If your law firm was leaving money behind, you would do everything in your power to fix that, right? If you could maximize the amount of revenue that you keep without adding extra work, it would be a no-brainer. Today’s episode is focused on operational efficiencies and best practices you can implement in your own practice to do just that and optimizing revenue in your law firm. We welcomed two experts with over 25 years of legal industry experience to get the best advice. Scott Brennan, CEO of Lexicon, and Tom Boster, the CFO, and COO help us gain insight so you can increase revenues, maximize efficiencies, reduce costs and spend more time practicing law.
What we cover in this episode:
- 01:30 – Introduction to CEO of Lexicon, Scott Brennan & CFO and COO, Tom Boster
- 04:13 – Maximizing your net income through timekeeping, collections and quality
- 05:21 – Improved timekeeping gives you numbers you need to push your firm forward
- 14:24 – Best practices for collections
- 32:23 – Why quality should remain a focus
- 42:21 – Special Offer from Lexicon
Introduction to CEO of Lexicon, Scott Brennan & CFO and COO Tom Boster
Scott Brennan (left) has a diverse global business leadership background and, as the CEO of Lexicon, he is driving their strategy with a relentless focus on superior customer service. Lexicon liberates law firms to do what they do best; practice law. Lexicon provides industry-leading practice management software that can be fully integrated into a suite of services including revenue optimization, business analytics, marketing, client intake, billing, and collections.
Tom Boster (right), a CPA and CGMA with over 25 years of experience, is a skilled operations and project manager, and the CFO and COO of Lexicon. Tom’s history of working in the legal and healthcare industries has focused on software solutions, budgeting and overall performance improvements.
Scott Brennan, CEO of Lexicon
Tom Boster, CFO & COO of Lexicon
Maximizing your net income through timekeeping, collections, and quality
There are a few ways you can optimize your own bottom line as a firm. The more obvious options are to take on more cases to grow your net income, or you can make more per case without doing extra work. But, in addition to those more prominent strategies to increase revenue, there can be quite a bit of money that is spilled on the ground with your current caseload. By improving internal procedures around timekeeping, collections, and quality, your firm can dramatically improve profitability.
Improved timekeeping gives you numbers you need to push your firm forward
Do you track your time as you perform each task or do you wait and track it later? If it’s the latter, you’re missing out on revenue, and Lexicon has some shocking stats to share, along with tips on how to accurately capture all time in your firm. Since 2007, annual hours for attorneys were down about 132 hours per year. This could be attributed to lifestyle changes, lower productivity, or attorneys attempting to work smarter, not harder. Some smaller firms may not see the necessity of tracking time if they are billing on a fixed fee basis, but we would highly advise against that. Accurately and efficiently tracking your time by utilizing tools and technology can make a meaningful change in your business, ultimately optimizing the revenue in your law firm.
Many people make the mistake of thinking that their memory is better than it is in reality. Studies have shown that if you wait until the end of the day to track your time, you may be losing up to 10% of the time you had actually worked. If you wait until the end of the week, you could be losing up to 50% – 75% of the time you had put in, depending on the attorney. Read more about those studies here, on the ABA website. Whether you are billing by the hour or using a flat fee, it is very important to know where you are spending your time. Tracking ALL time (not just billable) will give you insight about certain tasks for which you or your staff are putting in more hours on a consistent basis. There could be services that you have under-priced and are consequently losing money on every time you do that task. In that case, you are not making as much money as you think. The same is true conversely for tasks that take less time that could be over-priced.
So what are the potential impacts of these losses? Even at the lower end of the studies, losing 10% of potentially billable time is a very material number. Scott gave an example highlighting how these things add up. “Even if you just miss 10 minutes a day and you bill at $200 an hour. At the end of the year you’ve lost $8,000 in billable hours, just through what feels like a very minor miss of 10 minutes across a single workday.” Take this shocking number and multiply it by all attorneys in your firm and the losses can be very impactful when considering only a 10 minute loss. This is why accurate timekeeping is so important.
Best practices for collections
Concise timekeeping and clear descriptions of what your work entails is the cornerstone of effective billing, and eventually in collecting that bill. Billing with ethical guidelines, using accurate notes for time entries, and making sure associates fairly represent the work that they actually perform is paramount to collecting payment for your services. The easiest way to help you enable better billing practices is to use a practice management software that has a timer built in, so while you go about your day, you can start and stop timers for specific tasks and clients. Many of the time-keeping fundamentals flow through into your collection efficiency. In general, only 81% of billable hours are actually invoiced. On average, firms only collect about 85% of what they actually invoice. Math is not in your favor on this one.
The collection cycle starts at the time that you make the engagement with a client. Best practices show that It should outline how the client will be billed, how might any retainers work, and sets the expectations of payment terms. Having those expectations upfront not only meets a firm's ethical guidelines, but shows great business fundamentals of having that communication upfront. You can continue that communication with the client throughout the engagement with a quality timekeeping system that shows the accumulated time throughout the month, and allows a firm to know just where the client stands.
A quality timekeeping system in your firm can be customized for a variety of different ways, to set alerts, and kick off tasks associated with the billing process. Technology has really evolved, and now it is much easier than it has ever been to keep time and it’s not as big of an administrative burden as many people once thought it was.
Why quality should remain a focus
While timekeeping is often the first thing that comes to mind when it comes to how much revenue your firm is bringing in, the client experience is just as important and often overlooked. Having a client-centric quality system in your firm keeps your focus on relationship building and customer satisfaction. Setting expectations with your clients, setting key audit points during the process, and measuring your own performance will give you the tools you need to continuously improve the client’s experience and get the feedback you need to make improvements and focus on quality within your firm.
When you have institutionalized a quality system for improving your internal processes, you can benefit from outsourcing things that aren’t core to your firm. Perhaps there are things that your firm does that could be better handled by a professional firm that specializes in that task. This can allow your attorneys to really focus on practicing law and managing their client relationships. The other potential benefit is that you can actually demonstrate to professional liability insurance companies that you have a quality process in place, which could dramatically decrease the cost of your professional liability premiums.
Optimizing your revenue is always top of mind as you lead your law firm towards the future. But could you be leaving money on the table? Our friends from Lexicon share with us the best practices for timekeeping, collections, and implementing quality processes for a strategy that will help you keep your hard-earned profits. We talk about timekeeping best practices, ways that you can improve internal processes and the overall impacts of ignoring this in your firm. Then we talk about collections and the importance of communication in your communications procedures. Lastly, quality should always remain a high focus to continue improving client experience and potentially even lower insurance costs. If you are looking for more content focused on the legal industry, feel free to check out our other legal podcasts here.
Links mentioned in this episode:
- Lexicon Services
- Tasty Solutions for Timekeeping, Billing, and Accounting
- Cultivating Business Growth – The Legal Series