple task, much more complex.

 We’ll examine “best practices” to both meet client requirements and provide the firm with solid accounting transactions for proper reporting and profitability analysis.

1.  Split-party Billing usually calls for a master file to be set-up where all fees and costs are posted to that file. Additional “bill parties” are then added with a designation as to what % of the fees and costs will be billed to each of the parties.
2. The system should check to be sure that 100% of the fees and costs are being allocated at all times.
3. The use of effective dates for each party is very important, it’s not unusual that there are “in’s and out’s” of bill parties throughout the life of a case. The ‘bill parties” don’t necessarily have to be clients and matters in the system, they can just be an entity called “bill party”. Many times this is much easier to just designate a person or company that will pay a portion of a bill without setting up all the official client/matter information. You just need a name and address to send the bill to.
4. Normally, in the case of Split-party Billing, a single rate is used to value each time entry. If different rates are used for each party it is difficult to determine a % of each bill to be split, from a dollar point of view. If each party must have a different rate, then the actual time entries are first split, and then valued separately for each party. If different rates are used each party receives a completely separate bill without calculations showing the % split.
5. Since most Split-party bills are going to one or more insurance carriers it is convenient to get agreement ahead of time on a common phase and task code set to be used.
6. At the time of billing the system looks to actually generate, in effect a single bill, with each bill party seeing their share of the total bill. So for example, if bill party #1 is paying 50% of the total and the bill is for $10,000 the bill would show all the detailed fees and costs, a “total bill amount” and then a line in the bill showing bill party #1 owes 50% or $5,000. If bill party #2 is paying 25%, they would get the same bill sent to their attention showing on one line that they owed $2,500.
7. There are a lot of iterations of this general idea of a “single bill”, including different bill formats, including past billing and payment history and outstanding AR or Retainers being applied for each of the bill parties on only their copy of the bill.
8. In Split-party Billing the “bill parties’ act as “sub-matters” to the master file or master matter. Therefore in many systems, Accounts Receivable can roll-up to the master matter, with the ability to drill-down to a bill party’s portion of the AR.   
9. Split-party bills can also be separately e-billed to multiple “bill parties”, i.e. insurance carriers.  In the case of e-billing it is not unusual that the e-bill party want all the “pre-split” transactions, the e-bill party already knows what % they have agreed to pay and the LEDES format will handle all of this.
10. The system should save all detailed transactions so that normal accounting adjustments can be made such as, reversing a bill, transferring a payment, charging interest for one or more of the bill parties, etc.

A la David Letterman, here is my own Top 10 2012 Technology Trends and a few concerns:

10. Collaboration: Firms have jumped on the collaboration bandwagon using tools such as Microsoft SharePoint to collaborate both on a firm and client-facing basis. This collaboration enables firms to stay on top of things such as productivity, etc. In the 2010 ILTA Purchasing Survey, 49% of respondents utilize SharePoint internally for collaboration, while 24% use it as a collaboration tool for client and other external communications.
Concerns: Not a lot; perhaps just a continued slow roll-out time and the challenge of keeping the information up to date.

9. Social Networking Increased: With the increased use of social networking, decision making has become easier both for firms and clients.  Almost all companies are socially networking one way or another and it gives firms more exposure overall.
Concerns: This increase has made people and companies more vulnerable. Larger firms want to make sure to control their message; social networking can do just the opposite. We just aren’t sure if attorneys twittering all day are really productive.

8. Technology Creating Technology: Smart technologies are spurring on a new slew of technology that tie in to existing technology to speed up processes. Many organizations are making the creative process to develop this technology more scientific by recording the process.
Concerns: Technology was developed to make lives easier. Sometimes the learning curve and implementation can create more work with a higher degree of complexity.

 7. 360 Degree Security (Accountability): With all of the information flying in and out of organizations, firms are becoming increasingly cognizant of the integrity of their information and how it is being protected, especially within the cloud. A 360-degree security plan is granular in nature and includes doing a lot of small things to ensure the maximum security.
Concerns: None.

 6. Workflow to Save Clients Money:  Workflow applications are a sure bet to improve internal efficiencies and productivity. Firms are looking for ways to reduce their internal costs that then allows them to potentially pass these savings along to clients. This may not mean rate reductions, but possibly lower increases.  
Concerns: Nothing really. Process improvement is smart business.

 5. Green: Going green is in and it will stay in for good reason. Technological advances such as paperless billing and workflow routing are saving countless resources.
Concerns: Going Green is getting a little tired, it’s a process, not a single event..

4. Video Conferencing: This has become a must-have in every larger, multi- office firm. It enables people to engage and communicate on a higher level. Video conferencing encourages collaboration as both firm associates and clients can increasingly meet face-to-face while saving on cost and going green.
Concerns: Video conferencing can be somewhat easier to implement than it was just a few years ago. Firms with VOIP phone systems may be more prone to also implement video conferencing.

