Accurate client billing is crucial for the success of any law firm. However, many firms struggle with keeping billing records organized and up to date. This can lead to inaccuracies that cost both the firm and its clients. In this blog post, we’ll discuss the importance of accurate billing, common billing mistakes, and tips for improving billing processes.
Why Accurate Billing Matters
Without accurate billing records and processes, law firms run the risk of underbilling or overbilling clients. A recent industry report found that nearly 80% of law firms lose up to 10% of revenue annually due to poor timekeeping and billing practices. This lost revenue directly impacts a firm’s bottom line.
Beyond the financial implications, improper billing can damage client relationships and trust. Clients who are overbilled may get upset and take their business elsewhere. Underbilling results in the firm not getting fully compensated for their work.
Accurate billing demonstrates to clients that the firm values transparency and fairness. It shows the firm is organized and on top of recording and managing time worked on client matters. Taking steps to improve billing accuracy protects a firm’s reputation and ability to operate successfully.
Common Billing Mistakes Law Firms Make
Many factors can contribute to inaccurate legal billing. Some of the most common issues firms face include:
- Procrastinated time entry – Attorneys waiting until the end of a month or longer to record time leads to missed billable hours and details. Encouraging real-time or daily time entry improves accuracy.
- Vague descriptions – Using generic labels like “research” or “document review” on billing records makes it difficult for clients to understand what specific work was done. More detailed descriptions are needed.
- Incorrect time increments – Billing in large blocks of time versus smaller increments (e.g., 0.1 hours) can result in overbilling. Breaking time down into smaller segments provides transparency.
- Duplicate records – Entering the same time entry twice in error skews total hours billed. Running audits can identify duplicate records before billing clients.
- Incorrect rates – Using outdated hourly rates or wrong rate tiers for attorneys leads to underbilling. Regular rate updates and reviews help avoid this.
- Calculation errors – Mistakes in adding up total hours or applying discounts wrongly inflate or deflate bills. Double checking totals and calculations reduces math errors.
- Disorganized data – Spreadsheets, notebooks and other paper or manual tracking methods are prone to chaos. This causes billing delays, lost hours, and frustrated staff.
While these examples are common, any discrepancy between actual hours worked versus billed hours can be detrimental. Law firms should strive for no more than a 5% variance to ensure high billing accuracy.
Tips for Improving Billing Accuracy
With some adjustments to processes and technology, law firms can get on track to precise legal billing. Consider these best practices:
- Standardize billing policies and procedures
Document clear guidelines for recording time, applying rates, billing frequency, invoicing, collections and more. This creates consistency across the firm. Have partners, associates, and anyone involved in billing review the guidelines annually and after any major process changes.
- Train all staff on billing practices
Ensure attorneys, paralegals, assistants, and anyone else recording time understands the firm’s policies and latest processes. Conduct training during onboarding and periodic refreshers. Have staff acknowledge in writing they have been trained. This avoids errors from knowledge gaps.
- Utilize billing software
Automate time tracking, invoicing, payments, and reporting using legal-specific software. This eliminates reliance on manual methods prone to mistakes. For one powerful option, check out LawBillity time and billing software for legal firms.
- Have attorneys record time contemporaneously
Entering time daily or in real-time is proven to be more accurate than backlogging or batch time entry. Make this a firm requirement. Enforce this by blocking access to recording time for previous dates to prevent backfilling incomplete records.
- Use detailed time entry descriptions
Require attorneys to give specifics like case names, tasks, topics researched, documents reviewed, people met with, etc. for transparency. Set minimum requirements for time entry details and bill directly for vagueness.
- Break down time in small increments
Using 0.1-hour (6 minute) increments provides a clear picture of time spent versus large blocks of time. Establish increments of 0.1 hours as the norm but still allow flexibility for appropriate use of larger time blocks.
- Review time regularly
Have billing staff or managers review and edit time for errors and vague entries before invoicing clients. Set a weekly or monthly cadence for reviews to happen consistently, not just at billing.
- Compare hourly estimates to actuals
Note differences between estimated and actual hours worked on matters to improve future estimating. Track trends over time to see where estimates are regularly off and adjust accordingly.
- Audit billing records monthly
Perform audits to check for duplicate entries, incorrect rates/fees, calculation errors and other discrepancies. Schedule monthly audits and use audit reports to identify areas of improvement needed.
- Send pre-bills for client review
Asking clients to review billing drafts allows errors to be caught early before final invoices are sent. Make this the firm standard for all clients or those above a certain spend threshold.
- Automate alerts on billing issues
Have your billing system automatically flag potential problems like vague time entries or rates changes for review before invoicing. This catches problems proactively.
- Keep billing tasks organized
Use centralized digital databases, naming conventions, folders, and other organization methods to ensure billing data stays orderly. This improves staff efficiency and accuracy.
Making billing accuracy non-negotiable at your law firm prevents lost revenue and shows clients you value transparency in your services and fees. Following best practices, leveraging technology, and making billing a priority ensures precision.
Streamline Billing with LawBillity
As you can see, inaccurate billing has a big impact on law firms and clients. LawBillity helps firms improve billing processes through our easy-to-use legal billing software.
LawBillity centralizes time tracking, invoicing, payment processing and reporting into one cloud-based system. Our software automates billing tasks to eliminate reliance on manual methods, spreadsheets, and paper timesheets prone to human error. Features like robust reporting, invoice auditing and rules-based workflows ensure accuracy.
We designed LawBillity specifically for attorney-client billing needs. Many legal professionals trust our software to handle billing efficiently while eliminating mistakes. LawBillity also integrates with popular legal practice management tools for seamless data sharing.
Try LawBillity Risk-Free
If you’re ready to get your firm’s billing organized and error-free, get yourself a free trial of LawBillity today. Our team is happy to give you a personalized demo and discuss how LawBillity can transform billing for your firm. Accurate client billing is achievable.