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Conventional wisdom (and an Al Pacino reference) reminds us that we should ABC: always be closing. For lawyers, the idiom might be better stated as always be collecting.
Billing and collections are critical to the success of any law firm. But timely billing and ensuring that your bills are paid in full and on time can be frustrating and challenging. These challenges are even bigger if your firm doesn’t have a dedicated billing and collections department.
Luckily, there are resources and technology advancements to help your law firm streamline its billing and collections process so that your lawyers can get back to lawyering.
Here’s what you need to know about billing for the legal industry:
We know that one size rarely fits all, but for law firm billing processes, there is standard practice. It usually starts with your firm bringing in a new client after a phone call or email and opening a matter (or opening a new matter for an existing client).
Billable time will be logged throughout the lifecycle of the matter, and, if your lawyers follow billing best practices, they’ll track time daily. Generally, at the end of each month, your law practice will compile the billed time and related expenses for each client into a draft bill, sometimes called a prebill.
The lead attorney or originator of the client will add notes, adjust costs, and revise the prebill as needed. That prebill bill is then approved, finalized, and sent to the client for payment.
The client then pays the bill. To optimize your client service, you can offer different payment options, including check and online payments through bank transfers and credit card payments. The accounting team stays on top of payments by tracking accounts receivable and will send out reminders to clients regarding any late payments, partial payments, or non-payments.
It seems like a simple process, and it can be. But you’re reading this blog post — and we wrote it — because we both know it’s usually not. There are ample opportunities for bottlenecks: delays in opening a new matter, attorneys not logging billable hours in time, reviewing attorneys sitting on approvals, bills being sent out late, and everything in between.
Your firm relies on getting paid and paid quickly to stay afloat. A clean, concise, and consistent billing process is the way to ensure that happens. The cornerstone of the billing process is often the billable hour.
Put simply, billable hours include all the time an attorney spends actually thinking or working on a matter. Billable time is time spent attending to professional tasks that your firm can charge to a client at the previously agreed-upon hourly rate. Generally, billable time includes things like drafting contracts or briefs, strategizing, researching, speaking or emailing with the client, or attending hearings or meetings.
Billable time is distinct from nonbillable time (e.g., time spent on administrative tasks (like billing!) and continued legal education). Billable hours are tracked in different increments depending on the firm’s preference. The key is that they must be tracked accurately to bill a client properly and correctly.
The billable hour is the cornerstone of many law firms’ billing practices. However, there has been a movement toward a range of alternative billing structures.
We get it: tracking billable hours can be a drag. It’s a lament of many legal professionals. Thankfully, there are tried and true alternatives to legal hourly billing. Here are some options for your firm to consider using to bill clients for your legal services.
This fee arrangement charges the client a set price for each matter or case without calculating the time spent on the matter. Flat fees may be preferred by clients who want certainty and consistency in the amount owed.
If you use this arrangement, be mindful of the risk of underestimating the work required for a matter and setting the fee too low. Diligence is key here.
Under a subscription-based fee arrangement, your firm provides clients with representation and advice on an as-needed basis for a set monthly fee. It also means that you’ll have a regular, predictable income.
Generally, this fee arrangement is beneficial for smaller clients who may need regular advice on matters like intellectual property and business law.
Note that a subscription-based fee is not the same as a retainer. A retainer is an advance payment for future legal services.
A contingency fee is paid by a client only if the case is won. This type of arrangement is typically used in torts, such as personal injury matters, as well as in class actions. It serves an important function for individuals who cannot pay out of pocket for representation.
Generally, these arrangements pay the attorney a percentage of the overall award. If you opt for this arrangement, it’s important to consider the risk that you may not be paid for your work.
Under a limited scope arrangement, you and your client would define your firm’s involvement in the case, likely limited in scope, and your services would involve only those tasks. A common example is retaining counsel for guidance in an e-Discovery process.
A sliding scale fee is just that: one that takes into consideration a client’s ability to pay and adjusts the rate accordingly. This fee arrangement may help your firm bring in new clients by making services more affordable.
Offering a payment plan may be key to your firm getting paid. Paying out a lump sum may be difficult for cash flow purposes for clients. By offering weekly or monthly payment plans, you can provide an additional service to clients and build goodwill while also getting paid. It’s key here to have clear, written guidelines on collections and payment methods.
The goal of the billing process is to get paid, and the best way to do that is to send clients bills that are timely, clear, and accurate. Standardization of your billing policies will undoubtedly help with this.
Start by creating a fee agreement template and well-defined guidelines that set forth your billing policies. These guidelines should include things like when in the lifecycle of a matter to send invoices and how detailed descriptions should be.
You should also have a written billing process that includes which attorney reviews the bill, how bills are sent out (e.g., mail or email), and what role the staff or accounting department plays in keeping track of bills.
Standardized invoice review is also essential. An integrated legal practice management software is your best friend here: you’ll speed up the process and minimize human error in compiling bills. Practice management software will also help your firm track payments collected and schedule follow-ups for those accounts that are past due. (It can also help with the collections process.)
A standardized billing practice makes it easier for everyone. Your clients will know what to expect and will be less likely to contest billing, and you’ll be able to keep better track of your expenses.
All invoices should include several key elements. The basics include contact information for both your firm and the client as well as the invoice number for quick referencing. Your law firm’s billing codes should also be included. This way you can keep track, at a high level, of which tasks or expenses you are billing to the client.
Billing descriptions will also help with this but at a more granular level. Getting your descriptions right is imperative: they should provide just the right amount of information and be clear to help avoid any client misunderstandings. For your clients who use LEDES billing, it’s important to draft time entries carefully and accordingly (e.g., avoid block billing and pay attention to the clerical and paralegal-type tasks performed by an attorney).
The invoice should also include the payment method, the total amount due, and the date by which the client should pay the bill.
Having uniform, thoughtful invoices will ensure consistency and help make sure that your firm gets paid for its good work.
For a moment, think about things from your client’s point of view. What would you want and expect from your lawyer?
You’d probably want clarity in billing and consistent billing practice. You can achieve these things by setting expectations early on and having regular, clear communications throughout the client relationship. Standardized billing practices and invoices will help you with this immensely.
If you’re using an hourly fee arrangement, the lawyers at your firm should track and enter their time frequently (and ideally daily). As you know, technology can help with this, and it can also help your lawyers draft templates with descriptions of tasks completed and billed.
We also recommend getting bills and reminders of payments out quickly. The sticker shock of a larger bill that accumulates over time may lead to misunderstandings. Regular invoices can keep client billing angst low and help your firm’s profitability.
Legal billing software can save your lawyers and firm hours upon hours by automating routine tasks. The right electronic billing software will help your firm generate and approve draft bills by using your firm’s preferred template and including all the information necessary to get paid.
Legal billing software can also send automated reminders to clients when payment is due (and overdue) and can generate financial reports regarding paydays to help you better visualize the big picture and stay up to date on cash flow.
Your clients can access a secure billing portal any time they need to view or pay bills, relieving strain on your law firm. The right legal billing software is also customizable to the unique needs of your firm, its various practice areas and billing rates, and clients, and can take into consideration your fee arrangement.
As you’re considering potential legal billing platforms, it’s important to choose electronic billing software that meets your firm’s needs. This includes steps involved to get onboarded and what data should be imported into your new legal billing software.
