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Search Results for: trust accounting

Accounts Payable Management 101 for Law Firms

May 23, 2023 By Kamron Sanders Leave a Comment

In uncertain economic times, all businesses are tasked with doing more with less – including law firms.

Every business has to pay what it owes, and with the added complexity of expenses you pay on your client’s behalf, managing invoices is key to saving money and freeing cash flow.

Developing and refining your accounts payable management strategies is essential for your law firm. Let’s take a look at the basics of accounts payable management, how it works in a law firm, and how you can improve your own processes.

What Are Accounts Payable?

Accounts payable includes everything your law firm owes to creditors, such as bills from vendors that are billed to the end client or internal costs for support services.

Typically, accounts payable refers to short-term debts, which are debts that you plan to pay within a year. Long-term debts, such as mortgages or loans for business assets, are usually written as separate liabilities outside of accounts payable.

Law firm accounts payable tends to be complex with strict regulations. With a fiduciary responsibility to your client, missteps in dealing with accounts payable could have ethical implications and consequences.

The Accounts Payable Management Process

Accounts payable management is the manner in which you handle unpaid debts for third-party vendors in your law firm. This may involve acquiring favorable terms of purchase, seeking trade credit lines, or managing the timing and flow of purchases.

The specific process for accounts payable management can vary between law firms, but it generally includes:

  1. Invoice Receipt: Your law firm receipts invoices from vendors for goods or services.
  2. Invoice Verification: Your law firm invoices are reviewed internally to ensure they are accurate and in compliance with the agreed-upon terms and rates.
  3. Invoice Approval: Once reviewed, invoices must be approved. Depending on the process at your law firm, this could mean partners or managers must go over them.
  4. Coding and Recording: After the invoices are approved, they are coded with relevant account codes for tracking expenses and entered into the accounting system.
  5. Payment Scheduling: Invoices that are approved and recorded are ready to be entered into the payment schedule, which includes determining the payment terms like due dates.
  6. Payment Execution: Payments are made to vendors according to the payment schedule. They may be paid using checks, electronic funds transfer, or online payment platforms.
  7. Reconciliation: Reconciliation involves comparing the firm’s records and the vendor statements to ensure payments have been made, the records are accurate, and any discrepancies are noted for financial reporting.
  8. Reporting: Tracking and recording accounts payable activities is essential to gain visibility into your law firm’s financial health. This reporting is also necessary for legal and regulatory requirements.
  9. Vendor Relationship Management: Throughout the process, your law firm must maintain communication and build a relationship with vendors to handle payment discrepancies and address inquiries.

How Do Law Firms Manage Accounts Payable?

Law firms manage accounts payable with robust systems and processes – as well as technology to assist.

Along with an accounts payable management system to ensure accuracy and timeliness, you must have an approval workflow to verify invoices and authorize payment to vendors. Depending on your internal procedures, you may need to institute multiple levels of approval.

Software like Bill4Time’s law firm invoicing software helps you stay on top of your business’ finances and accounting activity in one centralized dashboard. The billing features in Bill4Time make it easy to track expenses to ensure that you can get reimbursement from clients as needed. Since you can manage all aspects of your billing in Bill4Time, you get a comprehensive view of your firm’s finances. 

Common Challenges with Accounts Payable Management

Accounts payable management is key for your firm’s efficiency and financial health, but it can get complicated to manage. Between the reports and payment allocation tracking — here are some common challenges law firms face: 

Cost Recovery

Law firms often incur costs on behalf of clients, such as expert witness fees and court filing fees. It’s important to recover these costs and allocate them to different matters, which can be time consuming and error prone.

Billing

Similarly, law firms bill clients based on billable hours spent working on legal matters and case-related expenses. You have to track your billable hours and client expenses accurately to ensure you recover the costs you put out.

Complexity

If your law firm is juggling a range of clients and legal matters, it can be difficult to manage all of them simultaneously and track their respective expenses without a software solution to help.

Trust Accounting

If your law firm manages trust accounts for client funds, that comes with strict compliance that you must adhere to. This includes accurate tracking of client expenses, and allocating payment in the proper accounts. 

Invoice Management

Law firms receive invoices from multiple vendors for both law firm and client expenses, including court reporters, expert witnesses, research databases, and legal transcription services. All of those invoices must be processed, verified, and reconciled.

Tips to Better Manage Accounts Payable

Managing accounts payable effectively is crucial for any organization, including law firms. Here are some tips specifically tailored for law firms to better manage their accounts payable:

Establish Clear Procedures

Create well-defined accounts payable procedures specific to your law firm. Document the steps involved in the payment process, including approval levels, invoice handling, and payment methods. Communicate these procedures to all relevant staff members to ensure consistency, transparency, and efficiency.

Implement Electronic Invoice Management

Embrace technology by implementing an electronic invoice management system. This software streamlines the accounts payable process, automating tasks like invoice capture, data entry, and approval workflows. It reduces manual errors, enhances efficiency, and provides better visibility into the payment status.

Maintain Vendor Records

Accurate and up-to-date vendor records will help facilitate smooth communication and payment processing. Ensure that vendor details are correctly recorded, including contact information, payment terms, and any special instructions. Regularly review and update this information to avoid payment delays or miscommunication.

Monitor Payment Terms

Law firms often have specific payment terms agreed upon with their vendors or clients. Monitor these terms closely and adhere to them to maintain good relationships. Missing payment deadlines can strain relationships and may result in penalties or legal consequences. Consider setting up reminders or implementing automated payment plans to stay on top of payment deadlines.

Track Expenses 

Stay vigilant about tracking expenses associated with your law firm. Maintain proper documentation of all invoices, bills, and receipts. Accurate expense tracking allows you to review costs, allocate expenses correctly, and plan your budget effectively.

Review and Reconcile Accounts Regularly

Conduct regular reviews and reconciliations of your accounts payable records. Verify that invoices match purchase orders and are accurately recorded in your accounting system. Address any discrepancies promptly to avoid errors and potential financial issues.

Monitor Cash Flow

Keep a close eye on your law firm’s cash flow to ensure you have enough liquidity to cover your accounts payable obligations. Maintain a cash flow projection and regularly review it to anticipate potential shortfalls or surpluses. This analysis will help you make informed decisions regarding payment timing and prioritize invoices accordingly.

Remember, efficient accounts payable management not only helps maintain good financial health but also fosters strong vendor relationships and supports the overall success of your law firm.

Streamline Your Accounts Payable

Accounts payable for law firms can be challenging, but with a smooth management process in plan and support from law firm billing software, you can streamline accounts payable in your firm and improve your financial position. 

Filed Under: Blog

Why Systematic Time Tracking for Lawyers is a Must in Every Modern Law Firm

April 6, 2023 By Carole Poster Leave a Comment

In today’s fast-paced and dynamic legal industry, time is more valuable than ever before. As a law firm’s book of business grows, it becomes increasingly important for lawyers to track their time accurately and efficiently. This is why firms should incorporate systematic time tracking for lawyers.

Systematic time tracking is any time tracking system accessible in one place, whether digital, a software, or on a network. Ensuring all time tracking is done in the same software increases the clarity of the records. Using the same time tracking system across your firm allows you to see the work being done in real time, not divorced from other platforms, and in a format any staff member can understand.

Law firms can benefit from systematic time tracking because of the increased efficiency, productivity, transparency, and client trust and satisfaction it provides when done successfully. On the other side of the coin, law firms without a reliable and consistent time tracking process leave themselves at risk for billing disputes, and missing out on billable hours due to simple mistakes.

Systematic time tracking allows anyone at your firm to track time quickly, from anywhere, and in the same structured format. Below, we outline some of the benefits and ways to start systematic time tracking for lawyers.

Benefits of Systematic Time Tracking

While time tracking for lawyers may seem like it is purely administrative, there are also quantifiable reasons to incorporate this process into daily tasks for your law firm. With lawyers working long hours to keep up with client demand, it’s essential to track time spent on each task accurately. Let’s explore these benefits in depth.

Boost your Firm’s Efficiency

There are quite a few ways that law firms can boost their efficiency, systematic time tracking may be the simplest way to do so. As managers, understanding what takes the most time and what’s most profitable for your firm can help you delegate tasks in the future — allowing you to focus on what’s most important to your firm.

With Bill4Time, your firm can batch invoices, apply payments to current invoices, create invoice summaries and more quickly and easily.

