In this video, the presenter walks accountants and bookkeepers through the key findings of Clio’s 2024 Mid‑Market Trends Report, with a focus on mid‑size law firms (typically 20+ employees). The discussion defines what constitutes a mid‑size firm versus a boutique or solo practice, and highlights how these firms differ in revenue, billing rates, and operational metrics. The report shows that attorney billing rates have kept pace with inflation while non‑attorney (paralegal, billing staff) rates have lagged, leading to cost pressures. Mid‑size firms are taking fewer matters but charging higher rates, resulting in a substantial increase in billable hours and overall revenue since 2016. However, they struggle with collection and invoicing efficiency, reflected in lower realization rates and cash “lockup” – money tied up in unbilled time or delayed payments. The presenter explains key performance indicators (KPIs) such as utilization and realization rates, and offers practical advice for accountants: adjust billing frequency, use professional collection services like ColdBox, maintain cash reserves, and avoid draining cash at year‑end. The video emphasizes the value of the Clio report as a benchmarking tool for legal‑industry financial management and encourages professionals to leverage its insights to stay relevant and add strategic value beyond basic bookkeeping.
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So this week I wanted to talk a little bit about the Clio Trends Report, and particularly we're gonna focus on mid-sized law firms because that's the report that just came out. But if you're watching this video and you're new to working with attorneys, it's a goldmine of information about KPIs and, and areas that attorneys struggle with. So this is gonna be more focused narrowly on mid, Midsize firms, but there is a trend report for all firms, more small firms, 'cause that's typically the client that you'll see in using Clio. They are trying to push into the mid-market a little bit. So hopefully this will help understand a little bit about what is the pain points for big firms versus smaller firms. And we'll be focusing really on the midsize firms, which, If you want to look at a small firm, that's a firm that we call 'boutique' sometimes, a solo, solo plus one. Those are the smaller firms. These are going to be more— this information will be more focused around mid-size firms. So they're probably more of what you'll see if you start working with attorneys and you, you, they reach out to you and they'll say, oh, I have a partner or a couple of partners and we have 10, 15, 20 attorneys on staff. That's when you're getting into that mid-size. It's a sweet spot for us though. Especially when it comes to being able to develop a larger skill set around helping them. There's so many things we can help them with beyond the scope of narrowly focusing on bookkeeping, which is where I really would like to see everybody in the Law Lab kind of expand out to. And it's a good place to be. So what's the difference between the mid-sized firms and the smaller firms? So we're going to really focus on, you know, firms that are more like 20 or more employees in total. So it could be a firm with staff attorneys, paralegals, legal assistants. That's more what Clio defines as a mid-market firm. A little bit different than what Intuit classifies as a mid-size firm. Intuit's scope is a little bit smaller. But these things that you're gonna hear about, the findings in this report, are not just for mid-size firms. They might actually be some things that we will find with smaller firms. If you're starting to delve into working with attorneys and law firms, I recommend really starting with the smaller firms and building your way up from there. Get comfortable with them before you start to kind of dive into the mid-size firms unless one lands in your lap. But really, I think it's a better way to really look at it. And then we're just going to go through some of the metrics that we see, some of the newer terms. So you might hear a term called lockup as we get into the lockup section on this report. And really we're talking about what locks up cash flow. And this happens with attorneys. Might think of attorneys being flush with cash, but not every practice area or law firm fits that, uh, description. Some of them are tight on cash. So understanding why they're tight on cash, and maybe they have a lot of unbilled time that they haven't billed out and they need to really get that going. It's a way you can help your client. Maybe talk to them about not just billing once a month, but maybe billing in the 1st and maybe the 15th. So spreading it a little bit more to get the money flowing in, especially if cash is tight. So I would like to start with, you know, how are the mid-size firms? This is really, I'll, I'll give you a link to Clio's report. I highly recommend downloading these all the time. They're just a gold mine for us. So really we start to look at the state of the legal practices that are mid-size. How are they doing as opposed to how they were doing maybe 5 years ago, 10 years ago? They looked at the data, and actually they benchmarked some trends in business performance throughout the industry. Since 2016, they've really looked at the space of the midsize firms, and they have gathered the information on that year over year, and they've noticed that lawyers have matched