Ultimately, the right legal billing software is the one that will help your law firm automate your billing process, be easy to use, and save you time.
To understand the full history of legal industry practice management consultants, you’d have to go back 30+ years. Back then, all programs were server-based (not cloud-based) so law firms needed someone with enough technical expertise to understand how to load new programs onto their servers, install all the updates when they rolled out each year, deploy those updates to the firm servers, train and teach staff how to use the software, and ensure everything functioned and was maintained properly.
Obviously, things have changed quite a bit. Technology has progressed and law firms that are evaluating cloud-based programs don’t necessarily need someone to download their data and upload it to new software on a new server. Why? These days, the technology vendors will do all that leg work for you.
Over the course of the last several years, we have seen firms work directly with practice management software vendors and we have seen firms utilize practice management consultants. We’re not here to lead you one way or another, but rather to give you an overview of what both scenarios could look like.
When it comes to evaluating different programs, the first step is always going to be evaluating your firm’s needs.
The first thing a consultant is going to do is come in and interview you and your firm to understand your technical needs. They’ll probably be familiar with the program you’re already using as they begin their process. After conversing with your stakeholders, they’ll make a recommendation based on the information they collect.
If you’ve ever felt uncomfortable speaking directly with a vendor about what you need, or if you feel like you lack the technical expertise to make those judgment calls, we recommend bringing a consultant into the conversation.
Today’s consultants typically work with multiple systems. This can be both a good and bad thing.
The good thing? Their experience with multiple systems can prepare them to bring multiple options to the table for your firm, providing the pros and cons of each of the recommended services.
However, if a consultant works with multiple systems, they’re probably not an expert in any single one. So, if you’re evaluating multiple software systems and end up going with a specific one, your consultant will not necessarily be an expert in that chosen system. What this means is that they will likely have the foundational knowledge to initiate the basic setup for you but may lack the granular details to help you flourish and excel. In this scenario, working directly with the chosen software vendor specifically for implementation will be more advantageous because the vendor knows more about its own program, and will be better equipped to help you overcome any issues you may encounter.
Vendors and consultants operate under two very different business models. The vendor is a software company and the consultant is a service company. Software companies view services as a means to get you to use their software and to ensure your success with their program so you remain a happy and loyal customer. Service companies sell services as a way to make money.
Typically, working with a consultant is going to be more expensive than going directly to the vendor. The right consultant will offer a lot of value, but some firms don’t need those services. Think about whether or not it makes sense for your firm to hire a consultant in order to get from point A to point B.
If your main concern is cost and keeping expenses as low as possible, you may want to skip the middleman and think about working directly with a vendor.
Most software vendors today are set up for you to work directly with their team throughout your migration, go-live, training, and ongoing support period; however, they will also accommodate your firm if you choose to work with a practice management consultant.
Ultimately, the decision is up to you and what you think will not only best fit your firm today but your firm’s future needs as well.
We get it-you're sick of the games. The guessing game of law firm financial reports, that is. It’s hard to know what reports your firm should be running and even harder to interpret the data from those reports and connect the dots into a useful strategy. And most bookkeeping or accounting software, like QuickBooks, is just too hard to understand and too complex for your needs.
But it doesn’t have to be that difficult.
Your firm might be brand new to data analytics, or maybe it’s dipped a toe into the waters and has the basics down. Either way, keeping close, regular tabs on certain metrics and understanding financial reports will increase the effectiveness and efficiency of your firm and lawyers and, in turn, your law firm’s profitability. Technology can streamline this process and make collecting and interpreting your firm’s data easy.
This guide will provide a basic overview of legal reporting and analytics and tell you why they’re important and how they can help you intelligently run your firm. Then we’ll go in-depth into the different kinds of financial reports your firm should be running to help you understand your bottom line.
Legal analytics is the process of collecting, organizing, and applying data to the practice of law. If that sounds overwhelming, think of it as paying close attention to the heartbeat of your law firm’s finances and making adjustments as needed.
The goal of legal analytics is to use the collected data and subsequent reports to make informed choices for your firm. Is one practice area soaring? It might be time to hire another associate. Is your cash flow tighter in January right after the holiday season? You can prepare for that by increasing your savings in December.
With the right tools in place, your firm can review its information and create reports on all aspects of its business model. You can then use those reports to inform actionable steps that will best serve the health of your firm.
Let’s get a bit more specific.
It’s simple: law firm analytics and reporting go beyond simple financial forecasting, giving your firm a competitive edge. With legal analytics and reporting, your firm can dive deep into its functioning and gain valuable insights into its daily, weekly, monthly, and yearly net income and operations. Then you can use that information to implement workable solutions targeting both short-term and long-term goals.
Legal analytics can help you forecast with facts. You’ll be able to view data represented in charts and graphs to make sense fast of things like billable hours by attorney, money spent last week (last month, last year), and invoices. Analytics tools translate raw data into knowledge, and knowledge translates into power.
Legal reporting software offers your firm real-time reports that can be pulled daily, hourly, or even faster. This means you can quickly get your hands around potential problems before they become threats to your law firm. Basic data points for legal reporting include law firm accounting, billing, compensation, and productivity—all vital aspects of your firm’s day-to-day operations.
Below is a shortlist of the types of reports your firm should consider when building out its reporting structure. We highly recommend using practice management software with a built-in reporting tool — it’s simply the best practice. We’ve also got you covered with more detailed information regarding what these reports include and how regularly to run them with our legal analytics and reporting guide.
Productivity - Billable hours matter, and tracking them is important both for individual bonus payments and overall firm vitality. Analytics and reporting can help your firm track straight billable hours, nonbillable time, billable processes, profitability per attorney, and matter origination credit.
Practice area performance - If your law firm has multiple practice groups, keeping track of performance is important for both staffing and resource allocation. You should review the performance of your firm’s practice areas at least annually (and ideally quarterly).
Marketing and business development - Reporting and analytics can take your law firm’s marketing and business development to another level. Don’t spend money on marketing and campaigns without analyzing the effectiveness of those efforts. The following market performance indicators should be part of your law firm’s regular reporting processes: source of clients, client retention and referrals, website conversion and hits, return on investment, and production and origination.
With certain reporting and analytics tools, your firm can identify which clients always pay on time (and those that don’t), which attorneys are developing a specialty based on time billed to certain matters, which months are busiest, and which are slowest. Raw data points can be turned into complex spreadsheets and pivot tables that are easily viewable, accessible, and actionable.
What this means for you and your firm is that you can determine appropriate billable rates, monitor, and adjust financial performance targets, hire when you need, and generally make informed business decisions to improve your firm’s financial position. And you don’t have to wait till year-end to get all of the data. No matter whether you’re a small law firm or a megafirm, this data is available at the touch of a button all year long, without having to call your CPA.
A balance sheet is like a doctor’s report — a financial statement of your firm’s health. The classic balance sheet report provides your firm with simple insights into its current assets, and liabilities including accounts payable, and capital. It helps your law firm plan for both the short-term and long-term.
This income statement is a backward-looking report that your firm can use to look forward intelligently. It details the past 12 months of earned revenue and expenses paid (e.g., operating expenses like office space, tech, marketing, malpractice insurance, and legal database subscriptions). A profit and loss statement will help your law firm evaluate its most recent annualized figures, reducing the impact of seasonality and helping you visualize your firm’s health on a rolling yearly basis.
