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Survey – Getting Time Posted to Improve Law Firm Cash Flow

By on January 15, 2012

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?

2nd Business Day ——– 44%

1st Business Day ——– 30%

3rd 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.

 

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Categories: Best Practices, Financial Management, Law firm billing, Management, Productivity

Changing the Billing Paradigm – Part 4: Dealing with attorneys who don’t have their time entered.

By on June 19, 2011

Law firms can improve cash flow and increase profitability if they improve their billing process and practices.

The client billing process, in many firms is based on a slow, painful monthly schedule. Why … because it’s always been that way. In part 1 of this series we identified the nine (9) current painful and costly steps to client billing. In this posting we’ll discuss the issue of chasing attorneys without their time entered.

 Here is how to improve cash flow and profitability by dealing with attorneys who habitually do not enter their time as required:

  1. The first step in dealing with late time is to have a firm wide, iron-clad policy identifying the “rules” for time entry. For example, time entry is required daily and absolutely no later than 9AM the following morning. If the firm is going to constantly bill clients through-out the month there can be no lag in time entry, there is no “monthly cut-off” date.
  2. Step two is to make sure that the senior partners themselves adhere to this rule, otherwise it’s just too hard to get everyone else on board. Even if the secretaries do the entries, at least they get done on time.
  3. At this point you can determine the problem with those that don’t adhere to the rules. They don’t adhere because they just don’t manage their time properly, or just feel that they are above the rules. I’ve heard all the excuses about how their work is too important, they are too busy, what their hourly rate is etc., everyone who is allowed to have an excuse has one.
  4. When an attorney doesn’t follows the rules have the partners deal with it, don’t push this off to the staff who will only be ignored.
  5. What about penalties, such as withholding paycheck or expense checks? First of all, withholding pay may itself be a legal issue, secondly, all this become just a game, how long can I last, who has more power? The fact is that certain occupations require prompt and accurate reporting, it comes with the job. A police officer needs to file a crime report, a surgeon needs to file a report after an operation, income taxes are due April 15th, court filings often have critical dates attached. The attorney just needs to have his/her time entered immediately upon completing the day.

 In summary, get buy-in from the top, stick to the rules and don’t accept excuses, everyone has one.

 In the next post we’ll look at dealing with soft costs, why is it a problem and what can you do to improve the process and become more profitable.

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Categories: AFA - alternative fee arrangement, Best Practices, Financial Management, Law firm billing, Productivity, The Legal Market

Changing the Billing Paradigm – Part 2: Getting Attorneys to Enter Time

By on June 7, 2011

Law firms can improve cash flow and increase profitability if they improve their billing process and practices.

 The client billing process, in many firms is based on a slow, painful monthly schedule. Why … because it’s always been that way. In part 1 of this series we identified the nine (9) current painful and costly steps to client billing. In this posting we’ll discuss the attorney time tracking process.

 There are multiple issues with getting attorneys to track and enter time on a daily basis.

  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 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. 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.

 The bottom line is that Time Entry, must be done daily, must be accurate, and is just part of the job. The firm will do everything it can to make it as painless as possible, but it is an ABSOLUTE REQUIREMENT.

In the next post we’ll look at the month end process, why is it a problem and what can you do to improve the process and become more profitable.

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Categories: AFA - alternative fee arrangement, Best Practices, Financial Management, Law firm billing

Writing off Time … Why and Who Benefits?

By on May 21, 2011

Awhile back I read an interesting post that talked about writing off time and how this is presented to a client. So here are the issues as I see them.

 #1. Why is time written off?
This issue is faced by any business that provides professional services, including RainMaker. I’ll focus here on law firms. The primary reason time is written-off is that the client won’t pay for it. Why might this be the case?

  1. New associates are learning on the job, and you want to track their time but charge it off to an “educational” process.
  2. The firm quoted a fixed price for work to be done, the individual time entries exceed this fixed amount and need to be adjusted so that the bill shows the fixed fee. To some this might not seem like a write-off, assuming it took longer to do the tasks than the fixed price anticipated, but from an accounting point of view it is an “adjustment”. At the same time, if the same fixed price work was done in less time, it would in effect become a “write-up”.
  3. Firms may feel the need to provide a discount to a client on the bill. There are many ways to show this “adjustment”. You could choose to show a reduction in hours or rate for each entry on the bill, or just add a line at the end of this such as “less courtesy discount”, in either case the time or value of the time is written down.  Most time and billing systems have all sorts of ways to both show this and then evaluate timekeepers performance based on both sets of numbers, original recorded time values vs. actual printed or billed values.

