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Forefront eNewsletter

Q4 2016 EDITION

How Your Firm Can Use Data to Make Better Financial Decisions

Much has been written about how big data is disrupting the legal professional, but is that reality? How are law firms using data to make decisions? There are several points of data critical to the modern law firm's processes, such as billing, receivable cycles, effective rates, budgets, and forecasting. What do they all have in common? All of this information, which feeds big data and business intelligence, exists after the invoice is created. But what happens before the invoice is generated?

The Case of the Neglected Timecard

Billing systems provide a wealth of information once the invoice has been created. But today’s firms don’t make use of the information that appears before an invoice is generated. Yes, you might run unbilled time reports, you might use some automated workflow to send missing time to accounting and lawyers, but that is mostly the extent of the pre-invoice data that exists in law firms today.

The timecard is the unit of revenue of law firms. If there is no timecard, there is no invoice, which translates to no receivables. Even for flat fee billing, you need to know how much time was spent on a case in order to know whether it is profitable or not.
Understanding Your Firm’s Time Entry Data

You cannot manage what you don’t measure. Measuring your firm’s time entry is an important step in managing your firm’s financial performance. After all, poor timekeeping compromises billing accuracy, resulting in time leakage, longer billing cycles, rejections, and poor client trust. Timekeepers that take five days or more to enter time have problems such as leakage and rejections, while the timekeepers that create time entries the same day do not experience these types of problems, or at least not nearly as much of it.

The Impact of Poor Timekeeping

So, what kind of data should your firm measure in order to improve time entry performance?

#1: Time Velocity

Time velocity is the amount of time (in days) that it takes between the time that a task is completed and the time it is entered.

Time Velocity

#2: Contemporaneous Time

Contemporaneous time means that time is entered as the work is performed. Contemporaneous time entry lowers the risk of leakage and accuracy issues, so measuring the amount of contemporaneous time is key for firms to understand. It's common for firms to measure how many hours a lawyer enters, but most firms are not looking at how long those time entries took to create, let alone how many of them are contemporaneous. By measuring contemporaneous time entry, we are able to establish a baseline to improve upon.

Contemporaraneous TIme

#3: Who Enters Time

Why do we care about who is entering time? The biggest reason is that time cannot be contemporaneous if we are relying on the lawyers to give time to legal assistants to enter, meaning that it takes longer for time entries to be recorded and longer for them to be entered. Not only will it most likely not be contemporaneous, but who knows when the secretary will actually be able to enter it. This creates an inefficient environment that directly contributes to longer billing cycles as well as more room for things to go wrong.

Who Enters Time

#4: Reconstructive Time

There is nothing constructive about reconstructive time entry. Reconstructing time is the most concerning thing that a fee earner can do. Reconstructive time entry provides inaccurate information, adding another layer of anxiety to lawyers, billers, and other administrative staff members. How accurate can time entries be when employees are recreating a time entry for work that was completed two, three, or even four weeks ago?

How Enters Time

The Impact on the Firm's Financial Results

When we start measuring things such as contemporaneous time, time velocity, and who's entering their own time, patterns start to emerge that give us immensely valuable data about the fee earners, the billing, and the results we are seeing with both.

The Correlation Between Velocity and Who Enters Time

Through our analytics study that we do for our firms, we are able to identify trends. What has emerged is the correlation between velocity and who enters time. Lawyers that enter their own time achieve a faster velocity, meaning that they are more likely to be contemporaneous, have lower time leakage, and reduce write-offs.

Who Enters Time

Attorneys who enter their own time show better velocity and produce more accurate time records.

The Correlation Between Write-offs and Velocity

The correlation between velocity and who is entering time is good to know, as it helps us focus our efforts to improve our velocity. This means we will see more contemporaneous time entries. But a correlation that we've identified that we know directly impacts the bottom line is the correlation between write-offs and time velocity. When we map the velocity of fee earners with the amount of their write-offs, we can see a direct relationship: the longer it takes for a lawyer to create a time entry, the more write-offs that lawyer has.

While this may be new information to the firm, and a great way to identify the habits that result in write-offs, this shouldn't be a surprise. As our velocity increases and our accuracy decreases, it's common sense to expect that write-offs will occur.

Reconstructive Time

Why Data Matters to Today's Firms

Data allows us to establish a better understanding of the firm's time entry performance and how it plugs into the firm's overall financial performance. When we can establish a baseline for understanding a firm's performance, we can then focus on improving the areas that will generate the biggest impact.
 

Bellefield

Bellefield's iTimeKeep is the #1 most adopted Mobile Time Entry Solution for attorneys, enabling contemporaneous time entry while providing attorneys with an app that they want to use anywhere with their mobile device or desktop. Bellefield's relentless commitment to simplicity and innovation has led to recent developments, such as the first-of-its-kind gamification-based Engagement Program and the first timekeeping app for the Apple Watch for legal. iTimeKeep seamlessly integrates with Elite Enterprise, ProLaw, eBillingHub and other leading billing systems. Click here for more information.

 
 
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