With this report, you can view a full year of financials at any time. (For example, if you run a profit and loss statement on May 20, 2022, you’ll use financials from May 1, 2021, to April 30, 2022). This allows for continuous planning for the future performance of your firm.
The monthly revenue report helps your firm better understand the flow of capital in and out. It takes into consideration time billed and the collection of funds for that billed time and can be narrowed in scope to reflect your firm’s revenue on a weekly basis as well.
This report gives your law firm tangible knowledge of how to best prepare for short-term fluctuations such as the pending conclusion of a matter or late payment by a client. In short, the monthly revenue report helps your law firm plan for the current moment while also considering trends to help it prepare for the long haul.
An accounts receivable report shows the money that clients or other parties owe your law firm. Tracking this amount is key to making sure your law firm is both getting paid for time billed and getting paid on time. These reports track receivables for each client account and matter, whether currently due or past due, and help you forecast your firm’s cash flow (and know when there is a big payday just around the corner). You can monitor accounts receivable on a firmwide basis, per-client basis, and practice group basis.
A statement of cash flows helps your firm track and manage cash on hand. It details your net income, adjustments in reconciled net income, cash from operating activities, and depreciation. The statement provides valuable insights that can help you predict when your firm might need more cash and when it can safely stow it away for a rainy day. You can customize the statement to your needs, which may fluctuate over a period of time.
This report provides your law firm with in-depth knowledge of its actual versus target revenue and allows your firm to track performance metrics like utilization, collection, and actualization rates. With this information, your firm can figure out where improvements can be made (and where it’s doing great). The leaders of your firm will get an overview of both the aggregate and individual performance of their various teams, giving them insights into employee performance.
Legal work in progress or pipeline reports are project management tools that show the financial health of a project relative to its progress by tracking the amount of time an attorney has worked, the value of such time and expenses executed but not yet invoiced. These reports look at more than expected billing and take into consideration the totality of relevant revenue and expenses.
Pipeline reports help law firms identify red flags early on and track real-time information about where capital is, where it’s coming from, and where it’s headed.
This report shows where your expectations did not sync with reality, whether good or bad. Its value is in showing where your firm might have been off for budgeting purposes. Perhaps your firm brought in additional revenue from a marketing campaign. Maybe a big client needs more time to pay a bill. These reports deliver the information that your firm needs to make useful adjustments.
Good legal practice management software can transform your firm’s reporting practices and increase its optimization and efficiency to boot. Legal practice management software makes tracking and obtaining data easier. And with better, more accessible data, your firm can compile more useful reports.
The best practice management software offers reporting tools for standard and custom reports that use a single source of data that doesn’t need to be copied from system to system, saving your firm time and money and reducing the possibility of human error.
Your law firm’s matter management systems matter. In fact, they’re the lifeblood of your law firm.
It’s taxing to try to maintain multiple manual systems to track all of the details about your law practice. Why subscribe to several platforms to manage different aspects of a matter — from document management to practice management and client intake solutions — when you could just pay for one that can do it all? Why risk noncompliance with a time-consuming, manual approach to tracking all of your case details and documents?
Why not look to tech to help achieve operational efficiency by moving to an all-inclusive legal technology platform?
The future of the legal industry lies squarely in innovative tech solutions that integrate matter data with essential client intake, client service, billing, and legal operations details. Upgrading your firm’s matter management systems will help your firm keep humming along — and we don’t mean that annoying buzz in your head from constant worrying about what work hasn’t been done or what information you don’t have at your fingertips.
So, where should you get started? Fortunately, this guide on matter management systems can walk you through the benefits of matter management and help you start moving forward to improve your practice.
Put simply, matter management is overseeing all of the business processes of a law firm for individual matters. It may sound straightforward, but it’s anything but.
Matter management encompasses the ways that your law firm reviews, tracks, and administers data, documents, emails, meetings, tasks, all-important deadlines, statutes of limitations, filing requirements, client records, billing, financials, and more for each and every matter. It involves managing both internal and external processes and information.
Your firm’s matter management systems track each aspect of the lifecycle of a matter. For example, your firm’s matter management system might track a complex legal case with multiple parties and claims, keeping track of expert witnesses and filing deadlines. If your firm has multiple practice areas, your matter management system might also analyze the productivity of various practice groups and which matters have the most time billed and by whom.
In essence, matter management solutions keep a finger on the pulse of your firm and ensure it remains steady.
Effective legal technology solutions, including legal matter management software, are crucial to every law office. There is no other way to sift through and manage the chaos. The more time you spend integrating and updating your firm’s matter management processes, the less sifting through spreadsheets and stacks of paper you’ll have to do. Your legal operations professionals can leverage matter management software to streamline almost every aspect of the firm and allow your lawyers to get back to lawyering.
A firm may bring in hundreds or even thousands of new cases every year. Your legal operations teams need to have the tools to properly manage those matters, and your lawyers must be able to keep track of the intricacies of them all. It sounds like a lot, and it is. Proper matter management might be the most important function of your law firm: it’s how your firm stays afloat.
Imagine an integrated digital workspace where your legal operations professionals can run the firm’s daily operations, manage matters and projects, and collaborate seamlessly across practice groups and clients. The good news is that this magical digital wonderland exists.
While this guide focuses on matter management systems, it’s important to also consider your firm’s case management systems and how technology might help you optimize them too.
Our recommendation? A comprehensive, one-stop-shop technology solution that can handle it all.
If you’re looking for a way to simplify your team’s workload and handle your firm’s matters more efficiently, we’ve got you covered. Managing the lifecycle of a matter in a single, integrated system is the key to suffering fewer headaches while searching for information as well as less duplicative data entry. We recommend streamlining operations by moving to a technology solution with a range of dynamic capabilities so it will become your firm’s single source of truth.
Your law firm is a team, and legal teams work best when they’re able to collaborate seamlessly. Your matter management system should work to enhance teamwork and eliminate friction in communication.
Features like shared task lists and comprehensive calendaring systems boost organization and make sure your lawyers never miss another deadline. It’s especially helpful when your matter management system seamlessly integrates with your calendar continuously, such as with Microsoft 365, so you’re always on top of your schedule. And the most advanced systems can automatically populate deadlines in your calendar based on court rules. All you have to do is choose your jurisdiction, and your deadlines will appear on the appropriate date.
Additionally, matter management software can make it easier for legal professionals in your firm and corporate legal departments to collaborate on legal documents by providing access to shared documents with the ability to review and compare previous drafts. These features and more, like keeping track of the contact information for all parties, make working with outside counsel and other external partners more effortless and faster.
Some platforms also reduce the tedium of your email inbox with chat features. Real-time conversations help you get work done faster because you can get answers to pressing questions or immediate feedback on the work you’re doing. To make sure your team members are up to date, you can mention them and send an immediate pop-up notification. You can also keep track of your conversations by matter rather than going on an endless hunt for the needle in the haystack of your inbox.
Your matter management tech should do more than just track billable hours and generate invoices. It should also create comprehensive, usable reports to give you critical insights into the functioning of your law firm.