 3. Blackberry out iPhone are in: The use of Blackberry’s in law firms is rapidly dropping as attorneys are quickly moving to iPhone and Android devices.
Concerns: IT must support these devices whether they like to or not.

2. Cloudiness: Firms further embraced cloud computing and saved on maintenance and expense both in hardware and in time. The law firms have not embraced cloud computing, in general at the “enterprise” level such as time and billing. However, all other applications have started the move to the cloud.
Concerns: Can I really get my data back if I switch vendors, in what format? These are becoming major issues as firms move from cloud to cloud.

 1. Mobile Apps: Savvy firms are already rolling out mobile apps for iPads, and Android tablets (in some cases). These apps allow attorneys to enter time, inquire on contacts, documents and overall client information.
Concerns: IT needs to quickly get on board with how to handle mobile apps, provide security and support users. This is only going to expand exponentially over the next few years.

In my last post I revealed the details on a study I conducted to see how successfully firms were able to get attorneys to get their time in from the prior month. The results were not bad, 74% reported they had attorney time posted no later than the 2^nd business day of the month.

Now we’ll really separate the firms with a new survey that reveals how quickly firms can get edited pre-bills back from attorneys and bills out to clients.

Question #1:

From the time you give attorneys pre-bills hope long before they are due back in business days?

•  33%    1 – 3 Business days
• 33%    4 – 7 Business days
• 20%    8 – 14 Business days
• 14%    15 Business days or longer

Note: One firm reported that the “billing assistants” bill all month long and there is no requirements; the busiest billing day is the last day of the month.

Question #2:

When in an average month when are you done billing and the bills are sent, emailed or e-billed in business days?

•  13%   1 – 4 Business days
• 40%   5 – 10 Business days
• 13%   11 – 15 Business days
• 34%   16 Business days or longer

Note: Many firms reported that their billing routinely stretches into the next month and they are sending bills at the same time they are doing pre-bills for the next month.

Here are some quotes:

Worst: “We are very rarely completely done with the bills prior to sending the pre-bills out for the following month.”

Best: “We give the Attorneys 24hrs to respond back with changes or corrections. The morning following the 24hr review period the invoices are created, stuffed and mailed out within 4-5 hrs.

Conclusions

There is a wide disparity between law firms regarding how efficiently they manage the billing process. My review showed it had little to do with size of firm, number of branch offices or type of law they practiced. For example, the “Best” firm above has over 200 timekeepers and many offices. They however are highly disciplined, automated and structured. The law firms cash flow is directly related to getting bills in the hands of clients in the shortest period of time. There are ways to improve the billing process. You might want to review my 10 part series on improving the billing process starting here.

Law firms are like a cash registers, there is no revenue until you put the
actual cash in the drawer. The challenge is finding best practices that promote
maximize cash flow. This is short survey from responses to a law firm group
list serve determining how quickly law firms can close a month. The month-end
closing process is a key step for most firms in the cash flow process.

Here are the key steps to cash flow:

1. Get all time and cost posted
2. Balance the system
3. Close the month
4. Print and distribute the pre-bills
5. Enter the pre-bill edits
6. Print and send final bills
7. Collect the cash

So how fast can law firms close the month by getting in attorney time
for the month, as measured in business days from the end of the prior month?

2^nd Business Day ——– 44%

1^st Business Day ——– 30%

3^rd or longer Business Day ————- 26%

I think this as pretty good. Most firms responded that within 1
business day of “closing time entry” they have balanced their system, closed
the month and are starting the pre-bill process. The above survey does not measure
the time and costs that are not entered before the close-off.

In a future post we’ll take a look at how long it takes to get edited pre-bills
back from the attorneys and bills out the door. Leave a comment here for how
your firms closes off Time Entry at month-end.

There are multiple problems with getting attorneys to track and enter time on a daily basis. Let’s try and clearly identify the problem and see if we have some solutions.
 

1. It’s not natural. We can demand and threaten all we want, but quite frankly, detailed time entry is not natural for a professional. How would all of us non-attorneys like to track every tiny task we do all day long, and enter it into a computer down to the tenth of an hour (.10)? You have to be kidding right? Let’s see a show of hands, just as I thought, no hands are in the air.
2. It’s a form of micro-management. I want to practice law, solve problems, compete like an athlete, and detailed time entry is the client’s form of micro-managing every little thing I do.
3. It’s not convenient. Stop what you are doing, enter the time, start back up again and switch to work on another matter. This is a painful process, almost as painful as just working all day (week?) and then trying to parcel together all the (hundreds?) of time entries for the day. Let’s see, it’s 5PM and I need to recreate my time for today, did I talk to that client for 6 minutes, or was it closer to 12 minutes, I’ll enter .20 hours (12 minutes).
4. Out of the office … too bad. I’m off-site doing depositions and meeting with my client, detailed time entry isn’t very easy. It’s a big case and I’ll be doing this for the next few days. I’ll just enter in 8 hours and call it “depositions and meeting with client”, nope can’t do that, the carrier won’t pay they want “micro-management detail”.

