How Law Firms Can Reduce Non-Billable Hours
As a lawyer, you know that time is money – and money comes from the billable hour.
So, how is it then that law firms can be profitable when the average lawyer bills for less than 30% of their work day?
Non-billable hours refer to the time lawyers spend on tasks that do not generate revenue for their firm. This can include administrative work, training, marketing, and pro bono cases.
While non-billable hours are essential for the smooth operation of a law firm, they can also lead to inefficiencies and increased costs.
Striking a balance between non-billable and billable time is possible – let’s dive in.
How to Track Non-Billable Hours (& Why You Should)
Accurately tracking billable hours is expected in the field of law, but many lawyers are often less diligent when it comes to recording non-billable activities.
That said, law firms that are serious about optimizing their functions place equal importance on tracking all hours, regardless of whether they are billable or not.
Many law firms use time-tracking software, often referred to as “time and billing” (T&B software), to record and bill for attorney time. To keep track of both billable and non-billable hours, the T&B software typically has two different types of codes: “activity” codes for billable activities and “non-activity” codes for non-billable activities.
Recording non-billable hours can be helpful for law firms in several ways, especially by:
- Identifying the “real” cost of work
- Uncovering inefficiencies in operations
- Providing insight for more realistic deadlines
- Understanding what work partners are doing that is below their pay grade
When Non-Billable Hours Are Beneficial
Non-billable activities are beneficial – and necessary – for several reasons, a few of which include:
Employee development is essential for any business but can be incredibly beneficial for law firms.
Though a non-billable investment, developing employees helps them become more efficient and effective at their jobs, leading to increased productivity and profitability for the firm. Additionally, employee development can help to attract and retain top talent, resulting in less turnover and decreased costs associated with hiring and training.
Business development is essential for any law firm that wants to stay competitive and grow.
Law firms can expand their client base and increase their revenue by cultivating new business relationships and exploring different markets. In addition, business development can help law firms build their brand and reputation, making them more attractive to potential and existing clientele.
It’s no secret that administrative tasks can be a burden for any business, and as irony would have it, the acts of time-tracking and invoicing fall into this category.
Admin duties help to keep law offices organized and running smoothly while ensuring that lawyers have the information they need to meet deadlines. Lawyers also rely on completing admin tasks like maintaining filing systems, routine research, and scheduling to support them in their work.
Ways to Reduce Non-Billable Hours
Though required for a law firm to be successful, limiting the amount of time that non-billable activities “steal” from valuable work is essential.
There are several ways to reduce non-billable hours, including:
Implementing Practice Management Software
Practice management software is a computer program designed to help law firms streamline their administration functions by automating various tasks.
These programs provide lawyers with quick and easy access to client information, allowing them to handle their caseloads more efficiently and effectively. In addition, practice management software can help law firms improve their financial management and increase their profitability. Automating billing and invoicing, for example, practice management software, can help law firms save time and reduce their accounting costs.
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Hiring Internal Help
While increasing headcount may seem time-consuming and even unnecessary, the truth is that legal assistants and administrative support can benefit law firms in many ways.
Added internal help frees up lawyers to focus on more billable matters. Generally speaking, having a dedicated staff member to handle administrative tasks can improve the firm’s overall efficiency.
Outsourcing Your Accounting
Once again, time is money, which is why many law firms decide to outsource their accounting needs. By working with an experienced, reputable accounting firm, law firms can save time and money while ensuring that their finances are in order.
In addition to fiscal planning, budgeting, year-end, and cross-border tax preparation, professional accounting firms offer valuable insights into improving financial management within a law firm. And, of course, connecting with a team of accounting professionals can help you with trust reporting — your legal obligations around trust accounts, how to account for trust accounts, and the tools available to easily manage and report on your trust accounts.
As a result, outsourcing accounting is a wise decision for any law firm looking to improve its bottom line.
Find out exactly how to choose the right accounting partner.
Make Every Hour Count
At the end of the day, non-billable hours matter.
However, there are ways that law firms can streamline non-billable activities so as not to hinder their billing – and the rewards of doing so are significant.
Whether they outsource their accounting operations, hire internally, or invest in practice management software, law firms that strategically reduce non-billable hours benefit from higher partner pay, increased lawyer bandwidth, and improved overall efficiency.