The alternative is sorting through spreadsheets and hundreds of emails from various timekeepers and case files to locate essential data, reconcile gaps and inconsistencies, and then manually create reports, which will cost you both time and money. Reports generated in your matter management system make it easy for your firm to break down spending, gaining visibility into each legal practice area and individual biller. With this information, your business team can analyze budgets, set realistic pricing, and forecast future needs. More reporting through an integrated matter management system means greater access to data and gives you deeper insights into the health of your firm.
Time is money, and at law firms, this saying proves even truer. The minutes that timekeepers spend on time-consuming administrative tasks are minutes they aren’t spending on valuable client matters.
By centralizing your firm’s matter management system, your lawyers can access the documents and information they need more quickly and efficiently, serving both your clients’ purposes and your firm’s bottom line. A better matter management system allows your firm to track filing deadlines and statutes of limitations, helping you meet deadlines as well as avoid malpractice claims and compliance risks. Automated reminders about impending filing deadlines sure beat those sticky notes that are likely to get buried on your desk or fall off your computer.
Tech also allows your law firm to manage all types of costs proactively. When you centralize matter data, you improve your visibility into your workload as well as your costs. And you can wind up optimizing the allocation of your resources, which can help you save your clients — and your firm — money.
Your law firm has a lot of moving parts. Matter management software will help you keep track of those parts by assisting in effectively delegating and keeping track of those delegations, both internal and external.
You can create cross-functional workflows within your matter management system to assign tasks to your team members, including other lawyers, paralegals, service providers, and outside counsel, thus increasing efficiency and reducing the possibility of errors. The right software can help your firm oversee any external stakeholders working on a case, such as local counsel or expert witnesses. And general counsel will really enjoy the real-time visibility they have into matters and their timelines and budgets as well, improving their client experience.
Your law firm has an ethical obligation to protect client data and numerous incentives to protect its own. Firms considering a cloud-based matter management system for the first time may feel some trepidation — it’s a big transition, with lots of moving parts to coordinate.
The long and short of it is that cloud-based matter management systems offer your law firm improved security and compliance practices for both data and document handling because that’s their key focus. However, not all cloud-based legal service providers are created equal.
When choosing a cloud-based solution for matter management, look for a variety of features, including physical security measures, certifications, disaster recovery and business continuity plans, user authentication and authorization, infrastructure security, and data ownership. Although you won’t be able to see all of these security features, they’ll be vigilantly safeguarding your firm against threats every minute of every day.
Sound matter management tech will give your firm the gift of automation so you don’t need to keep reinventing the wheel. This is particularly helpful when it comes to opening and managing matters. Without a standardized template, it’s hard for a law practice to both establish and enforce matter standardization, which is the linchpin of enhanced efficiency.
With an integrated matter management system, your firm’s administrator won’t need to manually move data between systems, reducing the risk of human error. Tech will help to automate matters from open through close and can automatically assign or complete tasks for you while also keeping information up to date using a workflow system (and freeing up your lawyers for billable activities). It’s also easy to keep clients in the loop with automatic updates. Automation in matter management is your friend.
Lacking a reliable matter management solution can have a ripple effect throughout a matter’s lifecycle — and the profitability and productivity of your timekeepers and the entire firm. That’s why it’s important to start putting the proper systems in place to open matters effectively and track them throughout their lifecycle with customized reporting.
Centerbase matter management puts everything you need to know about every matter at the touch of a button. And what’s better is that you’ll be able to stop worrying about details that you’re forgetting or those sticky notes cluttering your desk with tidbits of information. Not only will a comprehensive matter management system like Centerbase serve both your firm’s and your clients’ needs, but it will also help you get out of the office in time for dinner and help you get a better night’s sleep.
In short, Centerbase can help your law firm reach its full potential with better matter management — with just one simple move to a comprehensive, easy-to-use technology solution. Sign up for a free demo on our legal matter management software and learn more about how Centerbase can help you streamline your firm’s operations.
The cloud has become a standard part of our lives. From streaming video platforms to smartphones and smart home devices, we rely on cloud computing to make our days exponentially more convenient. But individuals are not the only benefactors of cloud services. Over the last 10 years, business leaders around the world have incorporated cloud-based technologies, recognizing their greater efficiency and cost savings potential. Though it has taken a little longer, the legal industry has also started embracing the cloud.
As reported by the 2018 American Bar Association (ABA) Legal Technology Survey Report, less than 55% of all surveyed law firms utilized some aspect of cloud computing. The hesitation among law firms typically stems from three main reasons: worries about security, limited understanding of how the cloud operates, and ties to traditional methods of practice management. Many of these law firms still rely on filing cabinets and in-office servers, but the disruption of service that took place over the last couple of years made the drawbacks of this decision painfully clear.
As a result, law practice management software is meeting the cloud. Why are more and more law firms adopting cloud solutions?
Let’s explore in more detail the benefits of cloud computing, and why more and more law firms are adopting this cost-effective, more secure option for their legal technology solutions.
If you are a law firm leader or administrator who is frustrated with the inconvenience of premise-based software, this blog post is for you. It will explore four reasons why your law firm needs cloud-based legal practice management.
Legal practice management software helps law firms keep all aspects of their practice organized and running efficiently. Firms have been using them for years to handle such needs as document storage, contact management, calendaring, and task management. They become the backbone of a practice, and when they are not available – whether due to a server crash or office inaccessibility – firms can experience debilitating process failures. After all, practice management software is only beneficial if a law firm can actually use it.
With in-office options, the practice management software is installed on a local computer or server located within the physical office space. Those servers are usually only accessible from computers also located within the same space, which limits the capabilities of the practice management software.
Cloud-based legal practice management software is not installed locally on your office server. Instead, it is web-based, using a remote server maintained by the software provider. Access occurs through the internet, which makes the software convenient and virtually 100% available for use.
With cloud-based legal practice management software, legal professionals can access all of their data at any time and on any device. This includes everything from documents and emails to time tracking tools and invoices. It eliminates the need to be located within the physical office because all data is stored in the cloud, which can be accessed remotely with the proper credentials or through secure mobile apps.
Even when a firm member makes changes to a client file or administrative document, other firm members maintain access to the most recent version. Working with cloud-based legal software gives attorneys and legal support staff the ability to retrieve case data and work on matters in a secure environment without the need for those antiquated network connections that confine them to the four walls of the office. Remote work becomes easier, with greater efficiency, productivity, and accountability.
Law firms need an IT infrastructure that they can consistently rely on to meet their practice management needs. Recurring problems and excessive downtime limit productivity. They can also threaten a firm’s ability to maintain confidential client data in an adequately secure environment.
In-office servers are notorious for their unreliability. They break down often, especially without regular maintenance and updates. They are also known to be extremely glitchy which frustrates firm members as they try to complete time-sensitive tasks.
Firm administrators that choose an on-premise legal practice management software must prepare for continuous maintenance needs and repairs. Many firms find these tasks so challenging that they either keep an IT expert on staff to address server problems or contract with an outside IT consultant. Yet, even with the most proactive measures in place, servers can still go down, leaving firm members unable to use them.
Cloud services obviate all of these headaches. There is no requirement to manage expensive servers because the software provider automatically performs all necessary updates, regular maintenance, and backups. They also quickly address any repair needs, often before firm members even recognize that a problem occurred. Every technical task related to cloud-based practice management software is supported by one centralized team solely dedicated to its performance.
