Linda Artesani explains utilization rate: the percentage of billable hours versus total hours worked. Law firms typically bill only one-third of their time on client work. She recommends delegating admin tasks, automating with QuickBooks, and tracking daily time logs to improve profitability.
Chapters
Hi there, Linda Artesani, Artesani Bookkeeping. This week I'm going to delve into utilization rate. So we're getting more into the nitty-gritty of advisory services, services that we provide to our clients. And I think it's a place that when you start to bring up, have these conversations with attorneys and law firms, especially the partners of a firm. I think it's a place that you can find a way to organize your life better, organize the office staff's life better, and increase the amount of hours that you're actually able to bill for. So if you're not familiar with the term utilization rate, utilization rate is basically your billable hours divided by the total amount of hours recorded for a particular time period. That equals your utilization rate. And generally and typically, they'll— you will use a work week. So we do an amount of hours that are expected, or amount of hours that are actually hours working on client files, and then the amount of hours that you actually bill. So things that can affect those hours could be, you know, if you get a client that's just like arguing over a bill. Maybe you're doing duplicate tasks. Those are kind of areas that you might find that if you start to work with your firm and work with your staff, you can avoid some of those errors where you might have to write down some of the time that you actually worked on a file because it becomes not billable. If you look at the average for a firm out of a complete total amount of time that's worked in a client area, Only 1/3 of it is billed. So let that sink in for a moment. 1/3 of all the hours that you work on a client or clients, only 1/3 out of the whole entire piece is billed. So there's a lot of, a lot of time left on the table that's not billable, and that does affect the bottom line. It affects your profitability. And so one of the best ways to start to help to Correct this issue in the law firm. One of the things we do at our firm is we encourage these— the, you know, we have mid-market firms that we work with, so we encourage firms with multiple attorneys, multiple partners. We set up a Slack channel for your goals. So you set the goal: what would you like your utilization rate to be? How many hours do you think you work on client files? And how many hours actually get billed? And we start to work on that number. It becomes a metric that we track. And it's a metric that you can work and seek to get improvement on. Because let's face it, if the struggle is real, when you start to work with these law firms, you start to see patterns. When you start to get into the advisory level, you start to see patterns and issues that come up in a firm. A lot of times when we start to really get close and work with the attorneys, we find out the attorneys are spending a ton of time on admin work. So they might be doing delegating their own, working in their own calendar. Making their own appointments, handling a lot of their phone calls. Some of these things can be done by staff. You can delegate these tasks. Some of the attorneys we find are doing their own billing. They're doing their own recording of client payments against open invoices, doing their AR. That's a place where you can hire a firm like mine to track the AR for you so that you don't have to, because you're— If you're billing out at $250 or $350 an hour, Why are you doing these tasks that you can now dedicate to working with your clients and then again increase your revenue? It's all about revenue when it comes to this topic in that respect. So a couple other places you might find document management is definitely one. You might find that this place is not only delegation will work, but automation works, which is one of the reasons why we have QuickBooks Online Advanced is a big piece It's that driving piece of the accounting platform that we use. So we have that in place because there's workflows in there. There's places inside the program where I can set up so I don't have to have somebody in the staff tracking the AR. The bills are due net 15 on the 15th day. If they're not paid, automatically triggers out an email to the client saying, hey, this bill is due. Maybe you got it 2 weeks ago and you didn't open it. Then there's another one you can set up when the invoice is past due. Automation helps save with errors or anything missed. That's the beauty of automation and technology. It does a better job than the human can do with these kind of, with these kind of tasks, and it just keeps it, fills in all the holes. You won't miss anybody that way if it's automated, which is why I love the program, the platform. So maybe client support. Maybe you have on your team somebody, a paralegal or somebody that has the ability to be able to answer some of the questions that you might start to notice are repetitive. So one of the things we recommend is we'll have the attorney just take one day of the week and write down all their tasks, everything they do in the entire day, write it down. Take a look at it, look at the task list and say, what can I take off my plate? That I'm really— it's becoming a time suck for me. Maybe it's you do your own social media for your firm. There's lots of places that you can start to look at your day and maybe delegate the work away. Maybe somebody in your staff who doesn't make the pay you do can do that work, especially if it's repetitive. It could be an app that can do some of the work. So remember, those are the things that we have. You might have somebody entering, or maybe you enter your bills for your firm. Did you know you could use like a program like Receipt Bank, put them into the, into Receipt Bank? You can set up the processes to be automatic. Still have to code them to the job, but that's something the bookkeeper or the accountant can do for you. You don't have to be doing that task on your own. So there's plenty of ways that you can start to really work towards more time efficiency. There's a great podcast that I listen to quite often. It's very short, but it's just little tips on how to create a better workflow for your day. kind of organizing your day. It's— I think it's very effective for helping people find more time, and really not so much finding more time but making the best use of your time, and it's called Ditch Busy. So I'll give you a link in that in the, in the article that will be attached to this video. But just think about what you do in your day. Write it down. So sometimes writing it down, even though that's a task, an additional task, when you look at it, You can really see where the gaping holes are and where you might be able to plug them in and increase the time that you're able to bill out. Time is money when you're looking at billable hours, so it's a place that's effective in helping get more cash in the door, increase your cash flow, increase your revenue. Just one of the things that we just work through. I'll also tag back— Clio does a trend report. It's a great report. I'll tag back in the, in the page. Maybe grab a paragraph just to kind of tag back what the rates are for the average firm. So you can actually see the numbers and see why maybe some of the programs you can use are better. We will help you if you hire our firm. We will help you get off of whatever system that you're using, move you into a more automated system, and help you just grow your business in the best way possible for your firm. So on that note, I hope you all have a wonderful week. If you're an accountant or bookkeeper watching this, this video, or even if you're an attorney, you want to follow us, you can follow me on Facebook. And our Facebook group is called QB Community Live. I'd love to have you in the group. I share my tips there as well as across the board on my Facebook page. But it's, it's a great resource for anybody who has a question or anything to do with accounting or business management, business workflow. I hope you all have a great week and I'll see you next week. We'll talk about realization rates next week. Bye now.