their rates with inflation. But the non-lawyers are well behind. So that's an interesting statistic. So think about that for a moment. Law firms have multiple people that will do billing and the attorneys have kind of stayed with the trend. They've raised their rates overall, but the non-lawyers, the people who are doing the billing, it could be the billing person, it could be any person, maybe the paralegal's billing, any person that's doing some of the work in there, they're not keeping trend with raising that rate. And that's interesting to me because, you know, it still costs more to be able to get some of these service people working for the law firms. And I'm sure with the competitiveness of hiring, you're going to find that the attorneys are having to raise what they pay these people. So it's interesting to me that they haven't caught up on the billable rate back to their client with the non-attorneys. So that's fascinating that they're behind on that, that they haven't kept those rates moving along. For the most part, though, mid-sized firms have taken on fewer matters, but they've raised their rates enough that they don't have to have as many cases or matters at the same time as they did in the past. So comparatively to prior years, there's a difference there, whereas the smaller firms, because they haven't raised their rates as much, these attorneys haven't raised their rates as much as the mid-sized firms that they've actually also not taken on as many cases, and then there it's reflected in their revenue. So some timekeepers do bill, and that's what I was talking about when you have timekeepers kind of handling some of the tasks in the law firm. Legal assistance, anybody who's actually putting their fingers into the pie, and then it's billable hours, even though they're not the attorney doing the work. So sometimes in some law firms you'll see these other staff people doing the work. You'll notice that those staff people actually do have a billable rate, but it's not as much as that. It's not keeping in proportion to the attorney's rate that's going up. So they're not raising both rates, which is kind of interesting. I don't understand why that is. But any, you know, non-attorney that's an active user in the firm, they're not just, they're not billing out the same rate. The new matters per lawyer are definitely, responsible lawyer are definitely kind of, kind of level where they were before. The smaller firm actually have more new matters compared to the mid-size firms, which that's kind of interesting. And the billing and collection performance is strong amongst mid-size firms. So you're not seeing that dramatic over 90-day category like you see in the mid-size firms. You should always still look there if you're a bookkeeper or an accountant looking at the books. I tend to gravitate there, but there's always some way that we can help them, maybe start to collect the money quicker. Obviously we talked about CoolBox, but the average lawyer in a mid-size law firm is earning more for their firm than ever. So they're billing 140% more than they did in the past, more than in 2016, it's nearly 180% more. So that's interesting that in 2016 they were billing far less. So there's more billing happening, more billable hours happening in these law firms in 2024 as opposed to back in 2016. 'Cause I kind of compared those two periods and it's dramatic, it's a dramatic increase. So that's a fascinating statistic that we are looking at. KPIs, when you start to look at Clio's indicators, the KPIs that they check, so key performance indicators, law firms are definitely working on that collection rate and they're also looking to increase or improve their revenue and they should definitely look at KPIs or at least study them, especially the utilization rate and the realization rate. So utilization rates, are something that, and I'll give more detail in the article, but utilization rates are looking at the amount billed out as amount comparative to the amount of hours in a day. But then when you get realization rate, it's including how many, how much of that is paid. So a lot of firms could bill out a lot, but they're not collecting. So you wanna look at that number. And I like that realization rate 'cause it's really real what they're looking at. So lawyers in mid-size firms are finding more ways to streamline their workdays and put more time towards billable work. In the past, it's been, it's been dramatic that the amount billed out was far below a full day. So obviously nobody's gonna bill out 8 hours when they work 8 hours because there's time to go have lunch or have a bio break or whatever. But it's something to look at with, in the past it's been a very, very small amount of hours billed out when they looked at it and now the rates are rising. So that's That's an interesting statistic. So maybe the attorneys were looking at this Clio Trend Report saying, "I think we need to do some work on that." So the mid-size firms appear to be having less success when it comes to actually invoicing that billable work. So they're tracking the time, but they're actually not billing it out. And that's kind of fascinating. So that comes when, when you're talking about the realization rate, that's fascinating that they're not billing it out or they're writing it down or they're writing it off. So they might be looking at that time on an invoice and saying, ah, I don't think