Changes within a law firm require a practice management system that is flexible and quick to adapt. Whether you are the administrator of a mid-sized firm that is scaling up or you are downsizing your firm’s physical office space, cloud-based legal practice management software adjusts with the changing landscape of your law firm.
Cloud-based practice management software offers a variety of modules and features, and many providers allow administrators to choose which options best meet the firm's needs. As the firm grows, so can its practice management software. There is no need to start from scratch with a new system when you can easily make adjustments to what already works.
It’s no secret that office relocation can be a pain in the neck. But it’s even more challenging with an on-premise server. Moving the server from one location to the next will likely require the assistance of an IT technician. It can also result in a period of inaccessibility to important firm and client data.
With a cloud-based system, your firm’s practice management software remains intact and ready to access throughout the entire move. Unlimited storage capabilities alleviate the need for heavy file cabinets and multiple servers. With everything stored in the cloud, firm members can settle into their new digs and get right to work without the costly interruption.
Many lawyers still doubt that cloud technologies can offer the level of security that they are ethically obligated to provide their clients. Yet, the real dangers of theft and data breaches are much more prevalent with in-office systems. A single fire or natural disaster can decimate physical documents in a matter of seconds. In addition, the responsibility to protect an on-premise server from cyberattacks falls on the firm, and that can prove very expensive. Cyber experts and server updates cost money, but law firms must take on these costs to keep their physical servers secure.
When using cloud-based document management, data is continuously saved and stored within the cloud, protecting it from physical threats like fire or natural disasters. Law firm leaders also control which members of the firm have access to the software. Some systems even offer security measures that limit the accessibility of individual cases or client information.
Cloud providers maintain a team of cybersecurity experts who are on constant guard against cyber threats and attacks. They take on this expensive responsibility so that law firm administrators feel comfortable trusting them with their law firm data.
Law firm administrators that understand the power of cloud-based legal project management provide their firms with a valuable resource that streamlines and protects numerous aspects of legal practice. When choosing the right cloud-based option, look for features like:
As your law firm evolves, cloud-based legal practice management software can provide the continuous support and stability that your firm needs to become more productive and more profitable.
Many firms, upon deciding it’s time to evaluate new technology, make the mistake of immediately sprinting toward a solution, especially when they have been forced to react to address a sudden problem.
Diving headfirst into the search for a new practice management software completely forgoes a huge step (and arguably the most important one): meeting with the people who are going to use the software the most.
As soon as you realize your law firm needs new technology, the first thing you need to do is bring the discussion to your team internally. Too often, the decision to buy software is made by a handful of people within the organization, which makes firm-wide adoption more challenging. It leads to greater conflict and pushback and makes training on the new system considerably harder. Without team buy-in, expect a harder transition for many when it comes time to implement the new technology.
Let’s face it: Some people are set in their ways and will push back on adopting new technology, period. If you have staff who are used to using one system or a certain set of procedures to complete their work, they may be quite reluctant to switch to a completely new way of doing things.
If you'll be the one organizing and collecting the internal data, start by putting out some feelers to people in order to get a grasp on the sentiments around the firm. It will be more helpful than you think to know exactly what people’s gut reactions are prior to processing any feedback.
To get the best results, send your team an email saying you’re shopping for new software. Within the email, make it clear that you are looking for internal feedback. Then, set in-person meetings to discuss their feedback and thoughts. Conducting the actual discussions in person as opposed to over email encourages open dialogue and ensures your team feels like part of the process.
If you’re a small team, try to talk to everyone at the firm; if you’re midsize, it’s advisable to speak with at least one person from every department that will be heavy users of the software.
Consider speaking to partners, associates, paralegals, and legal assistants, among other stakeholders.
Once you have spoken to everyone, compile a list of all the feedback you received to categorize it into buckets. These buckets can be organized however you’d like, but if you need a place to start, try using billing, accounting, and practice management as a guide.
Oftentimes, the two parties that will push back the most when presented with new software are the billing team, who don’t want to change their processes, and the shareholders, who may not feel the expense is justified.
To address billing and accounting concerns, the first thing you should do is ask the team to identify any major pain points or complaints they foresee with moving to a new system. Listen to them, make sure they feel heard, and point out the benefits of the new system. In most cases, the initial change is the biggest hurdle to get past.
For the shareholders, it’s all about the value proposition. Show them the money! Highlight some of the ways the new technology stands to make your firm money, both in the long and short term. It will enable you to capture more billable hours, increase client satisfaction and referral rates, and attract top talent for a long-term competitive advantage.
After you have collected and categorized your firm’s feedback, the next step is to create your requirements list.
A word of warning: Use what you have collected as a guideline for what your firm MUST have vs. pitting staff with opposing opinions against one another. If you carry a mindset that every feature is equal and all practice management systems are the same, you’re going to be severely disappointed. Avoid the feature comparison trap by thinking about the direction your firm is going. Ask yourself: What do I want my practice to look like in 5 years? 10 years? What do I want my interpersonal relationships with my staff to look like?
The easiest way to start building your requirements list is to list every possible feature that a practice management software could have and then begin crossing off the features your firm doesn’t need.
Looking for a list of potential features your firm should consider when researching new legal software?
Visit sites like Capterra to evaluate the customer reviews for the software options you’re considering. Many reviews on sites like Capterra will talk about specific shortcomings. Feedback from third parties who have already used the software can often prove to be just as useful as feedback from your team.
These reviews can provide you with a great snapshot of customer sentiment, but don’t look to them as a shortcut to making a final decision. Rather, use reviews to find ideas or read comments about topics or problems you haven’t thought about already.
Additionally, if you’re part of the Association of Legal Administrators (ALA) or similar professional communities, take advantage of your network to ask questions such as: What is something you wish you had asked or known ahead of time prior to buying new legal software?
Be aware that one of the worst things you could do for yourself is to ask a vendor to fill out the requirements list for you. Instead, you need to have that list readily available and in front of you before a live demo.
What happens if you pass your list off to a vendor? First, you’ve commoditized the software and, second, you’re letting them check things off for you. When you watch a demo, you want to be shown what is important to you and you want to see how the software works so you can determine whether or not it will align with your processes. For example, a vendor may say its software includes origination tracking functionality, but that does not mean its origination tracking feature will match your firm’s needs.
No one knows your firm or processes better than you do, so don’t overlook these details!
Centerbase, a leading provider of cloud-based legal technology for mid-sized law firms, announced today that Paul Bridgewater has been appointed as Chief Executive Officer (CEO) and President. Bridgewater succeeds current CEO and founder, John Forbes who has led Centerbase since its inception in 2015. Forbes will remain an active member on Centerbase’s Board of Directors.
Prior to joining Centerbase, Bridgewater served as CEO of ResMan, a leading property management SaaS platform provider, where he led its growth through a customer-first model and scaled the reach of ResMan’s software to new segments within the property management industry through organic and complementary acquisitions. Before ResMan, Bridgewater served as CEO of Sage Payment Solutions (now Paya), where he grew processing volumes to more than $27 billion prior to a successful divestiture of the business.
