Implementing a data-driven and online billing solution is not only an easy thing to do, but it is often an effective way to boost profits per partner and other law firm metrics.
Optimize Profits Without Raising Rates
One of the best strategies to increase profits begins with the efficient use of data-driven solutions to increase productivity in law firms. More importantly, this is also beneficial and effective in boosting realization and collection rates.
A recent report by Georgetown Law notes the challenges in attempting to boost growth and law firm productivity. The report noted that “although many of the various law firms surveyed for the comprehensive report increased billing rates at different levels,” clients continued to push back on rate increases, keeping the pressure on the realization rates that firms were able to achieve.”
This trend demonstrates the ongoing problem of achieving profit increases solely through billing rate increases. Raising the hourly rate does little good if the client pays less of the hours billed.
As a result, data-driven solutions are becoming a beacon within the legal profession. The reason is that data-driven solutions allow firms to gain real-time insights to make better business decisions. In addition to better business decision making, management can improve their bottom line without simply raising hourly rates.
The 2018 Industry Outlook report by Major, Lindsey & Africa found that as law firms expand their use of various solutions, they often miss an opportunity to optimize profits by evaluating their own “productivity and growth, spot emerging business trends and build new pricing models” to increase profits and efficiency.
Increase Collection Rates
Another tried-and-true strategy to increase profits is to increase collection rates. The Georgetown Law report concluded that on average, “law firms are collecting only 83.5 cents for every $1.00 of standard time they record.” Interestingly, the report noted that these multi-year collection rate numbers continued to decline even as the economy improved from the depths of the 2008 financial meltdown.
Clio’s 2016 Legal Trends Report found that small to mid-sized law firms collect only 1.5 hours of daily time, and are thereby losing six hours or more of daily work. Such losses are attributable not only to clients not paying their bills but also to the time consumed by non-billable tasks such as billing review.
To increase collection rates, Rocket Matter suggests adopting solutions that will improve profits. These suggestions include creating transparent client communications, timely billing, expanding the intake process, applying various fee structures and more, including, perhaps most importantly, using a reliable practice management software system to capture time more accurately.
The idea of such adoptions is not only to generate profitable rates, but to set strict and realistic billing expectations for clients. Since there are no one-size-fits-all solutions for client billing, it’s essential to implement data-driven technologies to enforce reliable billing standards that are efficiently adjustable in meeting individual client needs.
Data-Driven Solutions
As advances in technology continue to rise, companies are producing data-driven solutions to transform law firm earnings. The use of AI and machine learning technology in law firms offer valuable data and analytical information to power decision-making in business operations. These tools give firms access to helpful insight which can pinpoint details such as win rates, cases with resolutions, time to injunction, etc., in specific areas of law. Analytics can also be used to track broad industry trends relevant to activities like strategic planning, business development, and marketing.
This means law firms that use AI technology can grow profits without raising billing rates. Tools such as EffortlessLegal’s BillerAssist LEDES Edition application use AI and machine learning to allow law firms to implement automated and predictive billing. These applications track time better, ensure that attorneys adhere to billing guidelines, and provide rich data on the work lawyers are doing, and how much they are earning doing it.
Improving law firm metrics is not difficult. and with the use of modern technology, it’s now easier and simpler to get started.
About the Author
Holly Urban is the CEO and co-founder of EffortlessLegal LLC, a provider of software automation solutions for law firms.