One of the key advantages of using a case management is that you can easily collect a large volume of data that would have been logistically difficult, or even impossible, to collect before.
Increasing turnover is important, and at times sacrificing margins for the sake of growing your business is the right thing to do. However, unless you are a tech giant trading on viral growth and social media buzz, profitability matters.
Many law firms know this, but are unsure of how to measure profitability on a granular level. Expenses can be easily analysed, but for any business service it is employee and partners’ time that is the biggest expense and the most difficult element to understand and manage. Filling in employee timesheets is a big admin headache for all involved, and is often not very accurate – let’s face it, who on a Friday can remember to the minute how they spent their Tuesday morning?
Using technology can make time management much simpler. For example, emails and documents in Thread are created within the platform – if they are tagged to a case, then time spent on them is recorded automatically and added to the case. Time spent on the phone, or in client meetings can be easily recorded with just a few clicks.
Manual time recording, and amalgamation of individual employee spreadsheets, can be such a chore that many companies decide it is not worth the effort for non-billed time. When time can be recorded almost in real time, using technology, that data becomes much easier to collect. The additional detail gained can provide valuable insights into creating a more profitable and robust firm.
Here’s how companies can leverage Thread Legal’s time management capabilities in order to make more profit with less effort:
1) Have employees record all time associated with cases.
With Thread, all work is done within the system so time spent editing documents, composing emails and working within the file can be recorded with one click. Time spent on the phone can also easily be added.
Whether or not the time is billable, all time should be recorded by all staff members. This includes any time that senior staff members spend giving advice on the case – as this can often be forgotten.
2) Gather a critical mass of completed cases.
We would suggest at least five from each category of law that you practice, but this will vary from company to company and depends on the goals you want to achieve with the data.
3) Use the Time Reports and Expenses features to collate the full time spent on the case and expenses incurred.
We would recommend that you have a high-level overview of the fee, costs and overall profitability, as well as each case, in as much detail as possible.
4) Start asking questions!
The most valuable information will be unique to every law firm, but here are some of the things that you might want to consider:
- Is one area of law consistently more profitable than another?
- Are clients within one type of industry more profitable than another?
- Are cases managed by one lawyer consistently more or less profitable than other lawyers?
- Are there any clients who are consistently highly profitable, or consistently unprofitable?
- If you charge flat fees, are they consistently offering a similar level of profit, or are there wide fluctuations? Are they averaging out as profitable?
- Are there any employees who are spending significantly more time on one area of a case than other employees?
5) Now begin to analyse your answers in the context of your business, and create a list of concrete actions that you could take based on your conclusions.
Again, this will be specific to your business, but here are some things you might want to think about:
- Allocation of marketing budgets.
- Amendments to fee structures or level of service included within an offering.
- Employee training or development.
- Targets for future profitability.
- In terms of targets for future profitability, one important thing to note here is that the aim of this exercise is not to promote profitability at all costs.
For example, a cornerstone client might generate little profitability within their account, but the association with that client could generate significant business.
However, a cornerstone client of ten years ago may not be as significant today – in which case their fees and profitability levels may need reassessed.
6) Prioritise these actions, and assign responsibility to individual team members.
Most companies will struggle to implement a long list of recommendations. Ensure that every person taking responsibility has a manageable amount of change to implement, and visible support from the senior management team.
7) Get the team involved.
Review individual case profitability against the targeted profitability as part of your end of case reviews. As said previously, profitability should not be the only factor that matters – sometimes it is worth putting profitability to one side in order to complete a difficult project well, or ensure a client is happy. However, once you start measuring profit your case owners will be more aware of this, and may have great ideas that will make their cases more profitable.
8) Keep on reviewing profitability data regularly.
At minimum every twelve months, although we suggest more regularly than this. Markets change very quickly, and what is your most profitable work today may not be in six months’ time when the industry changes.
The power of time recording for a law firm is that time data can be leveraged to provide insights far beyond ‘what Bob the paralegal was doing last Wednesday’. It can be used to help law firms allocate resource into the areas which will generate the most profit for the company, and identify areas where the company is investing a lot but not getting much return.
Thread Legal’s time recording capacities make time recording simple for both users and collectors of time-based data. Unlocking the powerful insights that this data holds in now up to you!