Running a law firm is like juggling flaming torches—you’ve got client needs, administrative work, and (oh, right!) keeping the lights on. Financial wellness isn’t just about having money in the bank; it’s about understanding the flow of time and dollars through your practice. Are you maximizing billable work? Are you actually getting paid for that work? And how can you make this process as smooth as possible?
Here’s a practical breakdown to help you measure your firm’s financial wellness—and a secret weapon to make it all easier.
Your time is the lifeblood of your practice, but it can be astonishingly easy to lose track of where it’s going. While you’re busy juggling client demands, court deadlines, and administrative chaos, your actual billable hours can quietly slip through the cracks. That’s why understanding how much time spent on billable tasks versus non-billable ones is crucial.
Start with these questions:
If you’re finding that a significant chunk of your day is eaten up by non-billable work, consider options like hiring support staff, outsourcing, or leveraging tools like case management software to handle repetitive tasks. For example, automating scheduling or document management can free you up to focus on the work that matters most.
Doing the work is only half the battle. The real question is: are you getting paid for it? Many firms face a significant drop-off between hours worked, hours billed, and hours collected.
Let’s break it down:
Billing Rate Utilization: This metric measures how much of your billable work gets translated into invoices. Are there tasks slipping through the cracks? If so, the issue could be as simple as inconsistent time tracking or delays in sending invoices.
💡 Pro Tip: Set a schedule for invoicing, such as weekly or biweekly, to ensure no time goes unbilled.
Realization Rate: This shows how much of your billed work gets paid. A high realization rate means clients are paying what you invoice. A low rate? That might indicate issues like clients disputing bills, failing to pay on time, or even poor payment terms.
💡 Pro Tip: Review your invoicing process. Are you clear and transparent about your rates? Are clients surprised by the final bill? Regular, detailed updates can reduce friction when it’s time to collect payment.
Collections Rate: Of the work billed and paid, how much has hit your bank account? Late payments or unpaid invoices can wreak havoc on your cash flow.
💡Pro Tip: Set clear payment terms upfront, and don’t be afraid to follow up. Automated reminders through software like SimpleLaw can take the awkwardness out of chasing clients for payment.
Finally, keep in mind that tracking these metrics isn’t about assigning blame—it’s about understanding where your processes can improve. A small change, like quicker billing or implementing online payment options, can make a huge difference.
Let’s be real: manually tracking time, billing, and collections can feel like a full-time job. That’s where a tool like SimpleLaw comes in to save the day.
Here’s how it can help:
Streamlined Time Tracking: SimpleLaw makes it easy to track billable hours without extra effort. No more guessing or trying to reconstruct your day.
Automated Billing: Generate invoices in a few clicks and send them out right away.
Payment Integration: Accept payments online to make it easier for clients to pay on time.
Insightful Reporting: Simple dashboards help you keep an eye on utilization and collection rates without diving into spreadsheets.
By diving deep into these two areas—time spent on billable work and billing efficiency—you’ll gain a clear picture of your firm’s financial health. Not only will this help you grow your revenue, but it will also give you confidence in your firm’s long-term sustainability.
And remember, you don’t have to do it all manually. Case management tools can make measuring and improving these metrics almost effortless, giving you more time to do what you do best: practice law.