There are three things a lawyer ought to know when it comes to getting paid: how much work has been done, whether it’s been billed, and finally whether the bills have been paid.
Ultimately getting to the bottom of these three criteria, consistently, often requires the owner of a firm to understandably be reaching out to someone, or perhaps something to perform the labour involved with tracking the work a legal firm is conducting on behalf of clients. Usually this is conducted through the use of secretaries, assistants and legal accountants. But increasingly we are seeing a synergistic combination of practice management and legal accounting software working in conjunction with the human resources required to operate a firm. In this way, the eco-system of legal firms operating in the 21st century is changing. Now more than ever, lawyers can have quicker access to profits generated by conducting billable hours throughout any given legal matter that they are pursuing for clients.
One of the best ways to view this is to pay attention to Work In Progress reports, a constituent element of good practice management.
With practice management and legal accounting software it is now possible to observe a digitized calendar to see a lawyer’s activities over the course of, for example, an entire week, to see how much work was conducted, and for whom. A good practice management system will easy-to-access dockets of a lawyer’s work. Software is now scripted in such a way that it allows practitioners to do a comparison to see which elements of a legal matter have already passed and have not been invoiced.
By highlighting this sooner with practice management software, a legal firm can get one step closer to unlocking potential revenue long before conventional means would allow. Recently an Ontario-based lawyer who transititioned to using uLaw software found out that he could transfer more than $10,000 from his trust account into his general account, just because he forgot he'd already done the work!
Any legal matter is always technically a work in progress. The wheels of justice turn slowly, and frankly this is beneficial to lawyers, but only if he/she keeps track of incremental work which has already been done. So even if the whole matter has yet to be completed (think of a divorcement, just as an example) a significant piece of the work may already be complete and ready to be paid by the client!
By unlocking access to data automatically logged through the last financial quarter of a firm’s lifetime, it’s possible to delineate between incomplete work and work that is finished and billable. As a result, one can obtain an automatically-produced analysis of UNREALIZED REVENUE waiting to be seized.
But alas, this is only one way to scrutinize only a fraction of a firm’s unrealized revenue. Practice Management software might show potential money that can be made, but it doesn’t account for whether a client actually pays the bills or not.
Remember the three things golden questions that need answering, they were discussed at the beginning of this post. The last one--questioning whether the bills have been paid--requires some actual insight to balances and banking.
Another very important report that can and should be generated by a firm on a regular basis is a detailed invoice balance. Among other things, the invoice balance can tell you how late a client or a lawyer is on a payment and if they have to pay interest. Legal accounting also lets a lawyer know how long an invoice has aged, how long money has been held in trust, and whether a lawyer forgot to transfer money from trust into general accounts.
If a client hasn’t paid you for work you’ve done, a lawyer can easily be aware of the revenue in question, complete with pre-calculated HST sums. Perhaps it’s best just to write it off, then?
Deep analytics (legal analytics) allow for these sorts of decisions to be made by a firm, and sooner. The sooner a lawyer takes their business managing skills to a higher level, the better chances it has for meaningful and sustainable growth built upon an accurate foundation of information generated by the firm itself.
Instead of doubling down on the amount of software or labour required to analyze these metrics, practice management and legal accounting software such as uLaw Practice combine both these elements to a law firm and make it available as a single tool.