I need to, I don't think I can bill this out. This is more time than I can actually bill a client. So mid-size firms are falling behind smaller firms on collection rates. So the smaller firms are doing better collecting than the mid-size firms. So that's an indication that you could actually work towards helping a client be able to collect on those, on the monies that are out there. And again, that would be your looking at ColdBox, looking at partnering with them. We have at our firm and it's been wonderful. Mm-hmm. They will help you collect money for your client. You can bill it back to your client and just have them work underneath you or work directly with the client. So you have a, a couple of options there, but they're a professional collection service where they've got a team trained that are able to help the attorneys collect. And they, and they'll do it in a professional way. So it's not gonna be those horrible collection service kind of calls. It's gonna be professional and that's how they're trained. So ultimately the number of hours billed where the amount collected needs to be considered against the overall rate. So you're looking at that realization rate. You want to look at the rate of the paid bills, and that's really when you're getting into realization rate. And when you look at this, this all leads into cash flow and getting the money in the firm, not writing it off, not writing it down. And poor billing practices can severely affect cash flow, which is when you get into this lockup situation. So lockup is a kind of a newer term. It's an accounting term, basically, and it's, it's where the firm has access to cash in the business. Where is that money? And if it's locked up, it's sitting in, uh, not billed, or it's sitting in billable time and it's not actually billed to the client, that's where you're looking at a problem with the money not flowing in. Maybe the client is looking at— trap, having to move money into the firm to pay, meet their payroll. So lockup definitely matters, and having cash on hand is important. You wanna look at that working capital. And then look at the overall long-term cost. So what is going to need to be paid over time? That's going to give you that figure on lockup. So it's, it's, it's in— it's definitely an integral part of our work that we do. And you really want to look at this number and look at how the cash is being brought into the business and how— what they have going on going in the future. One of the things, one of the trends we do see is a lot of times they might have a compensation programs set up for themselves that at year end they kind of look at all the money that was brought in at year end and they divvy out the profit. But when they do that, they drain, they drain the tank. Basically, they drain the coffers. There's no money left. And if they're not looking ahead at maybe a big insurance bill or a large payroll, now we're like, we're sitting there like, oh my God, it's going to be so bad. They don't have enough money for payroll. And you have to make sure this is planned out. We try to tell attorneys, don't, don't drain it down to nothing. Keep money maybe in a side savings account. It's just a good way to have your workflow in place. No one knows what the economy is going to bring. Nobody knew we were going to have a pandemic. I mean, look at that just for one simple example of why you need to have some money set aside, because no one knows if something's going to happen that's going to make the economy grind down, even for the attorneys. So it's important to start to look at lockup, look at where cash flow is, look at how much cash is available. Have they spent it all and pushed it all out into their own, uh, pockets as far as cash to themselves at year end? And did they make it so that it's really difficult in the beginning months of the year to try to keep that money flowing in? This is some of the things you wanna definitely look at when you're looking at law firm work and look at the total lockup. So you wanna look at the amount of time it takes them, especially if you're working with a personal injury attorney. You wanna talk to that attorney, find out how many matters are gonna be coming to fruition, what are the chances of you winning the matters, what's the time before the insurance company pays that money that you're able to divvy it out and get the piece that belongs to the law firm. That's really critical when you're working with attorneys, especially if you're working with a personal injury firm. You wanna make sure that you've got that in place. So that's about it for today's video. I hope this is helpful. It's just a place you can look. I highly recommend, I'll put a link in the, in the post for how to get access to that Clio Trends Report from Mid-Market 2024. It just came out about a month ago. It's really valuable information for you as the accountant or bookkeeper that if you're starting to walk into that space of really helping your client and being that level above bookkeeper that you are wanting to be to stay relevant in this, ever-changing, fast-moving world of accountant, of accounting, and of technology and staying ahead, this is where you want to be. And you definitely want to go take a look at that report. It's going to give you information that you need to push, put against your clients' numbers to see where they sit. We'll see you all next week. Bye now. Bye.
