What to Consider When Developing A Legal Revenue Distribution Model

Blog Revenue Distribution Models

When attorneys decide to put up a shingle and manage their own practice, they are no longer just a lawyer. The attorney has made the decision to become a business man or woman. Part of running any successful business is compensating those who contribute to your success. Attorneys and legal professionals work for your firm and you pay them. Simple, right?

Unfortunately, it isn’t that simple. Just like many other aspects of managing a law firm, building a legal revenue distribution model has many complexities. Many law firms will create revenue distribution models based on productivity.

Data Needed to Set Up Productivity-Based Legal Revenue Distribution Models

If your firm is looking to create a productivity-based legal revenue distribution model it is important to have the following data on hand:

  • The originating attorney who brought the case to the firm.
  • Execution responsibility, or the person responsible for overall efficiency, deployment of resources, and client communication.
  • Timekeepers contribution to billable hours.
  • Contribution to fixed fee & contingency matters or unbillable time

All of this data is spread out across a wide range of sources. It can certainly be a daunting task trying to compile all this data, but we have seen great success in firms who choose to automate much of the process. The process can be automated by aligning all the systems your firm uses to manage the different aspects of the business inside of a single practice management system.

Steps for Creating a Successful Productivity-Based Distribution Model for Law Firms

  1. Ensure that all matter parties, roles, and responsibilities are clearly defined.
  2. Measure ALL time spent working on and costs associated with a matter.
  3. Utilize proper pre-billing and billing processes.
  4. Effectively manage Accounts Receivable.
  5. Keep all accounting up to date.
  6. Appropriately allocate revenue before realizing income.
  7. Make a record of the compensation model.

Utilize Practice Management Systems To Manage Distribution Models For Law Firms

Understanding the steps and work involved in creating a successful revenue distribution model is often easier than implementing them. CosmoLex practice management software can help take your revenue distribution model from concept to a successful reality. Firms who have aligned their legal billing and accounting systems to work with each other often find it easier to take the necessary steps needed to build and manage a legal revenue distribution model. CosmoLex integrates both systems so that they are always in lockstep with each other.

For more information about Understanding Productivity & Compensation Models for Law Firms view our full webinar on the topic. Click here to watch the full webinar recording.

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