Originating attorneys who bring clients to law firms typically earn a 10% bonus on billed revenue. The speaker explains how to calculate and track these bonuses accurately using practice-management software like Clio, and warns against relying on spreadsheets instead of reconciling with your accounting system.
Chapters
This week we're going to talk about an originating attorney. You might hear that term when you work with lawyers, and you might hear originating attorney, responsible attorney. So some of the terminology you're going to hear when working with lawyers and law firm clients, it's got to do with how they get paid. So this is going to help you understand that whole concept and really understanding how attorneys are, are, are compensated is sometimes complex. Sometimes it's just a straight-up salary, but sometimes it's a little more than that. They usually— some of them get bonuses, which is kind of the road we're driving down here today. And knowing how that system works and understanding it as a whole is gonna help you when you try to make the calculations on these bonuses that you may see in a law firm. And this is actually It's a bonus if you look at it from the fact that an originating attorney is the person bringing the work in. So this is the person who originally brings the work in. There's your originator attorney, and they usually get about 10% on the case or matter. It'll, it can come into the firm, they're bringing into the firm, and then the work is being done by a different attorney. So the responsible attorney is the one that's responsible for the whole case or matter, but the originating attorney brings that person in. Or that client in. Typically, it can be the rainmaker, can be anyone in the firm that becomes an originating attorney. So they, they're compensated with a bonus. So the bonus comes if they bring the work into the business, which is encouraged. They will get a payment for bringing the new clients into the law firm. And so this model kind of highlights the role that a confident attorney's gonna play in the growth and success of the law firm. So think about that for a moment. So they structure that compensation and we have to structure the data so we're able to make those calculations. So originating attorneys will generate the business, but they, and they're very important to the success of the law firm, but they may not take the ball all the way through the case or matter. It may be handed off to another attorney in the firm, that responsible attorney. So the compensation's usually a percentage of the total amount billed to the client. And it usually comes out as in the form of a bonus. Sometimes it can be structured in a different way. So you really need, as a bookkeeper, you need to understand how it's structured at the law firm that you're working with and understand really how this works for both the attorneys and encouraging the attorneys to bring the work in. And also it's important to understand how it affects the clients. So we want, Obviously if an originating attorney brings business into the firm and it goes to the responsible attorney and the responsible attorney doesn't do a good job, there's a problem, right? So we wanna make sure that the motivation is there not just to bring the bodies in, but that they actually become clients and go on to be paid, paying clients. So with originating attorney compensation in the software, you're able to calculate this. So if you're using Clio or LeanLaw, there's a way to track originating attorney percentage, and that's gonna help you a lot when trying to determine the amount that's gonna be bonused out to that attorney. Uh, different practice areas have different methods of compensation, but this is definitely one that you're probably gonna see if you start working with lawyers. And it's very structured and it's going to help the law firm grow. And it also helps with, like I said, bringing business into the law firm. And you'll see it more in a more of the mid-market-sized firms. The bigger firms tend to have this. Smaller firms don't really have this model, but sometimes they do. It depends on the firm. So attorneys will receive a specific percentage of the revenue generated that the— from the clients that they bring in. And hopefully they're bringing in good quality clients. The whole— every party in this, this whole bonus structure understands The responsible attorney understands it as they get their piece of the revenue. It's going to be missing the originating piece. And we have to really structure the system to reward these new clients that are being brought in and they're actually becoming clients. So it's one thing to bring somebody into the— in the door as a client, but they have to actually sign and become a customer. I think the best practices when really looking at this attorney compensation is to Make sure that it— you understand its structure, and that it— there's careful consideration on how the money is being calculated. Everything has to tie back to the books. If it doesn't tie back to the books, and we've seen that where law firms will just take an outside spreadsheet and they throw some money in, or, or they throw some data in there without actually using the revenue from the invoice payments that are coming into the business. Really important to make sure that That's completely correct and accurate. Know that the other important piece of working with bonuses with attorneys and law firms is it's very time sensitive. These attorneys are waiting to get their checks, they're waiting to move on and get their money into the firm or out of the firm. So you know that this can't be held up. If you're doing a data migration from one software to another, this can be a factor. But also the other factor is if you just take on this client and no one was calculating it or they calculated it in a spreadsheet, you start looking at the spreadsheet, When digging into all the categories and the columns and the formulas, and you see that the formulas are inaccurate, you really want to tie everything back to the books, which may require you to go back and dig into the past. Tie it all back to the data in the— in the— in your QuickBooks file and in your software, your external software, and just make sure that it's accurate, and you might have to make adjustments there. Seen some crazy things with spreadsheets. So just be aware of that. And know that this is a great bonus structure. You are gonna see it's a very popular one. And as long as everybody's on the same page and the dates and the deadlines and all that, you know, it's gonna be done on reconciled data. Make sure of that too, because people can put whatever they want inside of Clio, but if it doesn't tie back to the books, it's really not, it's worthless. So make sure that you've got that 3-way bank reconciliation happening every month. And hopefully this helps you. If you're interested in learning more, please join our Accountants Law Lab. We meet every Friday. These are some of the topics we discuss, and we go into great depth, and we kind of target into the individual clients that our, our members have for their— for the work that they do. So hopefully this is helpful, and until next week, bye now.