Increase Staff Productivity

Additionally, for those that manage law firms, systematic time tracking can help you get the most out of your staff and increase the firm’s overall productivity. As managers review work reports from time sheets, there’s an opportunity to evaluate productivity levels.

Are staff able to complete tasks within a scheduled timeframe? What changes could be implemented to increase productivity? These questions can help managers assess staff performance as business increases, reducing bottlenecks and increasing productivity.

Provide Transparent Billing to Clients

When firms can accurately bill and back up their work with detailed reports, they have an easier time billing. Having the ability to provide records of time spent and details on those tasks on an invoice, helps foster trust between firms and their clients. When clients trust firms, they are more likely to pay their invoices in full, and in a timely manner.

Firms that keep a clear and organized record of work completed and by who that work was done can bill clients with transparency and confidence in their billing process.

Clients often delay remitting payment if they don’t understand the invoice. Bill4Time allows you to provide clients the details needed to pay you quickly and offer online payment options to get paid quickly.

Maintain Cost-Effective Practices

Instead of having a million different ways of time tracking across your firm, uniting staff to use one helpful time tracking software like Bill4Time can save time and money. Bill4Time reduces the risk of billing disputes, lost billable hours, and administrative costs.

Risks of Manual Time Tracking

While there are many benefits of time tracking for lawyers, there are also risks associated with not keeping a solid record of your firm’s billable hours. Manual time tracking can be extremely unorganized, leaving your firm at risk of losing potential billable time, high administrative costs, and more. Manual time tracking can be anything from scribbling on a piece of paper, trying to master Microsoft Excel, or even keeping track of your time mentally.

Without keeping an organized and clear record of billable hours, you can leave your firm vulnerable to billing disputes, high administrative costs, and other risks that cost your firm money.

Losing Billable Time (and Revenue)

Law firm profitability is top-of-mind for many partners and managers. One of the easiest ways to lose revenue is to not bill for hours worked. Seems simple, right? However, it’s estimated firms may lose up to 10% of their billable time if they wait until the end of the day to record it, according to the American Bar Association. If they wait days — that number could jump up to 25%. A quarter of your revenue could be lost due to a lack of organization.

Vulnerability to Billing Disputes

What happens when a client disputes an invoice? If firms don’t keep a coordinated record of what’s been worked on and done, how can they ethically bill a client? If firms get billing disputes and can’t find accurate records of work done, client trust is lost and word can spread quickly — ultimately costing your firm money either in litigation or time.

High Administrative Costs

The billing process can take up a large portion of time that could be spent doing more productive (or lucrative) tasks. With each record needing to be sorted through and billed directly to the client, this process can take weeks if it’s done manually. Without using an effective time tracking software, you may have to pay high administrative costs to keep up-to-date on client billing and getting your firm paid on time.

Decreased Client Experience

Losing a client’s trust often means the end of a working professional relationship. With inaccurate or unreliable time tracking for lawyers, clients may not be billed properly, work can get lost, or tasks may not be finished in time, leading to late work and potentially lost cases. Time is of the essence for you and your clients. The best way to respect a client’s time spent working with you is to accurately track yours so they feel as comfortable as possible using your services now and in the future.

How to Start Systematic Time Tracking

Luckily, implementing processes that keep time can be as easy as incorporating software into your firm’s operations. You can start by getting organized and take into account the benefits and risks mentioned earlier. Whether you’re new to time tracking completely or just now implementing it into your firm, it’s never too late to start.

What to Look for in Digital Time Tracking Software

There’s a lot to look for in your digital time tracking software to make sure it’s the best fit for your law firm. Some key features may include reporting, task management, customer support, billing and invoicing, expense tracking, online payments and more. The more your digital time tracking software can do, the better your law firm can focus on your clients, taking advantage of the time you get back.

Track Time Across Devices

With today’s fast-paced work environment, having access to your time tracking software from anywhere can be crucial to maintaining accurate records. Bill4Time’s mobile app keeps you connected on the go. You can access data in Bill4Time from any device, giving you access to client and matter details from anywhere. With the one-tap timer you can track time and expenses easily, granting your firm the advantage of being mobile.

The Bill4Time mobile app allows you to work on-the-go. Record billable and non-billable time, separately track internal non client time, and track staff, contractors and consultants for precision and accuracy.

Online Payments

The more ways you offer your clients to pay your firm, the more likely you are to get paid. With credit card or ACH payment options, you and your clients will enjoy the added benefit of quick and easy online payments with Bill4Time Payments.

Don’t forget about Bill4Time’s billing and invoicing features. You can create, print, or email professional, detailed, and branded invoices in minutes. Bill4Time Payments makes it easy to set payment terms, currency, and late fees and know the status of any invoice with a single click. 

Maintaining firm compliance is as important as your reputation. Being a reputable firm means complying with all local, state, and federal regulations. To ease your mind and keep your firm in compliance, Bill4Time Payments is 100% compliant with the American Bar Association (ABA), IOLTA, PCI, and all 50 state bar associations.

Ease of Use

Law firms commonly don’t have the luxury of time with pressing deadlines and client matters. Time wasted trying to learn software that should be intuitive isn’t worth the effort. Bill4Time’s easy-to-use interface and integrations allow your firm to quickly make the most of digital time tracking software.

Whether you’re on the go or at the office, Bill4Time makes time entry simple — simultaneously run timers, record multiple time entries in one screen and automatically convert appointments into time entries.

Customer/Software Support

If any issues arise with your time tracking software, you want to have a team that has your firm’s back. Bill4Time’s incredible customer support team is here to help. With phone, email, and live chat options, a 24/7 knowledge base, and training videos, Bill4Time wants you and your firm to be successful.

Use Bill4Time For All Your Time Tracking Needs

Adding time tracking software to your firm is as simple as signing up for Bill4Time.

Bill4Time offers plenty of tools for time tracking, project management, and document management to ensure you can organize files, plan your calendar and tasks, communicate with clients, and track time to improve your productivity from anywhere.

If you want to learn more about Bill4Time and how it can help your firm implement time tracking to reach your firm’s goals, schedule a demo today.

Filed Under: Blog

How to boost law firm revenue by 70% with time tracking software

November 11, 2019 By Andrew McDermott Leave a Comment

Increase Revenue

Hate tracking time? 

It’s completely understandable. Attorneys have much better things to do with their time, like defending and protecting their clients. Here’s the problem. 

Tracking time is a necessary evil. 

It’s how attorneys, law firms and support teams get paid. The surprising part about all of this, if you hate time tracking, your managing partner may hate time tracking even more than you do. 

Law firms with poor time tracking habits bleed money

This sounds like an inflammatory thing to say. Is it true though? Here’s how Benjamin Lieber, Managing Partner at the Potomac Law Firm, described accepting attorney timesheets.

 “Lawyers would send me their time every month by email and would come in all different formats and all different conventions and levels of granularity. And even the units would vary somewhat. Some would use a tenth of an hour or some would use quarter hours, some would use a third of an hour, it was a mess…”  

Next, he explains what he did with the data, once he received it. 

“I would take all that, put it into spreadsheets and then put it into invoices. That worked okay for the first 10 or 12 clients…” 

The amount of busywork Lieber had to deal with was excruciating; it was an absolute nightmare. All of this, just to get invoices to clients on time.  

Looking at Lieber’s feedback, we know: 

  1. His attorneys sent their time entries in at the end of the month
  2. All of his attorneys were reconstructing their time entries
  3. These attorneys used a variety of unhelpful formats and billing conventions
  4. Lieber had to sort through these headaches at the end of each month
  5. This kind of billing at up a significant amount of his attorney’s billable time, as well as his

No wonder attorneys hate timekeeping! Lieber’s situation is a recurring problem across the industry. Here’s where this gets worse. 

Poor time tracking habits decrease revenue

The longer timekeepers take to complete their timesheets, the more billable leakage their firm experiences.

Ann Guinn, on her ABA blog, compiled the research. 

  • You lose 10 percent of your revenue (billable time) if you record time entries the day of, once a day.
  • You lose 25 percent if you wait 24 hours to record your time.
  • You lose 50 to 70 percent if you wait just one week.

The attorneys in our particular case study were waiting till the end of the month! If we’re projecting this out, this means firms could be losing 200 to 280 percent of the revenue they should have. Revenue that’s rightfully theirs simply because they didn’t track their time properly. 

