It’s not just so you can send out correct invoices. (Although that is critical!) Without a record of what tasks were done on each case—and how long each task took—it would be impossible to accurately bill clients.
Time tracking tools help your firm increase profitability. They compile a wealth of data about how firm employees use their time each day. By analyzing this data, your firm can detect areas of inefficiency and adjust business practices, rates, and team tasks to improve profitability.
Here are three simple ways to use time-tracking data to boost your firm’s bottom line.
1- Assess Utilization Rates
The best way to understand your firm’s (or individual attorney’s) productivity is to measure your utilization rate. To determine your utilization rate, divide the billable hours worked in a week by the total hours worked per week. If the resulting value is low, it means your firm is spending a lot of time on non-billable tasks.
Time spent on non-billable tasks is inevitable for every firm employee—having a utilization rate of 100% is simply unrealistic. However, it’s important to know how much time is spent on non-billable items and whether some employees are spending more time on administrative tasks than others. For example, if two attorneys with similar caseloads have very different utilization rates, it may indicate that better task delegation is necessary.
Understanding utilization rates can also help your firm analyze which processes and tasks could be optimized for greater efficiency. If non-billable tasks are eating away the work week, perhaps automation, delegation, or a process change could make these tasks easier and improve the utilization rate.
2- Analyze the Efficiency of Individual Tasks or Matters
Utilization rate looks at the way firm time is spent, but analyzing individual tasks takes things a little deeper. Time tracking tools allow you to create labels for individual items. By creating label identifiers for certain tasks, like client intake, case research, or invoicing, for example, you can identify how much time these individual tasks take and ultimately increase your overall efficiency.
Here’s an example: Your law firm is curious about the effectiveness of marketing efforts. You track all hours spent on non-billable marketing tasks, from lead follow-ups to the client intake process, via time tracking software. After analyzing the data, you discover that your firm’s time spent writing your weekly blog is not cost-effective. With this insight, you could make tangible changes—like outsourcing marketing to a legal marketing agency, using marketing automation software, or focusing on retaining repeat clients instead of bringing in new business.
You could also compare different matter types to determine whether some matters use greater firm time and resources than others. If you find a correlation, explore the underlying causes—do you have attorneys fully qualified to handle this matter type? Is the case law continuously changing such that particular cases require additional research time?
By using the available data effectively, time tracking software helps you establish patterns so that you can make impactful workplace changes.
3- Adjust Billing Rates Accordingly
One of the best ways firms can use time-tracking data for profitability is through monitoring and adjusting billing rates. Time tracking software gives you insight into how long each matter takes to bring to completion and whether your firm should be charging more for your services.
Do your hourly billing rates take into account time spent on research, phone calls, responding to emails, or travel? How many non-billable hours are you spending on each case? If you analyze the data and discover that the hours you’re putting in aren’t reflected by your earnings, it might be time to raise your hourly rates.
Legal practice management software allows you to set custom timekeeping alerts for individual case files, so you’ll know when you’ve spent more time than you expected on a particular matter. With this information, you can determine whether to implement improved intake screening, higher rates, or task delegation to make each case maximally profitable.
Many attorneys think they don’t need to track time on flat-fee arrangements. However, tracking hours on these contracts can provide firms with valuable data that helps them price their services more accurately. By comparing the billable and non-billable hours spent on a flat-fee contract to the fee charged, you can evaluate the profitability of these contracts.
Use CosmoLex’s Customizable Time Tracking Reports to Make Your Firm More Profitable
CosmoLex’s comprehensive matter management, time tracking, billing, and accounting legal software helps you analyze and improve every aspect of your business. By automatically pairing time entries with the appropriate matter, CosmoLex makes documentation, invoicing, and analyzing your business practices intuitive and simple.