 #2 How to Present this to the client.
The big question here is, does the client really care about the write-off’s? What message does it send the client when they see these write-off’s? From the law firms point of view they are trying to get some “value” from the client by presenting the written-off hours. Showing discounts, other than those agreed to in advance or write-off’s may send the message that the matter hasn’t been well managed. Clients don’t expect to pay for new associate training or any overage on a fixed fee, why show them? If the time written off is substantial a red flag may arise. The client won’t refuse the discount, but it write-off may backfire.

 What do you think about the reporting of time write-off’s to a client?

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Categories: Best Practices, Financial Management, Law firm billing

How Bill Scrubbing works.

By on November 17, 2010

In an effort to control outside legal expenses many clients have instituted strict billing guidelines. The early rules were quite simple and easy to follow, over a period of time many of these rules went from being objective to then include highly subjective requirements.

 So, how do law firms deal with the ever expanding list of do’s and don’t? They spend a great deal of time (read cost) proof reading bills by billing specialists before sending them out. This manual process delays billing, delays cash and at the end of the day, costs both firms and clients a lot of money. Even after manual proof reading, the rejections still come and the specialists are back at it again, appealing, re-billing or in many cases just taking substantial write-off’s.

 So, how can law firm’s deal with this growing problem? By utilizing a Bill Scrubber™.

 New technology developments provide a way to “scrub” client bills prior to submission to insure they meet client requirements. A Bill Scrubber checks each bill for a series of client rules and points out time and cost entries that need “help” prior to submitting the bill.

 How does a Bill Scrubber work?

  1. Using a template design, billing rules are set at the firm, client or matter level.
  2. Rules can be set to handle both electronic and paper billing requirements. For example, check that the time entry narrative does not exceed 255 characters on an e-bill.
  3. Depending on firm workflow have attorneys scrub their own entries or have centralized billing scrub the bills before and after sending pre-bills to attorneys for editing. The pre-bill can be set to show scrubber violations for further review.
  4. Advanced technology in the “scrubber engine” can even find target words that might cause a rejection, such as “inter-office ….” or “prepare for ….”. Pop-up screen suggestions can help deal with these target words.
  5. The scrubber will provide an “ignore” function to allow for subjective interpretations.
  6. The scrubber engine will look over both time and costs entries.
  7. A full audit trail is maintained to show the history of scrubbing, authorization for ignore, and results by client and attorney.

 Firms using this new technology will make it harder for clients to reject bills or short pay because of not following the billing guidelines. The use of scrubbing technology will also identify clients with more difficult rules and additional training requirements that might be needed within the firm to reduce the billing violations.

 Bill scrubbing will make money for a firm and improve adherence to client guidelines.


Bill Scrubber is a registered Trademark of RainMaker Software, Inc.

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Categories: Best Practices, Law firm billing, Technology, The Legal Market

Streamline your Way to Bigger Margins – #3 -“Is your Time Slipping Away?” – Time Capture Best Practices

By on October 19, 2010

This ongoing series will visit small (and large) overlooked ways firms can save (or gain) money that can add up to big dividends.

A few months back, I wrote a blog entry about law firm time entry. In it, I outlined the results of a survey on time entry and some best practices attorneys can use to avoid “leakage” or “slippage”. One of the points was “If you have a mobile attorney, let them try a Blackberry or iPhone time capture app; see if it will help improve productivity.” Since mobile applications are used for just about everything these days, I thought I would expound on the benefit of using mobile time capture to avoid slippage, and achieve the most accurate time capture possible.

To begin, what exactly is “slippage”? Although there are many different types of slippage (in stocks, foreign exchange, etc.), law firms experience this phenomenon when they simply don’t bill clients for the work performed. This can occur when work is forgotten, small amounts of time are not recorded that may add up to large amounts of time and/or work is underestimated. Slippage is a real issue that negatively affects revenue and may lead to longer billing cycles, and an overall poor reflection on an attorney’s time management skills.