Does the data back this up? 

Absolutely. 

Research from Adam Smith, Esq., shows billable leakage is a serious concern for firms that are reliant on reconstructive billing. According to Adam Smith Esq., timekeepers using reconstructive billing (at the end of the month) are failing to report all of their billable time. 

This leakage ranges from $20,000 to $40,000 per timekeeper, per year.

That’s unfortunate, but it’s certainly not enough to fix it. 

It gets worse. 

This survey also found attorneys spend an average of 3.1 hours filling out timesheets each month. The survey used an average rate of $438 per hour which means firms lose an additional $16,294 per person, per year. So a firm with 100 attorneys loses an additional $1,629,400 per year. 

The loss for our 100 person firm is now $3,629,400 to $5,629,400 per year. 

The bad news? 

This estimate is actually quite conservative. In a previous post, I showed how law firms lose an estimated $86,294 to $106,294 per person, per year. This figure doesn’t even include the financial fallout from leakage/overbilling.

What happens if we plug in the numbers for our 100 person law firm? 

The losses climb.

The financial loss balloons to $8,629,400 – $10,692,400 per year. 

How to boost law firm revenues by 70% or more

Work to eliminate the causes that produce these financial headaches. This solution is simple on its own, but that doesn’t mean it’s easy to accomplish. 

There’s a catch. 

Your partners. An Altman Weil survey found law firm partners were the number one impediment to change in the vast majority of law firms. 

“In 69 percent of firms, partners’ resistance to change is an embedded drag on progress, and recent economic successes may obscure any clouds on the horizon – at least for the short-sighted.”

Law firm leadership is most likely unwilling to change. If you’d like their cooperation, there needs to be a sufficient amount of pain involved. 

  • 69 percent of law firm partners resisted most change efforts (up from 44 percent in 2015)
  • 66 percent of law firms experienced insufficient economic pain to motivate change
  • 60 percent of partners were unaware of what they might do differently 

You’re going to need to win buy-in from the partners, stakeholders, and decision-makers in your firm before you attempt to make sweeping changes. How do you go about doing that? Patrick Lencioni, legendary business management consultant explains. 

The long and short of it? 

You have to mine for conflict. That’s right, you’ve got to flush out the disagreements, objections, concerns, risks, thoughts and feelings from key stakeholders in your firm. Notice what he says here. Achieving buy-in: 

  • Doesn’t mean there’s consensus or agreement
  • Does not mean everyone in the firm is happy with the decisions made or the outcome(s) presented
  • Fosters disagreements and heated discussions, the very things needed to earn buy-in 

Earn buy-in, and your firm will work to eliminate these causes. Ignore buy-in, and they may fight you or sabotage your efforts. Okay, imagine that you’ve done it. You’ve earned the required buy-in at your firm. What’s the next step you should take?

Fix the causes. 

Here are some time tracking issues that decrease law firm revenue and the fixes you can use to eliminate the problem. 

Revenue leak #1: Time tracking via spreadsheets

We discussed this above and in a previous post. Time tracking via spreadsheets is a problem for a variety of reasons. 

Spreadsheets introduce a significant amount of unnecessary non-billable time into an attorney’s workday. It’s unpleasant so most attorneys avoid filling out their timesheets for as long as they can. As a result, the accuracy of their time entries decreases day by day. 

Then there’s formatting. 

Remember how I mentioned attorneys spend an average of 3.1 hours filling out timesheets each month? In reality, that number is much higher. Here’s a common example that demonstrates my point about spreadsheets. 

  • Your firm has multiple clients 
  • Each client has their own spreadsheet
  • Each associate in your firm has their own copy of the time tracking spreadsheet 

Here’s where the problems begin. 

Don’t worry, the problems will jump out at you as soon as we begin asking questions. 

  1. Which timekeeper (e.g., associate, paralegal, partner, etc.) has the most up-to-date timesheet? 
  2. You’ve just added a time entry, did the other associates download the most recent spreadsheet? 
  3. Did any of the other timekeepers on your client’s matter overwrite your time entries? 
  4. Is double-billing an issue with any of the clients due to two associates working on the same, exact task? 

It’s an easy way to lose thousands or millions in revenue that’s rightfully yours. A partner added their time to an old spreadsheet overwriting your most recent work. It’s gone. The 15 hours of work you spent on your client’s matter has vanished.

But you don’t know that it’s gone. 

It also means you’re below your firm’s quota in terms of billable hours. Thanks to an inefficient time tracking system (spreadsheets) you’re working hard, yet you’re falling behind. You could have sworn you had more hours than this, but you’re too exhausted to audit the timesheets yourself.

You simply add to your existing workload.

Plug the leak: Eliminate timesheets

There are a few simple ways to fix this problem. 

  1. Switch to contemporaneous (as-it-happens) time tracking: Choose a tool that provides automatic time tracking. This encourages good habits and consistent behavior from your timekeepers. The easier it is for timekeepers in your firm to track their time, the more likely they are to do it. Make sure timekeepers know how to use the tool and verify that it’s used throughout the day. 
  2. Designate a minder to audit timekeeping daily: If you’re like most firms, you already have a minder, a managing partner, director or executive that’s responsible for managing the firm. The person responsible for these audits should have adequate power and authority to deal with non-compliance. 
  3. Create an incentive system: This system should have two components: the carrot and the stick. Your timesheets are inventory; it’s important that your auditor or manager treats them that way. This mindset should be driven from the top down. It’s incredibly important, even if you rely on alternative fee arrangements. 
  4. Follow your incentive system explicitly: Resistance should be expected. You should expect resistance from both the top and bottom. You may not be well-liked in your firm at first. Stay the course. Remove chronic non-performers, reward top performers. Show everyone in your firm that you’re consistent and true to your word. 

You’ll want to lay out a system of responses for compliant and non-compliant timekeepers in your firm. How will you handle non-compliance on the first, second or third offense? How will you reward consistent top performers? Are there any other requirements tied to your incentive system (e.g., non-compliant don’t receive bonuses, aren’t considered for key projects, promotions or partnership?)?

Revenue leak #2: Reconstructive billing 

What’s the easiest way to eliminate reconstructive billing? 

Change your team’s behavior. 

It sounds simple but it’s definitely not easy. Your associates may resist. Your partners will probably resist your change efforts. How do you get your team to voluntarily eliminate reconstructive billing? 

With a behavior model. 

BJ Fogg, a researcher at the Stanford Persuasive Technology Lab, created the Fogg Behavioral Model (FBM).  The FBM answers a simple question.

“What causes behavior change?”

The FBM shows there are three elements to behavior change.

  1. Motivation. A compelling reason for people to change their behavior. This includes pain (getting fired) and pleasure (a large quarterly bonus). They can be subjective, objective or both. 
  2. Ability. The capability to change behavior in the desired fashion. This encompasses two subcategories, the ability and willingness to change. The easier it is to do, the more likely your timekeepers will do it. The harder it is, the less likely they are to do what you ask. 
  3. Triggers. A prompt or call-to-action that tells people to “do it now!” Triggers come in three flavors: 
    1. Spark – a trigger + motivator (i.e., pain or pleasure + deadlines) that’s perfect for those with low motivation, high ability. 
    2. Facilitator – a trigger designed for those with high motivation but low ability. A good example of a facilitator is training that improves team ability. 
    3. Signals – these are simply reminders. They’re perfect for those with both high motivation and high ability. These signals are simple, concise and clear. 

These are the elements that work whether we want them to or not. This is how you change behavior and results in the long term. Here’s a detailed breakdown of the FBM. 

This is how you eliminate reconstructive time tracking. 

Why bother though? 

It’s worth the effort to deal with reconstructive billing because it erodes client trust significantly. It creates an environment that encourages underbilling or overbilling.

Remember, a 24 delay in recording time = a 25 percent loss in revenue. 

This may not seem like a big deal to timekeepers in your firm. It most definitely is. It’s the auditor’s job to give this issue the attention it deserves. But that all depends on the system you use. 

The right system increases revenue. 

A good time tracking system…

  • Automatically records time as-it-happens, increasing revenue by 50 to 70 percent.
  • Automatically convert appointments into time entries.
  • Automatically records billable and non-billable time, identifying profitable/unprofitable practice areas. 
  • Tracks time automatically, independent of location via desktop, laptop and mobile devices.
  • Provides daily, weekly and monthly time summaries to monitor and analyze timekeeper performance.

