Guest Post: Tracking the Zero Dollar Hour - Non-billable Time

Note: This is a guest post by Loretta Ruppert, who provides her take on the importance of lawyers tracking all of their time. In my next post, I'll post my views on this same topic.

 

Whether you’re e a solo practitioner or a multi-attorney law office, tracking all of the time you are in the office can help you make business decisions that impact how you leverage staff, your revenue and work-life balance for you and your employees. 

 

Are there days when you work twelve hours in the office but only bill 5 or 6 hours? Where did your day go? How did you spend the time you did not bill? Tracking how you spend your time, billable and non-billable, will help you understand where you might need to leverage administrative staff or other billable staff. If you are a solo attorney, you might think about outsourcing some administrative work so you can spend more time on billable activities. If you have matters or cases that have lower negotiated rates or have work that a paralegal can do (with your oversight), using a contract attorney or paralegal is another viable option. There are so many alternatives today besides using traditional on-site temps, such as using online virtual services for law practice support.

When you are in a firm with multiple attorneys, tracking non-billable time is even more important. Let’s first define what is billable versus non-billable time. Billable time is work that is reflected on a client bill. It could be marked as no-charge but because it was client work and it was important enough to include on the bill for your client to see, there was some value there. Non-billable time can be broken down into many components: (1) administrative (2) CLE (3) firm meetings (4) all other time otherwise unaccounted for. Some may argue with this definition but for simplification, we’ll assume this is the standard.

So many times I’ve heard attorneys say,” I charge a flat rate or only do contingency cases, so we don’t track our time. Not even the billable time.” Tracking time will provide real insight as to what your profitability is for a specific type of case, or for a particular client, and surface how much non-billable time you’re spending during your day. Even if you value-bill clients you can learn from tracking your time. For example, it may reveal an opportunity to streamline an internal process that eats up a lot of time, which can improve the productivity for you and your staff and ultimately increase your bottom line.

It won’t be easy to track non-billable time if you aren’t already doing so, and to some it will be a chore. But don’t feel you have to track non-billable time forever. Track it for a week or a month to gain factual information you can take action on to improve how you work. Be sure to include enough detail about your non-billable time. For example, you might be spending an inordinate amount of time interrupted by email, phone calls and staff, instead of working on client matter management. Keep track of the kind of requests coming to you, how often you check email, and identify the amount of time it takes you to recover from a phone call before you can refocus on billable work.

According to Ann M. Guinn, author of “Minding Your Own Business: The Solo and Small Firm Lawyer's Guide to a Profitable Practice" (ABA 2010), lawyers can spend up to 180 hours a year looking for things instead of practicing law. Are you a piler or a filer? Are you spending a lot of time searching for documents that were misplaced somewhere in pile labeled “to-be-filed?” Do you organize your day based on the piles of paper on your desk? How much time do you spend looking for a document: 5-10- 15 minutes? Whatever your methodology for organization, you should remember that 80% of what you file you’ll likely not look at again, and the other 20% is critical to the success of your case. A law firm management solution that organizes and centralizes the information for quick retrieval could pay off if you are billing your time instead of hunting for information.

The goal for tracking non-billable time is not just to leverage staff and increase billable time, although, in my opinion, that alone is worth it. Work-life balance plays into this exercise too. If you are billing more time and staff is being more productive, you can bill more in the same amount of time or you can choose to take more time for yourself.. Work hard – play hard! It’s a great motto to adopt to keep you and your staff happy and engaged at work.

 

Loretta Ruppert is the Senior Director of Community Management for LexisNexis’ practice management team, including matter management and attorney billing software.She has experience as a business owner, a technology and business consultant for law firms and other professional services firms and is an expert in developing back office software.

 

Comments

[Gerri Lynn Martin, CPA, MPM]

When I first starting tracking time (many years ago), it was not for billing purposes. At the time, we were writing software programs. All of our jobs were fixed price so I didn't need a billing program. As time went on though and staff grew, I felt like I wasn't making as much money as I thought I should be. So, with a promise not to use the figures against anyone, I required everyone to track all time. I found that I was severly under estimating the time it took for documentation. When I asked people why documentation was taking so long, you will never guess what I found out.... We needed a new photocopier that did a better job of collating. When you need to produce 25 copies of a 200 page document and it keeps jamming, much time was lost by people sitting around and manually collating. Who would have thought!!!

If all you are doing with your billing program is sending out bills, you are wasting your money. Locked inside that program is a wealth of management information. Unlock it and you will be amazed at how much better a business person you become. You can recongize log jams, biggest areas of profitiability, and competitive advantages to name a few.

[Clyde McDonald]

Another important reason for tracking you time is that in Ontario, and maybe elsewhere, your accounts can be taxed. Taxing is whereby a client can dispute their invoice through an informal court process.

Track all of your time, then give a discount. Or show the total time and total fees on your invoice. Contingency fees are also subject to taxation. By showing all of your time, the taxing officer will be less likely to reduce your invoice.