There are many contemporaneous time capture strategies the mobile attorney can implement to avoid slippage, here are a few:

  • This seems like a no-brainer, but find a mobile time capture tool that not only allows you to create time entries at any time, but also interfaces with the firm’s billing system, saving the time spent re-keying, or keying, billable time.
  • Utilize automatic time capture applications that allow users to record time automatically based on the medium, e.g., phone call, email, etc.
  • Make sure the mobile application has an automatic reporting feature. This will allow you to quickly review time spent on specific client and matters and then simply feed it into your time and billing system.
  • Mobile applications not only help lawyers to actualize all billable hours, they also make it possible to get back to clients right away. In this day and age, stellar customer service is one of the primary keys to client retention.
  • Go beyond the “normal” PDA applications and utilize the technology to the fullest extent. For example, some BlackBerry phones offer digital dictation, document review, work product retrieval, etc. This is another great use of down time while on the road.
  • Don’t be afraid to explore the firm’s existing technology. There may be compatible features that an attorney may not know about – these features can help save time and, of course, help to increase productivity.

    These are just a few small things the mobile attorney can implement to increase client satisfaction, make the best use of time and decrease slippage overall.

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Categories: Best Practices, Financial Management, Law firm billing, Practice Management, Technology, The Legal Market

Is e-Billing … a sinister trade-off?

By on October 3, 2010

Has it just become too hard to e-bill clients?

  Let’s look at some of the challenges:

  1. There is no standard e-bill format, LEDES 1998B is probably the best there is.  Clients have not adopted the LEXES XML format, despite years of effort to make it the standard. The 1998B format has loop-holes and almost every corporation has added customizations to it.
  2. E-billing submissions get disputed and results in a payment delay. An attorney has not been approved by the software, he’s approved alright, but the clients software hasn’t been updated.
  3. The audit software used by the client says “this work should have been done by an associate, not a partner”, the time entry is rejected. There is a “;” in the narrative, the entry is rejected.
  4. The current Phase codes, Task codes and Activity codes are not always easy to use, attorneys don’t always understand them. Wrong phase/task/activity code, the entry is rejected.
  5. Then there are the billing rules for each client, they won’t pay for this, that and the other thing. You need special advanced permission for a variety of day to day items.
  6. Did I mention that the firm submits the e-bill in a matter of seconds on-line, and waits, and waits and waits for payment, less all the disputed items, of course.

 What’s the real purpose of e-billing? To make life difficult, delay payment and lower legal expenses?

  It’s almost like a sinister trade-off.

 Since law firms charge incredibly high hourly rates and bill for everything under the sun  …  companies paying these bills require e-Billing, all sorts of codes and impose increasingly difficult billing rules.


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Categories: Best Practices, Financial Management, Law firm billing, The Legal Market

Tracking Work Location – A Taxing Issue

By on August 29, 2010

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 physically 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.)

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Categories: Best Practices, Financial Management, The Legal Market

Understanding Accounting Dates – Can you answer these questions?

By on August 5, 2010

Law firm managers and attorneys need a basic understanding of how accounting systems uses various dates and the impact these dates have on their clients and financial statements. Today’s law firm accounting systems (including time and billing) are all very sensitive to how transactions are “dated.”

Transaction Dates – these are the “effective dates” of the transaction, not necessarily the date the data is entered. For example, an attorney actually enters billable time into the system on July 6th for work that was actually done on June 30th. The Transaction Date (date of actual work) would be June 30th, there may be an audit trail in the system that shows a “system date” when the actual entry was made which would be July 6th.

Accounting Period – a firm defined range of dates, usually a complete calendar month. Some firms may define different dates, for example a “month end” always ends on the last Friday of the month, except in December. Even thought the Transaction Date of this time entry is June, in all likelihood, the June accounting period has been closed and the transaction will post to the July Accounting Period.  In our time entry example above, the time entry belongs to the July Accounting Period even though the transaction date is July.  However, if the June Accounting Period is still open, many accounting systems will go post this transaction to the June Accounting Period because the transaction date falls within the predefined date range for the June Accounting Period.

See if you can answer these questions based on a June Accounting Period, ending June 30th.

  1. The firm gets a very substantial check in the mail July 1st, the check is dated by the client June 25th. Does the check get included in the June Accounting Period?
  2. July building rent is due at the landlord’s office by July 2nd, the firm cuts the check and mails it on June 25th. The check shows a July 1st date on the check. Is this a June Accounting Period expense?
  3.  The firm finally gets all the pre-bill edits done for June bills and print the bills on Monday, July 19th , they go in the mail on July 20th. Are these considered June or July bills (Accounts Receivable)?

Answers

The first caveat is that firms are not governed under the same accounting standards (FASB, GAAP, SEC etc.) that apply to public companies. Secondly, a basic rule in accounting is consistency in handling transactions. In addition, some law firms do really strange account ting things, since there really isn’t any oversight.