What does this mean? 

The timekeepers in your firm are less likely to forget about their time entries. They’re motivated, incentivized and reminded consistently. 

It’s everything they need. 

Law firms with good time tracking habits make 70% more

Many attorneys see time tracking as a necessary evil. 

These attorneys don’t see their timesheets for what they are, inventory. Your timesheets are the lifeblood of your firm, even if you rely on alternative fee arrangements. They give you the precious intel you need to improve the financial performance of your firm. 

But it all depends on your tools. 

The best legal time tracking tools make recording time automatic, enabling timekeepers to record their time as-it-happens. The right tool works with your incentive system, motivating your team to go above and beyond. It provides managers and partners with the data they need to optimize firm performance over time.

It’s one of the best things attorneys can do with their time. With the right tools, systems and approach you’ll find time tracking is an indispensable benefit to your firm.  

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Filed Under: Blog

Legal Practice Management Best Practices

August 16, 2019 By Andrew McDermott Leave a Comment

Don't ignore change

It’s the inevitable event.

The one consistent theme in the legal industry that continues to threaten attorneys and law firms. Attorneys do their very best to resist this threatening event yet none are successful.

In the end, those who resist, fail.

How is this event so troublesome that it threatens even the largest, most successful law firms? What exactly is this “inevitable event?”

Attorneys see this coming but many choose to ignore it

What cryptic event am I talking about?

It’s change.

Attorneys, law firms and the legal industry at large have a serious problem with change. Attorneys are seen as Luddites, rather than the early adopters they could be.

But why?

Pundits at Thomas Reuters suggest that this resistance to change may be baked into the legal industry:

“One underlying reason may be the legal profession’s focus on precedent. The very nature of the practice of law, and the U.S. legal system as a whole, largely rests on guidance from previous case law or interpretation of legislative intent. Additionally, the practice of law is inherently risk averse; lawyers are known for writing long memos that issue warnings of what might potentially go wrong, and transactional attorneys often draft from precedent, rather than creating documents from scratch.”

It’s no secret that the legal profession is a cautious, risk-averse endeavor. If you’re practicing law, your entire focus is oriented around reducing and eliminating risk for your clients.

It’s a two-edged sword.

The cautious, risk-averse nature that makes attorneys (you) so formidable is also the same nature that creates this strong resistance to change. Contrary to popular belief, this isn’t a personal defect, it’s a strength. This is how you’re able to defend your clients so effectively.

Here’s the downside.

This strength needs to be aimed. Most attorneys aim their cautious, risk-averse nature at anything that’s perceived as a threat. But research shows this is the wrong move.

Why is it the wrong move?

When attorneys ignore change they increase risk

Increased risk leads to danger, disaster and loss. Here are a few objective examples to demonstrate what I mean by increased risk.

  • Law firms following the traditional model push their associates to produce more work (i.e. chargeable hours) year-over-year. Their associates eventually reach a breaking point as mistakes, errors, and negligence begin to take hold.
  • Individual attorneys lose six hours each day to nonbillable work. They could automate, semi-automate, and/or outsource this nonbillable work but for whatever reason, most don’t. Most attorneys/small firms struggle with rainmaking or business development unnecessarily.
  • Clients aren’t willing to pay for legal research, junior/first-year associates and large bills for legal miscellany (e.g. photocopies, food, travel expenses, etc). Traditional firms have resisted this push leading to a significant loss of business.
  • A research report by Verizon found legal professionals were the easiest to hack. This creates an avalanche of liability that results in unnecessary lawsuits, penalties, fees, lost goodwill, and lost client trust. A key example? Cravath Swaine & Moore and Weil lost $4 million to cybercriminals in 2016.

Can you see the risk?

Change resistance increases risk, danger, disaster, and loss sometimes exponentially.

Why pundits perpetuate change resistance

Pundits and experts tell you to do something you know you can’t do.

Take unwarranted risks.

They ask you to trust third-party firms  (i.e. security firms) with your client’s sensitive data. You’re asked to trust, no, to let go of the responsibility that comes with business development.

These risks seem unreasonable.

If you’re like most attorneys and law firms this triggers psychological reactance. Most attorneys and firms in this position feel their choices are being limited in some way as if they’re being asked to behave in an irresponsible or imprudent manner.

So they resist.

There’s a better solution. One that provides attorneys with the agency and control they need to avoid risk while simultaneously addressing the need for change. I mentioned it just a few paragraphs ago, did you miss it? If so, here it is again.

Aim your cautious, risk-averse nature.

When you don’t know how to recognize the legitimate threats around you everything seems dangerous. What does this mean for you then? It means you need to follow a few specific best practices.

  1. Create heuristics to recognize potential (yet unknown) threats and opportunities
  2. Aim your cautious, risk-averse nature at threats. Attack aggressively, win decisively
  3. Accept and plan for failure
  4. Create heuristics to limit, learn from and exploit failure

1. Create heuristics to recognize potential (yet unknown) threats and opportunities

You can use a basic form of heuristic analysis to identify unknown events that exist in or around your law firm.

What exactly is heuristic analysis?

Heuristic analysis is a methodology that’s used by cybersecurity software providers to identify unknown threats. Here’s how security professionals use this heuristic model.

  1. They examine suspicious looking code
  2. They compare suspicious looking code to a database of known/confirmed threats
  3. They flag anything that matches confirmed threats in their database

Pretty simple, right?

Believe it or not, this simple heuristic model has all the tools you need to spot potential threats and opportunities for your law firm. We just have to adapt the process above to suit our needs.

Here, take a look.

  1. Examine suspicious elements (e.g. people, circumstances, offers, events, etc.)
  2. Search for precedents that match (or are similar to) your suspicious elements
  3. Flag suspicious elements that are confirmed

Okay then.

How would you go about using this in your law firm? Let’s look at a recent example. Law.com shared a story about a client poaching lawsuit.

A personal injury firm’s case that accuses a New York area competitor of paying clients out of a briefcase full of cash to switch law firms has escalated, with the plaintiff revealing that one of its paralegals went undercover as a potential client to obtain “forensic” proof of wrongdoing by William Schwitzer and his law firm.

Ginarte Gallardo Gonzalez & Winograd raised eyebrows last year with a lawsuit in Manhattan Supreme Court claiming that Schwitzer and his firm, William Schwitzer & Associates, used non-attorney “runners” to entice Ginarte clients in a doctor’s office waiting room to switch firms. The Ginarte firm revealed Friday that one of its paralegals pretended he was injured on a construction site and recorded conversations with the runners and two lawyers at Schwitzer’s firm.”

It’s a wild story, isn’t it?

It seems both these firms have missed the point. These firms are competing for client business. From the sound of things, their competition is routine and cutthroat. Can heuristic analysis be used to identify the types of clients most likely to switch law firms?

Absolutely.

Let’s apply the same heuristic model to this scenario.

  1. Examine suspicious elements (client poachers, clients switching law firms)
  2. Search for precedents that match (or are similar to) your suspicious elements
  3. Flag suspicious elements that are confirmed

First, we start asking questions to identify suspicious elements. We keep questions until we get to the source of the problem.

  • Which clients switched firms in favor of [competitor]? What motivated them to leave?
  • When did they decide to leave? Where were they?
  • Which clients stayed with us. Why did they stay?
  • What are the differences between clients who stay and clients who leave?

Research into this story confirmed some important details. Clients were being offered $2000 and a free Uber to switch. This narrows things down considerably, doesn’t it? The data in this example shows many personal injury clients need money but they’re temporarily unable (or unwilling) to work.

These details aren’t complicated, are they?

It’s an opportunity for you to create a compelling value proposition for your firm and your clients. What does this mean then?

  • You can identify the characteristics of a loyal/disloyal client, enabling you to market your services appropriately
  • You can find a way to provide indigent/injured clients with the short-to-long term income they need (directly or via third-party providers)
  • You can use the strong value proposition you created above as a sales and negotiating tool to win and retain prospective clients
  • Create client intake tools and educational resources to inoculate new clients against poachers
  • Create an irresistible offer that acts as an economic moat protecting your firm against bigger, stronger, unscrupulous or more aggressive competitors

This is the power of heuristic analysis.

