Beyond Billable HoursHow Law Firms Can Optimize the WIP-to-Cash Cycle

The financial performance of your law firm is more than simple accounting.It wasn’t too long ago when it was a merely a matter of making rate increases, and then searching spreadsheets for opportunities to reduce costs. However, with the proliferation of client billing guidelines, alternative fee arrangements, and new processes such as eBilling, it becomes more difficult to realize revenue, and more importantly, improve margins.

In other words, optimizing the revenue cycle goes beyond billable hours, accounts receivable and on-time payments. However, improving margins is well within reach for many law firms. Without raising billing rates, signing new clients or cross-selling an existing client, all that’s needed is to make the business processes carried out by timekeepers more efficient.

This step-by-step guide will examine core areas law firms can identify and implement in order to operate as a more modern and efficient organization, and in the process improve their WIP-to-Cash cycle.

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RETHINKING LAW FIRM STRATEGYRemaking the law firm’s approach into a more efficient and cost-effective organization starts with a tough task: winning over all the stakeholders — partners and board members, in particular. Here are some of the challenges and opportunities for creating change.

The company way: Legal culture is steeped in tradition and prestige. As little as 15 or 20 years ago, law firms could leverage their reputation to chart the course on how legal services are delivered, and how much they cost. They also had the clout to define billing hours and implement annual rate increases with few questions asked. In other words, law firms were in the driver’s seat when it came to providing legal services and assessing bills.

A tale of two organizations: Over the past two decades, the gulf between the values of corporate culture and legal culture has widened. (See list.) Today, clients expect more responsiveness and higher value from their legal spend.

Finding alignment: Corporate culture seeks and expects efficiency and value from its partners, and it’s no different when it comes to making decisions about legal spend. Successful firms that thrive in the 21st century need to be mindful of their clients’ values and align their strategy and vision with theirs. While a degree of caution is still valued, companies also expect agility, growth and a solution-driven mindset from all partners.

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legal culture

• INNOVATION

• MOBILITY

• AGILITY

• GROWTH

• SOLUTION-DRIVEN

• PROCESS-DRIVEN

• CAUTIOUS

• REPUTATION/PEDIGREE

• PROBLEM-FINDING

• TRADITIONAL2

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INNOVATE OPERATIONSConsidering the less familiar and traditional path is never easy. Delivering legal services in the way clients want them — easy to use and access, automated, flexible and responsive — takes a new mindset, and, probably, a change-up in operations.

Structure: Look beyond traditional legal hierarchies and consider how more efficient corporate structures can be adopted and applied at the firm.

Recruitment: Look beyond traditional legal pedigree and consider a greater diversity in skills and education, including technology, science and medicine, to create a team that can respond in a more agile way to emerging trends.

Focus: In order to devote more time and resources to the core mission, consider outsourcing routine and labor-intensive tasks, such as discovery, document review and diligence, to outside firms. These tasks can be performed at much less expense.

As law firms face mounting pressure to demonstrate value and deliver services more efficiently, taking steps to improve operational efficiency will prove to be a key driver in reducing costs.

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ADOPT TECHNOLOGYAs law firms meet the challenge of streamlining their operations, technology designed to help people across the organization perform routine tasks quicker, will take center stage.

Consider Technology in the Context of What All Your Fee Earners Do: Too often, law firms purchase a technology solution to solve a specific problem, and over time aggregate a patchwork of systems. When a fee earner must bounce back and forth from system to system, technology feels like a chore and a detractor from the practice and business of law. This leads to aversion, which delays time entries, bill editing, collections, and ultimately holds up the entire process of converting WIP to cash.

Recruitment: Do all the technology systems in your firm talk to each other? The relationship between a billing system and case management is a quintessential example: the revenue a firm makes, centers around case management, yet these systems are not traditionally integrated with billing. Are all the various eBilling systems used by your clients available in one dashboard?

Use Technology to Battle Technology: Law firm billing systems enable the ability to build libraries of the most common rules found in client billing guidelines. This helps move the review process upstream and back to the sphere of influence within the firm, while also providing standardization to breed efficiency. Imagine if rules could be implemented at client intake, so that a narrative that trips the eBilling system alerts the fee earner, thereby initiating corrective action at the time of entry.

These integrated technologies exist and can have a tremendous positive affect on both front and back office efficiency.

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PROCESS IMPROVEMENTProcess improvement is one of the easiest and least expensive ways to improve the bottom line. However, efficiency for efficiency’s sake is a strategy that can backfire and hurt firm morale. Instead, focus on areas that can have immediate and tangible results.

Implement a Streamlined Billing Workflow: Simply mapping out the billing process will illustrate inefficiencies that can be rectified and automated. A firm can likely put a dollar figure on what the process costs today, and what the proposed improvements would save the firm tomorrow.

Make it Ridiculously Easy to Enter Time: The capacity to access law firm systems on mobile devices, with the functionality fee earners have come to expect in the office, must be woven across all systems. Mobility makes it ridiculously easy to enter time. Combining that mobility with easy access to billing guidelines ensures that time is entered faster, and pre-bill review is done accurately and early in the process.

Leverage Data: Don’t overlook the fact that the best technology solutions don’t simply streamline the delivery of core legal services. They can also provide ongoing insights on how efficiently the firm’s processes are working. Firm leadership can use relevant data to continuously evaluate and improve the processes and efficiency of the firm.

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ENABLE MOBILITY ACROSS THE FIRMOne of the biggest mistakes law firms make at the beginning of a mobility initiative is merely trying to replicate the entire desktop experience on a mobile device. This effort misses the mark because it isn’t supporting a specific need. Lawyers who work on complex legal problems may, in fact, find some tasks do require a desktop or laptop. Here are just a few processes law firms can streamline with mobility.

Obtain Client Data from Anywhere at Any Time: Obtaining client data is about empowering lawyers by providing self-service access to information with real-time data. A lawyer might need to know case or financial information in the back seat of an Uber ride on the way to a client meeting, for example. Secure, mobile access to that information should be available to them.

Manage Expenses On-the-Go: Mobility provides a firm’s lawyers and staff with the option of tracking expenses as they travel. An employee might choose to fill in the details of an expense right away on a mobile app, instead of saving receipts and having to fill out an expense report at a later date.

Initiate and Approve Billing Actions: The more sophisticated mobility tools are more than just an inquiry tool. For example, if a matter is complete, a billing partner can quickly pivot from merely reviewing it, to notifying the billing team and initiating the billing process. From a lawyer’s perspective, the entire billing process can be supported from a tablet – from initiation to invoice approval.

Review, Edit and Approve Pre-Bills: The sooner a law firm can invoice, the sooner it gets paid.

Streamlining the pre-billing process is a proven way to boost cash flow and margins. Mobility has a critical role in that pre-bills can be edited electronically from anywhere with an internet connection. Instead of taking a stack of paper pre-bills home for the weekend, this can be done on a tablet. Edits to the narrative, the adjustment of hours, or transferring an entry from one matter to another is both efficient and easy.

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CONCLUSIONA landmark study of 900 companies across Europe and North American published in the McKinsey Quarterly in January 2010 found that simple improvement in back office productivity can increase profit margins by 2%. What would an additional 2% of margin mean for your firm’s profits per partner, and bonuses to associates and law firm staff? Think how it would affect firm morale, culture, and talent acquisition and retention.