 We could of course go on and on about the “issues”, now let’s talk about how to improve the process and profitability.
 Improving Time Entry:

1. Admit it’s a Pain. The first step to get attorneys on board with the time entry process is to admit that all of the “issues” above are true and painful. No attorney enjoys entering time. Make sure the attorneys know that you know this and are prepared to mitigate the pain as much as possible.
2. The Real Reason for Time Entry, it’s the Job. When you want to charge clients $250 – $1,000/hour, with few restrictions or limits they want detail for every moment of your time. If you don’t like this level of scrutiny find a new job, many others have. Just accept this as a way of life, the life you’ve chosen.
3. The Firm will Help. Firms are smart to individually help attorneys with time entry. Senior attorneys and partners may have secretaries to help them, we assume their billing rates are high enough to easily afford the labor costs. Time entry software isn’t always easy, take extra time to train attorneys, be patient, show them short-cuts after they learn the basic program. Provide attorneys the option of using a web time entry product or a mobile app to assist when not in the office.
4. New “Found Time” Tools. Utilize the latest tools that track the attorney’s entire day on a task by task basis, then easily turns them into otherwise missing time.
5. Send it off-Shore. That’s right, if time entry is just going to be a problem and expensive attorneys and staff struggle with it, take a look at off-shore time entry. Scan old-fashion paper sheets and let someone else do it.

It’s time for your firm to make your 2012 News Year Resolutions; these might help you decide on some that will be sure to please the partners.

Improve Cash Flow. I’ve written several articles in the past regarding improvements in cash flow, mostly around the collections process, here is one. Improving cash flow starts with the engagement process. All new clients and even some new matters require a standard firm engagement letter that is executed BEFORE starting work for the client. Payment terms must be clearly identified along with retainer requirements. Is the “retainer” classified as an IOLTA payment in your state, there is actually a big difference, read here.

The use of automated Collections software with Wizards (workflow) will greatly improve collections, see Mary’s story here and here. The idea is simple, you’ve done the work, you should get paid. One unique possibility is to ask clients to pay by ACH Debit, we all do it for expenditures like our credit cards, monthly mortgage payments, utility bills etc. At the end of the month just send the client an email with a PDF bill attached and then after an agreed to period, like 20 days, sweep the money from their bank account. There are much fewer accounts receivable issues and cash flow improves immediately.

Provide Partners with Information not Data. Law firms are guilty of providing partners with stacks of month end reports with tons of “data”. What the partners want to know is; so what?, what does this mean?, what should we do about it?, how does it affect us?. The CFO at the firm should make sure the information the partners receive is understood by the partners from a business point of view. Partners are attorneys, they too many times want to see all the details, all the reports, and do their own research, that’s what attorneys do. A smart law firm will boil all this down into summary format and provide the analysis up-front. A good Business Intelligence system with a data warehouse will help automate this process.

Provide Accrual Based Analysis not Just Cash Reports. Most firms in this country choose to operate on a cash basis, however cash basis reporting. See my story on cash vs. accrual accounting here. Beginning in 2012 start educating your partners on accrual basis reporting, show them a more clear picture of how the law firm is structured from a profitability point of view. There is more to law firm profitability than the current cash balance in your check book.

Reduce Risks. Rick management becomes a much more important topic as a firm grows geographically and diversifies into more areas of law. Why, because there is more room for errors that can be very embarrassing and costly. Conflict checking for business issues and adherence to federal laws may actually out-weigh some of the normal legal representation issues. For example, here is a story dealing with a potential new client embarrassment. Make you’re your firm isn’t caught up in a SDN violation, it could be very costly. Check this out.

Lower Internal Costs through Productivity Gains. This is so easy to say, yet a little more difficult to do. We’ll focus on improvements in just the quality of what you do, see this story on quality. There can be many more ways to improve productivity and lower costs, check this out.

I hope your firm enjoys a peaceful and happy new year.

The world of how we buy things continues to change, even in ways we’d never imagine. Last year about this time I wrote on the new way to buy a large screen TV on-line from Amazon and even get price protection during Black Friday, see the story here.

 In this posting I’ll tell you about the new way to buy tires for your car.

 Here’s my story.