With the right set of questions, a clear plan of attack and actionable data, your firm has the tools it needs to create a competitive advantage your competitors will struggle to overcome. You can use heuristic analysis to identify strengths, weaknesses, opportunities and threats.

Heuristic analysis is a best practice that’s rarely discussed. Use it to:

  • Identify A player employees
  • Discover the reasons why your clients are leaving
  • Create irresistible offers and compelling value propositions that motivate clients to stay
  • Simplify rainmaking and business development, attracting an avalanche of leads, clients and revenue
  • Systematically increase your billable rates (and collection realization rates) year-over-year
  • Keep A player employees happy and loyal without the exorbitant incentives and bonuses required by employees at most firms

The possibilities are endless. And here’s the important part. Heuristic analysis works well when you compare and contrast across a variety of dimensions including:

  • Region, location and jurisdiction
  • Comparison by practice areas (e.g. real estate law vs. corporate law)
  • Legal industry compared with other industries (e.g. venture capitalists, accounting, consulting, etc.)

When it comes to heuristic analysis, the sky’s the limit.

2. In your cautious, risk-averse nature at threats. Attack aggressively, win decisively

I’ve mentioned that you can use heuristic analysis to evaluate your firm’s strengths, weaknesses, opportunities and threats. Strengths and weaknesses typically aren’t time-dependent. Opportunities can be, but there’s often a fresh one just around the corner.

Threats are different.

If you identify a threat it’s typically wise to take action immediately. This is the time to do what you do best.

Attack.

You want to use your cautious, risk-averse nature to minimize and/or eliminate threats. You aren’t always required to rush into battle but it’s a good idea to attack threats (the problem) aggressively, where appropriate, and win decisively. Here’s a list of threats you may face in your firm.

  • Losing prospects
  • Losing clients
  • New competitors
  • Industry disruption via innovative processes, competitors or events
  • Falling billing and/or collection realization rates
  • Poor/delayed timekeeping
  • Falling utilization rates
  • Decreased productivity and/or performance
  • Decreased morale
  • Decreased lead flow
  • Decreased profitability by client/practice area/timekeeper/role
  • Consistent failure to hit/achieve goals and key performance indicators
  • Law firm culture/values clash

You’ll want to identify your primary, secondary and tertiary metrics.

  • Primary metrics are about survival, these are the metrics you check regularly
  • Secondary metrics are about growth, the ones you monitor on a semi-regular basis
  • Tertiary metrics are concerned with expansion, those you monitor less often

This needs to be defined by you. Here’s a short list of the metrics you can monitor your firm. Primary threats should be addressed immediately. Secondary threats addressed urgently and tertiary threats addressed promptly.

3. Accept and plan for failure

Good practice management takes time. It’s difficult to extract both immediate and long-term value consistently. What does that mean for you? That you accept and plan for failure.

How do you do that?

Let’s say the attorneys in your firm are turning their timesheets in at the end of the month. You know the longer they wait to record their time, the more inaccurate your billable time and realization rates will be.

  • You lose 10% of your billable time (revenue) if you record time the day of, once a day.
  • You lose 25% if you wait 24 hours to record your time.
  • You lose 50% if you wait one week.

If they’re turning in timesheets at the end of the month you’re losing 50 to 70 percent of your billable time. That’s an incredible amount of lost revenue. Imagine making 50 percent more simply by recording your time as-it-happens?

That’s a painful example of failure.

You won’t always be able to plan for failure ahead of time. Often times, you’ll experience failure first. This is your chance. You can accept the failure now, then plan for that failure in the future.

Here’s how you do that.

  • Recount a personal or professional failure you’ve experienced
  • Outline how things went wrong and how they could’ve gone wrong
  • Identify (a.) Your ideal solution to the problem if you don’t know that move on to (b.) The person or professional who knows how to solve your problem

You’ll want to create a comprehensive list of the ways things can and will go wrong. This can be scary to outline in detail but it’s important. Outlining your worst fears – the way things can go wrong, it’s a form of inoculation. It de-fangs the fear, anxiety and stress that comes with failure.

The strategy is straightforward.

When you experience failure, make it worse. Outline the mistakes you made and the mistakes you could have made. Make a list of everything that went wrong. Then make a list of everything that could go wrong. Then identify the solution.

That’s it, simple right?

4. Create heuristics to limit, learn from and exploit failure

How are you supposed to learn from failure? If you’re running a firm with other associates you know how hard it is to change their behavior. How are you supposed to limit, learn from and exploit failure if you can’t persuade your employees to change their behavior?

It’s simple.

You apply the right behavior model. Best practices fail and poor behavior continues when you’re missing the right behavior model.

Okay, first things first.

What do I mean by “behavior model?” It’s behavior prediction and forecasting.

A behavioral model is a collection of data you use to make predictions about future behavior. I’m oversimplifying things here intentionally. I don’t want us to get bogged down or lose focus.

BJ Fogg, a researcher at the Stanford Persuasive Technology Lab, created the Fogg Behavioral Model (FBM).  The FBM was designed to answer a simple question.

“What causes behavior change?”

The FBM shows there are three elements to behavior change.

  • Motivation. A compelling reason for people to change their behavior.
  • Ability. The capability to change behavior in the desired fashion.
  • Triggers. A prompt or call-to-action that tells people to “do it now!”

These are the elements that work whether we want them to or not. This is how you change behavior and results in the long term. Here are some examples of each category.

Motivation

Motivations rely primarily on desire, things we want and things we want to avoid.

  • Sensation governs pain and pleasure. These can be both subjective and objective.
  • Anticipation regulates hope and fear. This includes subsets like expectation and frustration.
  • Belonging regulates social rejection and social acceptance.

Ability

Ability relies on ease and simplicity. If it’s easy-to-do it more likely to be done. What about simplicity? You making simple by removing barriers. The more barriers you remove, the more simple behavior change becomes.

  • Time. “It takes too long” or “That was faster than I expected.”
  • Money. This has a negative financial impact on me/us vs. a positive financial impact on me/us.
  • Physical effort. “This is exhausting and hard” vs. “easy and enjoyable.”
  • Cognitive ease. Easy to think about, difficult to think about.
  • Social acceptance. This is socially unacceptable (stressful) vs. this is socially acceptable.
  • Regularity. “This isn’t something we normally do” (irregular) vs. “At 2 PM I usually…” (regular).

Triggers

Triggers are known by different names. They’re often called requests, offers, cues, calls-to-action or prompts. When it comes to changing behaviors (i.e. as-it-happens billing) there are three types of triggers.

  1. Spark: A trigger that’s paired with a motivator (like the ones we’ve discussed above) works best when motivation is low.
  2. Facilitator: A trigger designed for people with high motivation but low ability. This trigger is a helpful way to learn how to use a new software feature. Acting on this trigger means a recurring task will be more difficult at first, then easier to accomplish again in the future.
  3. Signal: This trigger is appropriate for staff members who have both high motivation and the ability to act. These triggers simply serve as reminders to take action. They’re simple, straightforward and clear.

This is how you limit, learn from and exploit failure. This is how you attack failure preemptively. These best practices aren’t as obvious, but they are timeless.

Use these heuristics to improve:
Business developmentRainmaking
Time trackingExpense tracking
Billing and invoicingOnline payments/payment processing
Collection realizationUtilization rates
Document assemblyDocument management
Project managementEmployee productivity
Data and cyber securityAccess management
AccountingReporting (e.g. financial, practice, security, etc.)

The possibilities are endless.

Here’s the most important part about these heuristics and best practices. They’re timeless. These strategies and tactics aren’t trends or fads. There relevant today and they’ll be relevant in 2030. They’re simple details that require a bit of consistent thinking.

Can your firm counter the inevitable?

Change is the consistent theme of the legal industry that continues to threaten attorneys and law firms. Attorneys do their very best to resist change yet, in the end, none are successful.

Change comes for us all.

Attorneys, law firms and the legal industry at large have a serious problem with change. The same, cautious, risk-averse nature that makes you so formidable is also the same nature that creates this strong resistance to change. Contrary to popular belief, this isn’t a personal defect, it’s a strength.

Aim your cautious, risk-averse nature at your problems.

When you don’t know how to recognize the legitimate threats around you everything seems dangerous. Follow these best practices and you’ll find your firm is prepared for the inevitable, the unexpected and the unknown.