  1. As a best practice, the firm should post this with a July Transaction Date belonging to the July Process Month unless the June Accounting Period is not closed.
  2. Even though the check was printed in June, the Transaction Date was shown to be July 1st and therefore this belongs to the July Accounting Period, …. A July expense.
  3. This billing issue is usually depended upon the Transaction Date the firm actually prints on the bills themselves. If the firm shows a June date printed on the bill it will post to the June Accounting Period if that period is still open in the accounting system. If however, the firm prints that July 19th date on the bill, July 19th becomes the Transaction Date and the bills are deemed to be in the July Accounting Period. This can also be important because in most systems the AR aging process is based on the date printed on the bill.

Do you agree or disagree with these answers? Let me know.



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Categories: Best Practices, Financial Management, The Legal Market

40 Years of Time and Billing Technology – 1990′s to Current Times

By on July 25, 2010

Legal time and billing software has seen a great deal of change over the past four decades.  From punch cards to Web-based time entry, the industry has and continues to make impressive technological leaps. Here is a brief synopsis of some of the time and billing “rites of passage,” if you will, from 1970 to more current times..

 1990’s – Current Times

 By the mid 1990s, almost all firms had newly networked PCs that had become word-processor and email machines. A split was starting to take place in the time and billing world. Small and mid-sized firms were moving to 100% PC solutions, and larger firms were remaining on UNIX mini-computer systems. This was predominately a database issue. There were no large scale PC-based databases. A vendor could choose FoxPro or ACCESS but neither would scale up to meet the needs of larger firms.

 Early DOS-based time and billing systems such as Pyramid or Juris®, originally designed for very small firms, were already starting to creep into mid-sized law firms with Windows-based versions. This allowed firms to finally eliminate their mini-computers at a substantial cost savings. An early pioneer in this endeavor was a West Coast-based visionary, Alan Rich, Jr, who had a PC-based program that ran on SCO Unix. His company was called Elite Data Systems. He boldly challenged the larger time and billing vendors with a price competitive UNIX-based system, which eventually enabled him to become the all-time market leader in larger law firms.

During this time, another disruptive technology made its’ mark in time and billing technology history. After many years of development in the university and defense community, in October 1995, the Federal Networking Council unanimously passed a resolution which defined the term “Internet.” The Internet refers to global linking by unique addresses (IP), with the ability to use a standard communication protocol (TCP/IP), that provides users with access to remote information and the ability to send email messages around the world on a standard platform. The same debate again took place, as it had done during the introduction of the first PCs 10 years earlier. Was this geek toy (the Internet) ever going to have any useful benefit?

The early Windows® PC time and billing systems were, for the very first time, allowing attorneys to enter their own time, perform simple inquiries and view docket calendars. The technology frenzy began around 1997, when firms started planning for the Y2K phenomenon. Many older computers only had 2-digit year fields in their code which was fine until 1999 tried to become 2000. Large numbers of firms had to invest in new systems. It was also time to “standardize,” proprietary was out, standard was in. Even larger firms were switching to Windows®-based time and billing systems, discarding their mini-computers for larger PC file servers. Microsoft® SQL Server became the platform of choice, and the cost of databases and servers plunged over the period of just a few years. Hardware no longer became a major issue as it was in the mini-computer age.

 Attorneys, too, were changing. They started accepting desktop PCs as a tool of their trade and even began to travel with notebooks, eventually adopting palm-sized systems such as BlackBerry and now Apple iPads.  

More Current Times

 Today, firms have come to expect unlimited flexibility, hundreds of advanced bill formats, unlimited rate structures and e-billing. Firms expect fully- integrated collections systems, full-text conflict searching, marketing, case management and docketing that are every bit as capable as their accounting systems. Business Intelligence and Digital Scorecards in a browser screen have put highly complex data analysis in the hands of everyone from novice attorneys to partners who seek information to manage the practice of law and their clients as a business.   

 Will we circle back to the old days? No? Well, we may see the day when all time and billing systems are 100% browser-based, running from a giant Web server(s). This effectively turns the desktop computer back into a “terminal,” since a Windows®-browser program is identical to its predecessor terminal emulation software. It is also possible that once a firm runs the majority of applications strictly from a browser, the servers will get migrated off-site to the “cloud”. The “cloud” would effectively operate as the service bureaus of 35 years ago. We probably won’t see the paper time sheets and key punch operators again, and no one believes we’ll see firms eliminate pre-bill editing. Other than these changes the basic core of time and billing, along with the rest of the accounting functions, in essence hasn’t changed much in 40 years.

 

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Categories: Financial Management, Technology, The Legal Market
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