 My granddaughter needed new tires for her 2006 Cobalt and of course she had no money, just call grandpa right. I just hate buying anything at retail, unless I get a really big discount. I’ve bought tires for my Corvette on line many times and had them shipped to my house, this always saved a lot of money. However, I felt almost embarrassed to call a local shop and ask them to install tires I didn’t buy there.

 This problem is now solved. I found that Tirerack.com now has formal relationships with a lot of well-known tire dealers in my area, they are called Recommended Installers. Here is how it works. You buy your tires on line at Tirerack’s web site, and then choose a local tire store as your installer. The tires are shipped directly to the local shop where the work will take place. The web site also displays the entire costs of mounting, balancing and any state nuisance fee such as a “disposal fee” for your old tires. This allows you to compare the “hidden” costs of buying tires among local shops. There is also an overall customer service rating for each Installer.

 Of course I’m always a little skeptical of good deals, so I thought I would call around to the local shops to make sure they would actually take delivery and do the installation. I contacted my local Pep Boys, Goodyear, Tires Plus and Firestone stores, I was shocked. In all cases the stores told me that they were doing a substantial business of just providing installation services for Tirerack.com customers. One major chain store actually told me that they were almost installing more Tirerack tires than tires they sold in their stores. A definite paradigm shift.

 So, how did this finally work for my granddaughters car? I bought 4 excellent Hankook tires (on sales and a rebate) at Tirerack, had them delivered to Pep Boys. Tirerack sent me continual emails verifying my order confirming both the shipping and receipt by Pep Boys. Pep Boys called to schedule the installation and confirmed the service pricing on the Tirerack web site. It couldn’t have been smoother.

 My granddaughter was happy and I saved a lot of money, on not just the tires, but on various sales taxes.  

 Let me know if you’ve found a better way to buy large cost items.

Legal Project Management is a great idea that, apparently, no one wants to pay for.  Law firms find it hard enough to get paid for things they actually “do”. These tend to be specific tasks, write a letter, file a brief, a deposition, a court appearance, etc. It is difficult to get paid for “review file” because the client believes that this type of task should be covered as part of general overhead and therefore included in the rates charged for actually “doing” something. Yet reviewing the status and planning the next course of action might very well be “project management” activities.

Sometimes it’s difficult to describe exactly what Project Management (PM) really is, what do you really “do”?

 Wikipedia even has a definition for Legal Project Management. It’s interesting that even Wikipedia points out the use of PM in the e-Discovery arena.

 We were fortunate to have Steven Levy at our RainMaker Annual Client Conference this year. He provided us some interesting perspectives on legal project management. You should check out his book on Amazon, it is quite interesting.

 One thing is certain; it is hard to understand Project Management. I can tell you for certain that without it you’ll have mismanaged projects and they are VERY COSTLY from a number of angles, including unhappy clients.

  Law firms already do Legal Project Management, sometimes by accident, but do it. The secret to success is to define the best you can to clients and find ways to get paid for it. Project Managers are crucial to the success of any defined project, both firms and clients must agree to a way to pay for the true cost.

Law firms today have a very mobile workforce, attorneys who may work from home, and at one or more branch offices. At the same time cities and states are scratching for tax revenue to keep themselves afloat. It truly is a taxing problem.

 Here is an example of a potential issue:

The XYZ Law firm has an office in Philadelphia, PA and Cherry Hill, NJ (just across the river). Attorney Kevin lives in West Chester, PA (not part of Philadelphia) and has an office set-up in his home where he frequently works. Kevin spends 2 days a week in the Cherry Hill office, 2 days in the Philadelphia office and 1 day working from home. The firm shows that Kevin is “assigned” to the Cherry Hill office. On occasions he travels to Harrisburg, PA and spends the entire day on-site at his biggest client working on various matters.

 It’s now time to file tax forms, there are at least 4 tax entities involved at the city and state level. How does the firm decide how much revenue to report for:

Philadelphia – Business Privilege Tax (firm)

Philadelphia –City Wage Tax (attorney)

Commonwealth of PA – Corporate Tax (firm)

State of NJ–Corporate Tax (firm)

 Firms should track the actual “work location” on every attorney time entry. If the attorney is physical sitting in the Philadelphia office working on a matter, the work location is “Philadelphia”. Don’t confuse this with the “office” that the client or matter is assigned in the time and billing system. Many times the client or matter is assigned to the office of the billing attorney, or some other professional type. Revenue generated based on the Billing Attorney’s office may not be accurate enough to satisfy the tax collector.

 Preparing an analysis of time recorded and collected by work location, should satisfy any audit requirements. In most systems the work location code can be made a mandatory field for each time entry.

 (Disclaimer: I’m not an accountant, nor am I qualified to offer any tax advice whatsoever.)