Filed Under: Blog Tagged With: heuristic analysis, legal practice management

The Ultimate Guide to Evergreen Payments for Law Firms

April 10, 2019 By Andrew McDermott Leave a Comment

Cash-poor businesses.

A postmortem analysis by CB Insights listed “ran out of cash” as the second most common reason for business failure. While it’s typically a problem for startups and new firms, it’s also a problem for established law firms.

I’m talking about feast or famine.

One minute your firm is awash with clients and projects. You’re scrambling to keep up with the demand, to serve your clients well. The next minute it feels like your firm is starving. It’s stressful and difficult to grow your firm under these conditions.

There is one major cause that’s often ignored.

Financial highs and lows = a lack of structure?

I’m not talking about the financial highs and lows that come with attracting or losing a major client. I’m also not talking about the one-off events that occur when your firm is in transition or your financial situation is undergoing a major change.

I’m talking about firms that are constantly in flux.

When I use the term “in flux” I’m talking about a specific set of financial circumstances that plague law firms.

  • A decreased ability to consistently attract new clients
  • Clients who frequently forget to pay their bills on time (or at all)
  • A decreased ability to attract additional work or referrals from “promoter” clients
  • A payment structure or building model that rewards bad behavior (e.g. discounts or write-downs if clients pay your invoice early or on time)
  • Lost income due to a missed billing cycle (e.g. forgot to send your invoice to clients)
  • Forgetting to follow up with clients who refuse to pay or pay on time
  • Consistently experiencing a cash flow crunch

What’s the common thread here?

There are several details that immediately spring to mind. Poor timekeeping, unclear billing policies and procedures, a failure to send out invoices, etc.  A lack of financial structure contributes to these firm killing problems.

Evergreen payments: the key to healthy cash flow

Definitions are important so let’s begin with the basics. When I use the word cash flow this is what I’m talking about.

I’m going to assume you already know this. My goal here isn’t to insult your intelligence but to ensure that we’re all singing from the same song sheet.

Cash inflow good, cash flow crunch bad.

This is precisely why you need evergreen payments. Evergreen payments simplifies the cash flow management process (a bit) for law firms. If you have a system that maintains good cash inflows (e.g. consistent, reliable and growing) your job is really only focused on one specific area.

Maintaining/decreasing expenses.

Evergreen/recurring payments make this possible for a few important reasons. When used appropriately, this makes feast and famine cycles a thing of the past. Let’s review the obvious and commonly cited reasons.

  1. More predictable cash flow. You and your clients settle into a routine. You bill at a specific time each month, often with a predetermined budget or range. Clients pay you automatically at a set time each month. You’re able to replenish your evergreen retainer or receive your next payment (recurring payments) at set intervals with little to no resistance from your clients, even if you’re unaware of the total cost. This decreases the likelihood that your firm will lose money.
  2. Decreased collections activity. If you’re a business-to-consumer or small business attorney, ePayments are a great way to decrease your collections activity and get you paid up to 70% faster. Bill4Time Payments is a built-in payments processors that allows you to offer secure, compliant ePayments to your clients. The low cost processor is built-in to your Bill4Time account and easy to activate.
  3. Value-driven client relationships. A financial routine shifts everyone’s attention to the value and outcomes received by the client. A recurring payment plan reduces the attention placed on the bills and payment. Yes, clients will still be focused on their bill which, as you’ll soon see, is important for consumption. A recurring bill means their balance will be broken up into small, bite-sized pieces clients can manage.
  4. Law firms become scalable. A payment plan gives your firm a certain amount of predictability. This is crucial for firm growth. The more predictable your receivables, the easier it is for your firm to raise capital (in the form of loans or equity), attract partners and grow your firm.

You’re probably already familiar with these benefits. Even if you aren’t, it’s not all that hard to figure out, am I right? Here’s the thing about these benefits. They’re obvious but they’re not the most valuable part of a recurring payment plan.

Okay then, what is?

As I mentioned previously, the most important components sidestep money altogether. Let’s review a few of the wildly profitable but hidden benefits of evergreen/recurring payments.

Hidden benefit #1: Clients are trained properly

The attorney/client relationship bears a striking resemblance to a parent/child relationship. Your clients are in a vulnerable position. They’re trusting you to advocate for and champion their interests. Evergreen/recurring payment plans train your clients to behave appropriately. It maximizes your client’s focus on value and minimizes their focus on price (which you don’t want to eliminate).  

You can do this in several ways:

  • Offer clients a set price or billing structure that’s easy to follow (good)
  • Provide clients with a recurring payment schedule for their matter (better)
  • Bill, invoice and receive payments automatically via credit card or ACH at set, predetermined intervals (best)

As a result, clients are trained to:

  • Spend more money
  • Request more ongoing work from your firm
  • Stay engaged in the process
  • Communicate openly and concisely with you

You provide your clients with statements verifying the amounts they’ve already paid. Notice, you’re not asking for permission, you’re providing a summary or accounting for a decision already made.

This is the key distinction.

This requires that you work to build more trust upfront during your intake process but it’s well worth it as you’ll see with the next benefit.

What if you don’t? What if you ignore client payment delays?

  • Allow clients to pay late without penalty and they’re likely to do it again (and again)
  • You (severely) diminish client loyalty (if they won’t stand up for themselves there’s no way they’ll stand up for me…)
  • You’ll experience a cash flow crunch as feast and famine cycles become the norm

You won’t be able to train your clients properly until you know why they’ve stopped paying. Here are a few of the most common reasons for nonpayment.

  1. A cash flow crunch of their own: Clients with financial problems are understandably hesitant to pay. These clients fully intend to pay you but they lack the financial resources to do so. Being paid is important, maintaining their habit is more important. You want to ensure your clients send you something each and every month. This may require that you provide them with less until they’re fully caught up. It may also require modifying representation. What’s most important? Treating your clients as allies, never as an adversary.
  2. Unhappy or dissatisfied clients: Your client realizes their case/matter won’t be resolved in their favor so they decide to stop paying you. It makes sense in their head. Why would they continue to pay you if they’re going to lose and be forced to pay the other side? An evergreen/recurring payment plan helps to circumvent this issue. It positions you and your client on the same team. Remember, clients, are more likely to use what they pay for. The more they consume the more they buy. The more they buy the more they trust. You’ll be able to earn more fees from evergreen clients who are focused on value rather than cost.
  3. Large corporations: Large corporations have their own set of billing guidelines, payment schedules and hidden requirements that need to be followed to the letter. Fail to do so and you may trigger a billing dispute delaying payment. If you’re dealing with unexpected news pick up the phone and call your client. Create a map of expectations ahead of time. You’ll want to outline the explicit and implicit expectations you’re dealing with.
  4. Clients who are unwilling to pay: These clients weasel their way into your firm with one goal in mind. To extract as much free/low-cost work as they can from you before they’re given the boot. These clients wreak havoc on firms as they make their exit. They leave negative reviews, burn bridges and destroy firm morale. It’s best to avoid these clients before they find a way into your firm. Ask for a larger upfront retainer (followed by regular and evergreen retainers or recurring payments).

Hidden benefit #2: Client loyalty + revenue goes up

Which client is more likely to stay? Richard a client who pays a $17,000 retainer or Geoffrey who pays $2,450 per mo ($29,400 annually)? Give up?

It’s Geoffrey.

Richard will feel a burning desire to get his money’s worth but the pain of his initial purchase (e.g. the potential for loss) will decrease with time. Geoffrey, on the other hand, will feel the need to get his money’s worth each and every month. He’ll ask you for more help, which will increase loyalty over time. Why?

It’s the psychology of consumption.

“The extent to which customers use the products they’ve paid for determines whether they will repeat the purchase.” John T. Gourville

The more your clients consume – the more engaged they are, the more questions they ask, the more assistance they require – the more likely they are to continue working with your firm. Here’s the interesting part of this research.

Cost drives consumption.

Do you want clients to spend more with your firm over time? To request your help with additional matters? To be more receptive and open to your suggestions – even if there’s a significant financial upside for you?

Of course you do!

It’s true, evergreen/recurring payments, don’t come with the strong upfront payment many attorneys prefer. They offer something better.

Predictability.

The sunk cost effect is the core driver of this predictability. Your clients feel compelled to use the services they’ve paid for to avoid feeling that they wasted their resources.

See for yourself.

Wait just a minute here!

Am I advocating that you use evergreen/recurring payments to manipulate clients, via the sunk cost effect, to keep them trapped in a relationship with you?

