The Factors of Productivity

Productivity means dollars in the door. I know this sounds obvious, but be careful not to mistake being busy for being productive. The following seven factors apply in varying degrees to most law firms. At the outset, your firm must have financial software in place for accounting and time & billing. For a range of software options, see the product listings at the Legal Technology Resource Center of the ABA Law Practice Division and the recently debuted ABABlueprint. For both the metrics and a persuasive argument for providing top-notch client service to facilitate payment of your invoices, see The Lawyer’s Guide to Increasing Revenue, 2nd Edition.

Factor #1: The advance fee deposit.

This is also known as the “retainer,” although Washington, for example, has specific definitions for advance fee deposit and retainer in its ethics rules. For new clients particularly, you must receive some amount to prove the client’s commitment to the matter. Funds may be provided by credit card, from family or friends or other sources. Said another way, if the client is unwilling to invest in the matter, why should you be willing to invest in the matter? Another maxim is “It is better to not work and not get paid rather than work and not get paid.” Being busy can deceive you into thinking you are generating revenue.

Factor #2: Collecting accounts receivable.

The older the receivable, the less chance of seeing it paid. Your software can provide an aging report to show how old your receivables are. Pay attention to this report. Slow payments may mean client disappointment with your firm. Every dollar collected goes right into your pocket, assuming the firm is meeting its overhead costs.

Factor #3: Billing work-in-process.

Unbilled time can also be portrayed in an aging report. Your billing is part of your service. The client will receive your bill, read your bill and hopefully pay your bill. You may also write a cover note or letter with the bill. Here are a few tips:

  • If delegating billing to an associate be sure to review the bill before mailing.
  • Keep the client informed of activity on the file to facilitate acceptance of the bill. Clients do not welcome financial surprises.
  • Do not bill small amounts. Hold small amounts over to a future bill.
  • Use your staff for editing smaller bills to allow you to focus on the larger bills.
  • Time entries should be meaningful with descriptions of the purpose of the activity and speak to the value of the time spent.
  • Set time aside to “get the bills out.”

Factor #4: Complete and efficient timekeeping.

This starts with being aware of what you do and to minimize time not recorded. I have heard an industry estimate of 15% of effort never becoming a time entry. Show all time worked and then choose to mark the time down, if necessary. Do this: calculate the additional potential revenue if each timekeeper in your firm added one hour per week across the year. Arguably, one hour of effort per week is not recorded on a regular basis.

Factor #5: Recoupment of expenses.

For small matters this is not a concern. For very large matters the recovery of copies, conference calls, faxes, postage, etc. can be significant. But please do not bill for the soda pop you provided to the client. That unfortunate instance happened to me.

Factor #6: Pricing.

Clients like certainty. We all prefer certainty. While legal matters, particularly litigation, can be close to impossible to predict, honest thought should be given to:

  • Contingent fee
  • Percentage of a settlement or deal
  • Fixed fee
  • Annual retainers for corporate and municipal clients
  • Fixed fee plus hourly
  • Success factors added

The scope of representation must be clear when quoting a fixed fee. See the LEDES billing codes at utbms.com. The LEDES billing codes are useful for knowing what tasks to include in your fee and for explaining to clients what a lawyer does on a matter. It may be worthwhile to meet with your major clients to discuss fee arrangements. Even if nothing is decided or changed, clients will appreciate your initiative concerning this important subject.

Factor #7: Managing overhead expenses.

Much of the cost of running your firm is fixed because rent and payroll do not change from month to month. But please prepare a budget of all of your costs to enable an analysis of any variances between budget and actual. Are you paying for products or services that are no longer necessary? Consider a silk flower arrangement in the reception area instead of weekly fresh flowers. Encourage all employees to suggest ways to save money. Cost saving is important but the revenue from an expanding client base is the real engine of productivity for any firm.

About the Author

Peter Roberts is a private practice management consultant for lawyers. He was the practice management advisor in the Law Office Management Assistance Program (LOMAP) of the Washington State Bar Association for 13 years. Reach him at pete@practicelawadvisor.com

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