“The team at Centerbase has done an incredible job building a robust practice management system tailored for mid-sized law firms,” said Bridgewater. He added, “I believe Centerbase’s commitment to client joy through a combination of a powerful back-end practice management solution and a front-end web marketing and content management system has positioned the company strongly within the legal technology landscape. I’m thrilled about this opportunity and will strive to continue driving value for our clients, team members, and shareholders.”
Under the vision and leadership of John Forbes, Centerbase has expanded its reach across the practice management and legal billing space, specializing in serving mid-sized law firms poised for growth. “I am immensely grateful to the team at Centerbase who have created an extraordinary platform and an incredible culture from which we were able to bring my vision to reality for so many law firms,” said Forbes. “I believe Centerbase’s best days are ahead, and I find that Paul’s character and expertise in the SaaS industry make him ideally suited to serve as the company’s CEO and President for this next stage of growth. I look forward to supporting Centerbase as a board member and cannot wait to watch the next chapter in Centerbase’s story unfold.”
“I am excited to welcome Paul to Centerbase and want to thank John for everything he has done to make it the company that it is today,” said Taylor McKinley, Managing Partner at Mainsail Partners and a Centerbase Board of Directors member. “We know Paul well from working with him at ResMan, where he demonstrated strong leadership skills with a relentless focus on delivering value for their customers. We believe he is the perfect addition to oversee this next phase of growth as Centerbase continues its endeavor of disrupting the legal software market.”
The announcement also follows Centerbase’s recent acquisition of Legalfit, the leading web marketing platform and content management system (CMS) built specifically for law firms. Bridgewater is excited to leverage his prior experience to create a platform that can serve the legal sector throughout the entire client lifecycle encompassing everything from a firm’s website to business management and accounting.
Centerbase, the leading provider of cloud-based legal technology for mid-sized law firms, provides innovative, configurable, and scalable software to power the growth of law firms. Centerbase’s practice management software, web marketing platform, and content management systems liberate legal teams from manual work by taking the guesswork out of marketing decisions, automating routine tasks, and connecting them in a single collaborative workspace. Boasting a comprehensive feature set of billing, accounting, and practice management tools plus the ability to offer full-history data migrations, Centerbase has become the go-to solution for midsize law firms. For more visit centerbase.com.
Mainsail Partners is a growth equity firm with offices in Austin and San Francisco that seeks to invest in rapidly growing, bootstrapped software companies. The firm has raised over $2.2 billion and invested in more than 60 bootstrapped companies since 2003. Mainsail has extensive experience investing in B2B software companies that the firm believes have the potential to be category leaders. Mainsail’s approach to driving value creation is anchored in a dedicated Operations Team that is purpose-built to help founders scale their businesses and accelerate growth. These women and men include former software company operators who leverage real-world experience, well-established best practices, and a true partnership ethos to support management teams. For more information, visit mainsailpartners.com or follow the firm on LinkedIn.
If you’re the administrator of a small or midsize law firm, you’re probably wearing a lot of hats. In fact, you probably have a closet full!
You’re overseeing the bookkeeping, ordering supplies, managing the budget, and running payroll. You’re handling equipment and facilities issues. You’re creating and implementing policies and procedures and setting long-term goals. You’re probably also handling the human resources side of the firm for non-lawyers, including recruiting, onboarding, training, and managing administrative assistants and paralegals.
In short, if it’s part of day-to-day legal services operations, and it doesn’t involve the practice of law, it lands on your desk. (There is a desk somewhere under all of the piles, right?) That means when your firm’s leadership team wants to find new ways to increase efficiency and drive law firm profitability, those tasks are automatically yours too.
It’s a daunting task, no doubt. But fortunately, there are legal technology solutions that you can implement quickly so you can demonstrate progress toward your goal. Here’s a list of typical efficiency problems that plague law practices along with some suggestions for how to solve them:
Legal billing is the lifeblood of a law firm. Because it’s so important, it often becomes a tedious process with many steps and approvals. But just because billing is critical doesn’t mean it has to be cumbersome.
Law firms can take the pain out of the billing process with an automated system that streamlines the billing workflow. Look for an e-billing system that allows lawyers to edit bills online — not in hard copy — to avoid the need to print and reprint or track versions of pre-bills. A system that allows reviewers to see previous markups means that bills are approved in less time and eliminates friction in the approval process, getting money into your accounts faster.
No one likes to measure their life in minute-by-minute increments, and lawyers are no exception. But, as you know, time tracking is essential if your firm wants to stay out of the red.
While you can’t eliminate the need for billable hours, you can take some of the pain out of the time-tracking process. Lawyers often don’t record all their time. Sometimes that’s because they’re writing down what they’re doing and don’t remember to note down every detail. Other times that’s because they’re on the go and don’t have their computer open, so they can’t recall the work they did when they get around to recording it later.
To make it easier for your timekeepers to track every billable minute, choose a billing system with a timesheet that integrates with the technology you use. Look for a platform that integrates with your firm’s software, such as tracking the emails that lawyers send in Outlook or the documents they work on in Word. And some platforms have mobile apps that automatically record phone calls, texts, and calendared appointments as billable events.
Lawyers regularly complain that their administrative workload takes too much of their billable time. In addition to billing, lawyers are spending too much time on non-legal work such as looking up matter information for clients and tracking deadlines. It’s difficult to manage a matter when information is stored in hard copy as well as in multiple systems online.
A matter management system can keep every matter detail in one place, from details for parties to all documents, emails, meetings, and calls. The most comprehensive platforms can track the outcomes of calls and meetings and the current budget status of a matter. They can also alert lawyers about upcoming milestones and deadlines. Additionally, they provide a searchable place to store notes about matters, substantially reducing the time it takes to find pertinent case information.
There’s a lot of competition in the legal industry. The firm that responds faster to the inquiry of a prospective client is often the firm that wins the business. Two out of three prospective clients say their decision to hire a firm is influenced by a firm’s responsiveness to their first contact. And when clients are impressed from the get-go, they’re much more likely to stay with your firm.
But manual intake processes create roadblocks to bringing in new matters. And all too often, form submissions from your website may not be a priority in an overflowing inbox.
An online onboarding process can expedite the conflict check process and ensure that you get the right information in the right hands, so you can contact a new prospect more quickly. Some platforms allow you to customize the intake form. Then not only can you route the collected information to the appropriate staff, but you can also automate workflows. This way, you ensure that no steps are missed, assign and follow up on tasks, track the progress of the matter, and smooth the intake process for the client.
Clients often complain that they don’t know the status of their matters. When lawyers don’t keep in touch, clients get frustrated. They call and email your firm’s lawyers, asking them to give them an update. That means lawyers have to drop the work they’re doing and comb through their files to inform their clients. And that means extra frustration for your lawyers too.
A system can make it easier for your lawyers to remember to send emails—without the need for the clutter of sticky notes or calendar reminders. Matter management systems can automate client emails whenever a matter moves to a new stage, so your clients are always in the loop. And they can also meet your clients’ expectations for 24/7 digital access to their case information via a client portal. Happier clients have stronger ties to the firm and are more likely to refer new business your way.
In this environment, it’s critical to make sure your people are happy at work. That means they can’t be stressed with too much work, nor can they be twiddling their thumbs at their desk. Striking the right balance means you need insight into their workload and productivity.
