In this solo advisory video, Linda Artesani of Artesani Accounting explains how write‑downs of billable hours erode law‑firm profitability and outlines concrete steps firms can take to prevent them. She begins by emphasizing the importance of tracking key performance metrics—utilization rate, realization rate, and timekeeper profitability—to understand the true hourly profit rate. Artesani warns against relying on spreadsheets and recommends dedicated time‑tracking software such as LeanLaw or Clio, even for flat‑fee matters, to keep hourly work visible. She then advises firms to set clear cost expectations during client intake, using a “change‑order” approach when scope expands. Delegation is highlighted: senior attorneys should focus on high‑value tasks while junior attorneys, paralegals, or legal assistants handle lower‑rate work. Adjusting the billing cycle (e.g., bi‑monthly invoicing) can improve cash flow, and aligning attorney compensation with efficiency reinforces the desired behavior. Artesani offers her firm’s consulting services to analyze a firm’s books and identify further improvement opportunities, underscoring that even a few unbilled hours per matter can significantly hurt the bottom line.
Chapters
Hi there. Linda Artesani, Artesani Accounting. This week I want to talk a little bit about the billable hour for the attorney and the law firm and how writing those hours down can really impact your bottom line. That's what this video and accompanying posts are all about. Have you even thought about how to rein in some of the writing down of hours at your firm? If you're a mid-market firm, even a small law firm, if you take a moment to step back and look at the big picture, look at how the attorneys at your firm are billing and how many hours are being written down on a monthly basis, you really want to dive into that metric. You want to look at utilization rates and realization rates. Those are really going to give you— and timekeeper profitability. So these are the metrics around surrounding that billable hour. I think in the real world, attorneys like to look at that there's 8 hours in a day times X amount of staff people that will be doing the billing. And here's my estimated amount of hours I'm going to be able to bill out for. And then really looking at the real hours that are really billed out and then looking at those hours that have been paid for. So don't look at the ones that haven't been paid for. Look at the actual one, actual bills that have been paid. So you're taking a look at those numbers to determine What the rate, the hourly rate, that's your profitable rate, is really happening in the firm. A few ways you can handle this. I think the number one way is to get the software. We see a lot of firms try to skimp on that piece and bypass it and just use a spreadsheet to track their trust. And there's just so many ways that that can go wrong. We see it day in and day out. So having the software just for that, but also for tracking the hours. Even if you're doing a fixed or flat fee billing, you want to track the hours because if that can get out of hand, if you put a number in a price on it and then the hours aren't tracked, you'll give your employees free rein to kind of expand on their hours. They're not really thinking about the hourly rate from the perspective of the law firm owner or owners, and that's not— never a really good thing. Look at technology. So make sure you get some good software. We recommend LeanLaw or Clio to track the hours at your firm per matter, per case. The next thing I think is starting from the top so that time spent with the client in the initial intake session, in the consultation, is going to be best served where you put a parameter around how much it's going to cost for the client. Because they, they aren't looking at hours, they're looking at how are you going to help me, and they're looking at what is it going to cost me. They're not really looking at it from an hourly perspective. If you can set up some guidelines around that, let them understand where it's going to cost them at the end of the day. So that if it does get out of scope, if the job gets bigger, drags on delays, you have to go back to the client and really tell them that this is what's going on. And then really kind of like doing a change order like you would do in a construction firm will help keep that person in the know and also will help you in collecting on those ever-important bills after the fact when the job is done and the matter is settled and the client moves on. So that's probably the number one way to set up those client expectations. Then delegate. So look at how your hours are being done. Look at a matter or case and see how many people worked on this matter. And is there items there that you have a senior attorney working on that maybe a junior attorney could do? Are there tasks in there that the paralegal or the legal assistant can do? They can do that at a much lower rate. So maybe you want to delegate those tasks, bring up hours for those attorneys to work at a higher level. And then you want to look at your billing cycle. You want to see how often you're billing. Sometimes cash flow is at crunch, gets stuck and bogged down. So expanding on the billable cycle to maybe more than once a month, maybe in the beginning of the month and the 15th, will help bring that money into the firm. And then the last thing you want to look at is how are you compensating the attorneys? Are you compensating them and rewarding them for a job done more efficiently? And that's something that you want to look at metric-wise as well. It's something that we do at our company, we really analyze the records for the law firms to let them know where they're at, what's happening in their firm, get a pulse of their firm, and to see where there's places maybe there can be room for improvement. Remember, writing down even a few hours per matter can add up in a law firm, and it can really, really hurt the bottom line. So it's important, and I have an example inside the article that shows you the ramifications of that writing down. You really want to Look at that from a, from a high level so that you know what works best for your firm and what makes your firm more profitable. Of course, you can always reach out to us. This is the work that we do, and we can help you analyze your books and help you maybe make some better processes in the law firm. Hope you enjoyed this. If you have any questions, comments, please feel free to reach out. And on that note, I hope you all have a wonderful, wonderful week. Bye now.