Absolutely not.

I’m stating something much worse.

I’m stating that your clients will use, rely on and manipulate the sunk cost effect themselves and that there’s not a thing you can do to stop them from doing so. Once they’re invested (financially) in your firm, and you’ve earned their buy-in with evergreen/recurring payments they’ll do it themselves.

Be careful.

The sunk cost bias increases in strength over time. The longer the relationship, the more money spent, the more your clients consume, the more reliant clients are on you – the more likely they are to continue paying for your help.

It’s your job to ensure your clients are treated well.

Hidden benefit #3: Circumvent client games

You know the one.

Your client feels their case/matter won’t be resolved in their favor so they decide to stop paying. Again, it makes sense in their head – why pay you and the other side if they’re going to lose? A recurring payment plan circumvents this issue.

  • Clients spend less money upfront but pay regularly for your help
  • If they fail to pay their recurring payment plan they could lose your support at an inconvenient, catastrophic or unpredictable moment. A recurring payment plan can also circumvent piecemeal billing, providing firms the structure and predictability they need to retain quality clients.
  • Evergreen/recurring payment plans take advantage of the sunk cost bias. It’s a tendency people have to irrationally follow through on an activity that fails to meet their expectations due to the amount of time and/or money invested. 

Hidden benefit #4: You (semi) productize your firm’s services

Productization requires specialization. If you’re a multi-purpose firm a recurring payment plan can work but it will also require a lot more work. Specialization with a few practice areas is key. If you focus exclusively on family, tax or intellectual property law you can productize your services using recurring payment plans as a delivery framework.

A recurring payment plan breaks your service/work into manageable financial pieces. Pieces your clients can afford to pay for.

Here’s a brief primer on that.

Did you catch that?

There are three types of productized services.

  1. The foot-in-the-door-offer. Irresistible introductory offers that are designed to attract client attention in hopes of securing an ongoing relationship with higher fees. This productized service is an excellent strategy to attract a consistent stream of B2B clients.
  2. One-time purchases. These purchases fulfill a client need but they also set the relationship up for upsells, cross-sells and down-sells. You’re not pitching clients irrelevant services they don’t want or need. You are piggybacking on your one-time offer, showing clients that an ongoing relationship would provide them with more value.
  3. Recurring retainers/subscriptions. Clients pay you for a value-added service on a weekly, monthly, quarterly or annual basis. This doesn’t have to be labor intensive work either. You can use evergreen retainers and subscription payments as a strategy to handle the tedious or routine work clients need done on a day-to-day basis.

Here’s a brief idea showing you how you can use a productized service to grow your firm.

Step #1: Set up your DBAs

You’ll want to verify that this is acceptable in your local jurisdiction. You’ll also want to notify your malpractice carrier of any pertinent changes. You can use your DBAs for a variety of purposes.

  • Creating a low-cost brand that automates or semi-automates routine legal work (e.g. wills, basic trusts, agreements, etc.). This low-cost brand would be a helpful and cost-effective way to rapidly train new graduates/associates. It could also be a significant profit center for your firm.
  • Creating a prestige brand that bills at a higher rate. This is perfect if your prestige brand only matches illustrious/valuable clients with law firm partners who have 20+ years of experience under their belt. It’s an ideal strategy if you’re looking to win larger contracts from well-paying corporate clients.
  • Creating a volume brand that produces large amounts of high-quality work at reasonable, mid-market rates. This would be perfect for grinder associates were focused on churning out as much high-quality work as possible. It would also be ideal for the minders who manage them.
  • Creating a specialist brand that focuses on specific practice areas or precise areas that require a tremendous amount of legal expertise. This is perfect if you’d like your firm to branch off into specialized practice areas (e.g. IP, tax or compliance law).

This quick bullet list isn’t comprehensive. It’s not intended to be. It’s designed to get you thinking about the ways you can use sperate brand identities (via DBAs) to create consistent and steady cash flow for your firm. It would require that you maintain a separate brand identity for each DBA (e.g. business cards, websites, social media, mailing addresses, etc.).

Why go to all this trouble?

Your brand stands for one specific thing in a customer’s mind. If we’re relying on the Pareto distribution, I know most attorneys receive 80 percent of their revenue from 20 percent of their practice areas.

Separate brand identities provide stability.

Practice areas that are viable today may not be as viable tomorrow. Properly used, brand identities via DBAs provide firms with the flexibility and financial stability they need to weather any economic storm.

Step #2: Create and set up payment terms

You’ll want to create the payment terms necessary for your firm whether you’re using DBAs or not. You’ll want to make sure evergreen retainers are stored appropriately in your trust account until their earned (obviously). It’s something you already know but it’s still surprising that so many attorneys miss this.

You can use evergreen retainers, recurring and subscription billing, fixed fees and other alternative fee arrangements, where appropriate, in your DBAs.

Again obvious, but worth repeating.

Next, you’ll want to avoid one of the biggest mistakes solo attorneys make when discussing fees with a prospective client.

Assuming your client understands.

You want to lay out the terms of your evergreen retainer clearly, so your clients understand it, ahead of time. You’ll want to verify (without being condescending) that your clients understand.

They should know:

  • When evergreen retainers will be replenished (e.g. triggered by schedule or dollar amounts)
  • What happens if they fail to pay for/replenish their retainer (e.g. work stops, withdraw representation)
  • The late fees and penalties associated with their failure/inability to pay
  • That you’ve made a good-faith effort to suss out any questions, objections, fears or concerns upfront
  • What their options are if they object to any of the terms you laid out

What happens if clients reject the terms you laid out?

It’s simple.

You refer them to a DBA that will better serve their needs. If a low-cost client wanders into your prestige brand looking for help they may balk at the price. No worries, simply redirect them to your low-cost DBA.

Step #3: Get existing clients to switch

When it comes to switching there’s a hidden fear.

“Clients don’t want to switch. If I push too hard to leave or I’ll lose their business.”

Relationship is the antidote to this fear. Specifically two kinds of client relationships.

  1. Constrained relationships I have to stay in this relationship
  2. Dedicated relationships I want to stay in this relationship

Customers in a constrained relationship feel they have to stay to avoid losing the exclusive benefits there are currently receiving. They may also choose to stay to avoid the transitional pain and expense that comes with switching.

Here the main factors that impact your client’s psychological commitment to your firm.

  • Sunk cost effect. Remember this? The more recent the spend, the more likely customers are to stay and consume. The more money they invest the more likely they are to stay. The more they consume now, the more they’ll consume in the future.
  • Regret avoidance and loss aversion. It’s better to not lose $ than to gain $. When customers are satisfied, they tend to avoid doing things they feel they may regret; they stick with what they know and stay with the status quo to limit risk. The stronger your value proposition the greater the loss aversion.
  • A desire to feel in control. Customers typically don’t have control over the outcome. As a result, they prefer to maintain control over their circumstance. Doing this helps them avoid the psychological pain that comes with uncertainty. Customers stay with the status quo to avoid losing control.

What about dedicated relationships? These customer relationships last longer because they’re self-sustaining. These clients develop emotional bonds with the associates/team handling their matter/project. It’s no surprise then that loyalty flows naturally from these client relationships. Which factors are most important to these relationships?

  • Benevolence. Your clients feel a consistent sense of goodwill from you. The relationship isn’t adversarial it’s a healthy mix of partnership and caretaking.
  • Integrity. Your clients see you’re focused on delivering value. You don’t nickel and dime your clients, you’re too busy delivering exceptional results on their behalf. Your clients know you’re honest, ethical and morally sound, whether they’re watching or not.
  • Competence. You’re the best-of-breed, the finest your client can afford. You’re highly competent, you’re able to produce results other attorneys can’t or struggle to achieve.

This is how you get existing clients to switch to evergreen payments. You have a constrained, dedicated or combination (both) relationship with your clients.

Anything else is voluntary.

Want to increase the likelihood that your clients make the switch to evergreen or recurring payments? Give them a compelling reason.

  • Create a compelling value proposition. Create a service/firm with an exclusive, compelling, credible and clear offer from your client’s perspective.
  • Reverse or assume their risk. Find a way to eliminate, reduce or modify the risk to your clients. The risk to your client switching comes in two flavors (1.) the obvious risks (e.g. loss money, receive less attention) and (2.) the hidden risks (e.g. you’re overcharging me, this deal is predatory, etc.)
  • Give them an out. Give your clients the opportunity (as much as possible) to say No. Provide them with a clear exit if they’re unwilling to continue with the current arrangement. Examples include upgrades, downgrades, renegotiation, and alternate DBAs.