A platform that offers productivity tracking and timekeeper budgeting tools can give you critical insights into your team’s upcoming assignments and deadlines. You’ll be able to see how much time people are billing on certain tasks and projects. Perhaps most importantly, you’ll be able to ensure that tasks are being distributed fairly throughout the firm and reallocate work to avoid overload.
Though no two matters are alike, they still have many documents in common. From retainer agreements to settlement agreements and from requests for production to interrogatories, there’s often no need to recreate the wheel.
A document management system can make it easy to get even greater value from work product by organizing it for creation and reuse. You can set up templates and auto-generate documents with client information built in. Or you can search for a prior work product for a client or a similar project that you can repurpose for a new matter.
Hounding clients about overdue bills is a serious pain point for many firms. Accounting or billing staff have to send manual reminders and call clients who are overdue.
An automated billing system can send out reminders once a bill is overdue and then periodically until the client pays off the balance, eliminating that headache from your billing team’s workflow.
Law firm managers and partners often want quick access to reports so they can make decisions. Pulling together a report that collates all the data and metrics they need is easier said than done when you have multiple systems that store firm accounting and matter data separately. Before you can create a report, you have to gather, sort, and compile that information into a readable form.
But a system that integrates accounting, billing, and practice management software enables you to assemble comprehensive reports at the push of a button. Better yet, the right system will give your firm’s leadership team a dashboard view that offers real-time insights into how the firm is performing.
Modern law firms would love to hire a professional to drive innovation, efficiency, and profitability within their firm. But for many small firms, that just isn’t in the budget. Instead, they have to look for other ways to improve case management and your law firm’s productivity. Enter legal tech management tools: namely, practice management systems.
While a practice management platform can’t replicate all the functions of a legal operations guru, its automation of time-consuming tasks and simplification of workflows can take some of the burden off a law firm administrator’s plate.
A practice management platform that integrates matter management, timekeeping, calendaring, billing, accounting, reporting, document management, and more in one system can serve as a resource for quickly increasing a law firm’s efficiency. And, in turn, it can help you improve your law firm’s bottom line, alleviate the bottlenecks of manual work, and help turn your law firm into a pillar of productivity.
Timing is everything. This old adage holds true even when thinking about upgrading technology.
Maybe you’ve been on legacy software for years. Maybe you work entirely on paper. Perhaps you’re still dipping a fountain pen into an inkwell (by the way, if that’s the case – cool). Wherever you’re at, how do you know when it’s time to start evaluating new technology?
When firms begin to think about evaluating new software, two distinct mindsets come into play: reactive and proactive. Which one your firm holds will set the stage for how you kick off this process.
For firms with a reactive approach to software purchases, one (or more) of the following primary motivations tends to drive them to reevaluate their legal technology:
Just like car batteries, servers don’t last forever and eventually need to be replaced.
Picture this: Your server is on the fritz but still operational. Your IT guy says it’s got six months to a year at best. Still, you hold off on any major moves and it dies unexpectedly three months later. Now, you’re looking at hours of downtime, potential loss of data, and thousands of dollars to replace it.
A reactive firm will wait until its server is at the end of its life, which forces them into making a sudden choice to either buy a new one or move everything to the cloud. Since buying and maintaining a server is such a big capital expenditure, at this point, the firm often realizes that the costs associated with replacing the server do not outweigh the benefits of upgrading to cloud-based technology.
Investing in technology that enabled remote work used to be a proactive exercise for law firms. Now, over two years into the pandemic, many have been forced to make a reactive shift to remote work, which is now considered essential.
Remote work was an immediate necessity at the start of the pandemic, but firms are now looking for ways to evolve these arrangements, which may have been enacted hastily, to make them more efficient, seamless, and responsive. The “make it work” approach is quickly being replaced with a strategic one that identifies areas for improvement sooner rather than later.
No matter where your staff or attorneys are located, they need to have access to their work; if they don’t, your firm is going to lose money. Cloud-based technology paves the way for a more effective remote working environment.
Many firms already use some form of cloud-based technology, but that doesn’t automatically mean they’re happy with the software they chose. Their current system could lack features that the firm needs to operate. This is the unfortunate result of poor communication with the vendor, or not being explicit enough about the firm’s needs during the initial discussions with the sales team.
Another pain point that often leads firms to switch software is how their data is distributed. If their current software doesn’t have the integrations they need to manage day-to-day tasks like document management, calendaring, and court deadline scheduling, the firm must rely on additional third-party programs. Working out of multiple systems makes it significantly harder to both run operations efficiently and utilize data effectively enough to make sound business decisions.
Imagine software that has billing features but lacks accounting functionality. In this case, firms must rely on outside technology for all of their accounting needs, leading to copious amounts of manual work, and, subsequently, more chances for human error. If you’ve ever had to enter information into multiple systems like this before, you know very well the pain we are talking about here!
According to the American Bar Association, 25% of all U.S. law firms have experienced at least one data breach. In other words, the risk to your firm’s information is at an all-time high.
At one point in time, cloud technology was viewed as a security hazard compared to on-premise servers. Today, however, that reality has changed. On-premise servers are at significantly greater risk for breaches because they are exposed to many more physical elements.
The easiest way to take server security off your plate is by working with a cloud-based provider. Ask yourself what you can do better to protect your firm and your clients and how you would react to a breach. The data you handle is sensitive and hackers today use sophisticated techniques to gain access to it. If you aren’t relying on companies that protect data for a living to keep yours secure, you are exposing your firm to significant risk. As soon as a security breach happens, a reactive firm is pushed to evaluate new cloud-based software.
If any of those motivations resonated with you, it is time to start looking at new legal technology while you have the leisure to do so.
Firms with a proactive approach are intent on staying ahead of any problems and motivated by a desire to improve. Instead of waiting for issues to occur, these firms pursue action-driven solutions to maximize their operations. This road often leads them to consider cloud-based software much earlier than a reactive firm.
If a firm’s goal is to increase revenue, the initial reflex for many is to try to hire more attorneys. But, if you leverage the right technology, you can increase revenue by capitalizing on features that allow you to capture more billable time. This can be as simple as the ability to enter time on your commute, or it can be complex like being able to instantly track and create billable events for text messages, calls, and emails as conversations occur.
On average, attorneys only capture 2.3 billable hours a day, so automatically capturing your time as it happens is the easiest way to grow your business and increase revenue without hiring more staff.
Your clients expect three basic things from you:
Your firm needs to be available. No one hits the panic button faster than a client who either doesn’t feel heard or can’t quickly get the information they need. When you go with software with advantages like a client portal, you help reduce the number of client calls your staff may receive while helping your firm stand out by giving your clients a quick way to access what they need.
A client portal also helps you achieve autonomous accessibility, which has the added benefit of reducing the time you spend answering their questions.
This responsiveness can be translated into new business as well. When people are searching for representation, oftentimes, it is the firm that responds to their call or email first that wins the business. Not only are these firms setting the tone right off the bat, but they are also making the client feel prioritized – a huge factor when it comes to converting prospects into billable clients. Legal software is the best place to start if you want to improve these aspects of your client experience.
As we all learned these past couple of years, the ability to access files from any location is imperative to today’s practices. Firms that were paperless before the pandemic were able to continue their practices without missing a beat. The advantages are valuable outside of a pandemic as well. Digital case files allow your attorneys to access them wherever they are – from court, a client’s office, or home.