This is how you get clients to switch.

The good news? It’s upfront work that pays dividends indefinitely. The bad news? It’s difficult, requires a fair bit of thinking and in the end, most firms give up before they’ve completed the process.

This is how you win.

Step #4: Manage your financial data

It’s a mistake to attempt to manage your financial data manually. There’s too much data to manage and not enough time to analyze it. With practice management software, you can manage evergreen payments on a recurring basis. You can set up alternative fee arrangements (e.g. subscriptions, fixed fee, contingency, holdbacks, etc.).

There’s something more important here.

It’s the data.

If you’re looking to get a decisive victory with your cash flow management you’ll need a significant amount of data. You’ll need a way to track these metrics comfortably. The easier it is, the easier it will be to grow your firm.

Verify that your software can do the following:

  1. Set up alerts: These alerts are automatic, alerting you to any potentially dangerous or problematic issues before they hit the point of no return.
  2. Schedule software: If you’re relying on practice management software, you’ll want to schedule reports so they’re run automatically, on a schedule, all the time. Get everything out of your head and into a trusted software system.
  3. Schedule people: Build a team of trusted, freelance/outsourced providers who can help you with the above list of metrics. If you’re doing amazing work (and I assume that you are), you won’t have the time you need to track all of this consistently. Surround yourself with software and people who can.
  4. Focus on accuracy: You’ll want to provide your people and software with the information and resources they need to perform. This means you’ll need to track your time accurately, record data in your software tools judiciously and focus on doing this consistently. Skip this step and your metrics won’t be accurate.

If you’re using practice management software you should be able to set evergreen and recurring payments up easily. You’ll want to ensure that you receive notifications or alerts when you retainer balance is low. Your practice management tool should also manage your trust accounts.

Financial highs and lows signal a lack of structure

New and established firms struggle with feast or famine cycles.

One minute your firm is awash with clients and projects. You’re scrambling to keep up with the demand, to serve your clients well. The next minute it feels like your firm is starving. It’s stressful and difficult to grow your firm under these conditions.

This doesn’t have to be you.

Most of these law firms exist in a constant state of flux. They struggle to receive payment from their clients. Their day-to-day cycle is a consistent source of stress and anxiety. Evergreen payments are the key to healthy cash flow.

Cash inflow good, cash flow crunch bad.

Evergreen payments provide firms with the predictable cash flow and decreased collections activity they need. These law firms become scalable, high-performance growth machines. They’re exceptional value generators for clients, employees and partners.

With strategy and evergreen/recurring payments, you’ll have the tools and resources you need to create the cash-rich, feast worthy law firm you deserve.

Try Bill4Time for free.

Filed Under: Blog, Legal

How Alpha Customer Candace Carponter Uses Bill4Time to Grow Her Law Firm

March 20, 2019 By Andrew McDermott Leave a Comment

candace-carponter

Candace Carponter, founder of Candace Carponter PC, is a fighter.

She’s a real estate and civil litigator based out of New York. She’s  been in practice for more than 30 years. The New York Times outlines how she fought Atlantic Yards for several years and was head of the legal team for a community organization in the area. She has a track record of fighting for those who can’t fight for themselves.

She’s also been a Bill4Time alpha customer from the very beginning.

“The reason I was one of the first clients of Bill4Time is because one of my good friends, who also is a litigator in New York, was one of the original investors in  Bill4Time.”

Candace Carponter, Managing Partner, Candace C. Carponter PC

Here’s how she used Bill4Time to grow her firm over the course of three decades.

The Challenge

In the beginning, Carponter struggled with paperwork. She was buried under a sea of time slips, post-its and documents.

“I was using Timeslips before that.  It was an innovation but was still  a lot of paper; it eventually  morphed into an online product, which made life easier and more efficient.”

But she still needed a way to manage the administrative and business development tasks of her practice more effectively. She wanted a comprehensive suite of tools she could use to handle the timekeeping, billing and invoicing.

“I’m out of the office a lot so I had to put my time in the next morning, which you shouldn’t do, but that was my only option. Finding a way to bill as I worked was the key. That’s the only effective way to bill because otherwise you do lose time, because you’re trying to reconstruct what you did, instead of keeping accurate, contemporaneous records.“

So what was the barrier?

“One of my major problems is that I deal with 20 to 30 different clients in a day, so whereas everybody else will have four to six entries, I will have 30 to 40 different tasks every day, which makes getting it all down time consuming and therefore less likely. But if you have the ability to bill as you go, from wherever you are, you are much more  likely to capture all of your billable time.“

These problems kept her attention away from the matters, the people who really mattered. A quick summary showed Carponter needed:

  • A way to manage an overwhelming amount of paperwork
  • A reliable timekeeping method that enabled her to track time as-it-happens
  • An accurate way for her staff to track their time reliably as-it-happens
  • Help improving realization rates. Better billing habits = more revenue
  • A system that tracked these details so they could provide clients with the reporting/accounting they needed

The Solution

“When I started out at Legal Aid, we didn’t have to bill our time. So even years later, it’s still not the very first thing I do. However, the rest of my staff is much better at it because they were trained on Bill4time and they have been raised in the legal field with it. So they are pretty good about making sure they enter their time on a daily basis.“

Carponter realized firms are under a significant amount of pressure to justify their expenses. Clients want to see they’re getting a significant amount of value for their money. Using Bill4Time, she’s able to provide a significant amount of detail with each line item, detailing the who, what, where, when and why of a task or matter.

This isn’t common.

“When our clients get a bill, they understand what I was doing for every tenth of an hour. I don’t just say phone call, I say phone call and exactly what was discussed and with who.  Bill4time allows me to treat my clients as I always have – letting them know exactly what I am doing for them.  If they didn’t want that personal touch, they would go to a large firm that doesn’t have a one-on-one approach.

Carponter elaborates:

“Regardless of what you’re paying, you want to know what you are paying for. Even two tenths of an hour at $350 an hour Is money — that’s real money. People want to know what you’re doing for your two tenths of an hour. And so I try to be as specific as possible so they don’t feel like they’re getting overbilled or treated unfairly because legal fees can take your breath away.

I’ve seen other bills. It’s frightening to me how high legal bills can be and how little detail is often in them. There’s just no way I would do that. You know, I’m the one who wants to know exactly where every penny goes. So, if I’m going to be paying a $3,500 bill, I want to make sure I receive value for my money. That’s why we’re very careful about how we bill and to make sure that our clients know exactly what we’re doing for them during the course of a day.”

Carponter relies on Bill4Time to generate the kind of results she needs to serve her clients well. From her perspective, her firm is client centric. This isn’t the case in most big firms and her clients realize that. That’s the whole reason they come to her.

The Results

“If I could just connect Bill4Time directly to my brain, that would be great.”

Carponter uses Bill4Time to manage the timekeeping, billing and invoicing aspects of her business. Her firm has the tools needed to track time as-it-happens, instead of working to reconstruct her time. Research shows that contemporaneous timekeeping increases a firm’s revenue by a whopping 50 to 70 percent.

It also enables Carponter to:

  • Improve client relationships systematically. Clients don’t have to wonder about the line items in their bill. With Bill4Time, Carponter is able to break it down for clients with a significant degree of granularity.
  • Saves a significant amount of time. While the average attorney has four to six items in a day to account for on their time sheets, Carponter has 30 to 40 per day. An automated tool like Bill4Time improves her individual/firm utilization rate by eliminating the unnecessary busy work and hassle that comes with standard time sheets.
  • Verify and validate the value her firm provides. When it comes to billing, it’s common for firms to be elusive. Some firms use block billing and generalized data as a matter of convenience. But the short term benefits of convenience come at a significant loss — the loss of future business as client trust declines.

Carponter is a fighter.

In the beginning however, she spent a significant amount of time fighting through administrative headaches – accurate timekeeping, mounds of paperwork, an inability to provide detailed reporting at a moment’s notice. Bill4Time has changed this for her firm. It’s given her the ability to focus her attention on the detail that makes her notable.

Fighting for her clients.

Try Bill4Time for free.

Filed Under: Blog, Case Study, Legal

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