With all file information hosted in the cloud, firm attorneys and staff can access the files from any location with internet access.
The bottom line: Proactive firms are motivated to meet the current state of technology. They take active steps to adopt modern solutions that may not have existed five years ago, taking note of their current pain points and strategically planning out how they can alleviate them. Generally, they set out to improve current processes, become more efficient, and implement software that allows them to be agile, grow, and develop.
Most law firm leaders do not enter the legal industry with an accounting background, but a basic understanding is important to inform decisions about billing processes, the acceptance of payments, and trust accounting.
Simply put, you need to know about your law firm’s financial performance. But, you also need to be able to meet your legal, regulatory, and ethical obligations, such as preparing your federal and state income tax returns and managing your clients’ money. Accounting practices enable you to prepare financial statements, capture expenses, and create budgets and forecasts. The better you understand your law firm’s finances, the easier it will be to make smart decisions for your business and avoid legal and ethical headaches.
A lot goes into navigating the world of law firm accounting. Let’s explore some of those vital components:
The wrong bank could create financial complications for your firm and result in serious legal problems.
When choosing a bank, consider the following:
Law firms typically need a business checking account for the management of general business revenue, a savings account to set aside money for taxes or emergencies, and an IOLTA account for holding client funds in trust.
Some law firms also choose to open a money market account to take advantage of a higher interest-earning rate, as well as a business credit card for strategic practice growth.
For law firms that hold client funds in trust, the IOLTA trust account comes with its own set of detailed accounting rules and risks. Noncompliance can result in severe penalties, so it is important to understand the complexities of trust accounting.
With so many different rules in place, it can be challenging to stay on top of all of them. Even still, some mistakes show up more often than others, with the most common stemming from these IOLTA rules:
As businesses, law firms must stay on top of their federal, state, and local tax obligations. The specifics vary based on the type of practice, but most firms have a responsibility to pay the following types of taxes:
This is not an exhaustive list and firms may have a variety of additional tax obligations. As such, firms need a tax professional in their corner to help them navigate these vital responsibilities. For firms that do not have an accountant on staff, a contracted Certified Public Accountant (CPA) can offer valuable guidance for limiting tax liability.
Legal time tracking is not an easy task, so law firm payroll poses challenges that do not exist within other industries. Firm members may have varied pay structures, which requires a payroll process that offers flexibility.
Payroll accounting includes components such as:
The rise in outsourced legal work adds another layer to payroll duties. Law firms should carefully categorize employees and independent contractors for taxation purposes.
Once the invoices have been sent out, law firms need processes in place to actually receive payments and manage collections. After all, there is nothing to manage if revenue is not going into the firm!
While most firms still accept cash and checks as payments from clients, online payment methods have become more common within the legal environment. This requires having a system in place to accept these payments, and the choice of provider could mean the difference between accounting success and failure.
Invoicing is arguably the most important part of law firm accounting, as it is the mechanism by which firms bill for the legal services they provide. Improper invoicing can have many negative consequences, including unbilled tasks, sporadic billing, and unpaid invoices.
Law firms can choose an independent legal billing system to handle invoicing tasks, but the most streamlined option incorporates legal billing into a legal practice management system. With these platforms, firms benefit from advantages such as simplified approval processes, tracked invoice changes, and the ability to process numerous types of fee arrangements.
Some legal practice management software options include extensive data reporting capabilities so firm leaders can quickly access financial reports with just a few clicks of the mouse.
There’s no doubt that your legal practice management software should include accounting features within the larger platform. In fact, this is one of the most common reasons that law firms choose to implement cloud-based software.
Legal professionals spend time tracking billables and nonbillables. Management spends time reviewing revenue statements, budgets, pricing, and law firm expenses. Billing administrators spend time generating invoices and following up on delinquent accounts. By having legal practice management software that includes both billing and accounting features, you can streamline some of the most time-intensive, manual processes at your law practice. This software also lets management review billing and accounting data within the larger context of other law firm metrics.
Legal practice management software without any billing or accounting features leaves a gaping hole that management usually needs to fill with multiple platforms. This can confuse the data and your employees, and it typically creates more work for everyone. Plus, it usually results in an added expense for the law firm.
As you’ve probably gained from this post, law firm accounting can be challenging. But, it doesn’t have to be another headache on top of the stresses of your law practice.
The first step is to put down the pencil and paper - or even the Excel spreadsheet. If you want to get really serious about your accounting, you need to ditch small business accounting platforms, like QuickBooks that aren’t designed specifically to meet small law firms’ needs.
You need a legal practice management platform that includes full billing and accounting capabilities, making sure that you’re able to track every last penny and satisfy your ethical obligations to your clients. To find a tool that’s able to resolve your biggest accounting challenges and meet your firm’s needs, look for a platform that is equipped with the following accounting features:
Given the number of financial accounts in a law firm’s financial ledger and the potential number of firm clients, it can be daunting to track them all in a standard bookkeeping system. Law firms must track assets, retainers, receivables, revenue, equity, expenses, and much more. A centralized repository that puts all of your bank accounts, operating accounts, and related information at your fingertips in real-time is essential.
Every lawyer knows that closely managing client trust accounts is an integral part of ethical (and legal) law firm billing. Billing and accounting software must be able to effectively manage lawyer trust accounts that hold clients’ funds before they are earned. This includes tracking interest-bearing accounts (IOLTA) and three-way reconciliation with the asset sheet, trust asset account, and trust liability account.
Legal accounting and billing software must be able to accurately track billable hours and support LEDES e-billing practices. It’s even better if the software has features to automatically detect timekeepers’ billable hours, such as the ability to capture time for appointments or communications sent through the same platform.
Some law offices use flexible fee arrangements, depending on the client or type of case. To be effective, the accounting software should recognize various fee arrangements like fixed fees, contingent fees, and subscription-based payments.
Generating invoices and collecting payments is one of the most time-consuming parts of legal billing. Software that can automate the billing process by automating and sending invoices to clients, facilitate edits and changes to bills directly within the system, and collect credit card payments through a secure system will cut down on the time that administrative staff spends on billing.
It’s important for billing and accounting software to synthesize data and generate reports that give law firm management insights into the efficacy of billing procedures. These reports may include billable and nonbillable hours per timekeeper, client, or case as well as measures of attorney profitability.
Law firm billing and accounting are important because they tie directly to the financial success of the business. Legal practice management software must be able to track metrics related to big-picture finances like expenses, overhead, and cash flow so that management can pinpoint areas of success and opportunities for improvement.
Perhaps the most important feature of legal billing software is that it can be customized to support your unique business goals. For example, a legal billing solution might offer add-ons like billing templates, an app, a customizable dashboard to track relevant billing and accounting metrics, or the ability to create one-of-a-kind financial reports.
Features like these can make the difference between an inefficient accounting process that’s prone to errors and bookkeeping and accounting systems that run like clockwork, enabling you to meet your ethical obligations and client trust account reporting requirements.
Mastering law firm accounting is no easy feat. However, the right legal accounting software can help you streamline these critical accounting functions.
If you keep the above components in mind and put them into practice, you’ll be well on your way to navigating your firm’s finances successfully and without penalty.
