As lawyers, you are no strangers to the concept of billable hours. It is how most firms and solo lawyers operate and make money. However, as much as it is a fundamental part of your practice, it can be a challenge to navigate, especially for small firms and solo lawyers. Many of you may have found yourself in financial trouble due to a lack of understanding, and it is high time that we address this issue. We will delve into the problem of billable hours, how lawyers got into this predicament, and offer viable solutions moving forward.
To start, let us take a closer look at the issue of billable hours. Balancing these hours with the number of hours on contingency cases is vital. Contingency cases are solely based on settlement amounts and judgments, which means that the law firm funds the expenses related to the case. As a result, the firm must have the funds on hand or in their savings to keep the case alive. One way to fund these cases is through billable hour cases.
For example, when ten hours are rendered to a contingency case, the firm expensed $4,000 in billable hours, which is not charged to the client. In this case, the firm should ensure that $8,000 in billable hours on other matters are simultaneously being done. This ensures that the firm can continue to meet its operating expenses, such as salaries and office leases.
It is also important to remember that all cases involve client and case expenses such as expert witnesses, depositions, marshal services, document fees, and more. These expenses in billable cases are paid for by the client when incurred. A retainer is an advance of client fees paid upfront when the firm accepts the cases and typically includes a stipulation that the retainer balance must be replenished when the funds reach 50% of the balance. This ensures that funds are “in trust” to cover the ongoing expenses of the case.
Now, let us turn to the problems that arise when legal practitioners do not follow these rules. When attorneys work solely on contingency cases, the firm is not billing clients for billable hours, which means that no funds are coming in to cover the operating expenses of the firm. This creates another problem when the firm needs more money to fund the contingency case, including expert witnesses, research, investigative services, or court filing fees. Ultimately, the firm exhausts its capital account and can lead to financial troubles.
As lawyers, you have enough to worry about with the demands of your profession. The last thing you need is financial stress from a lack of understanding of your billing system. This is where Nothing But Numb3rs can help. Our firm offers billing services throughout the United States and takes care of law firms’ IOTA accounts, ensuring that you operate with the highest level of financial excellence.
Let’s Recap:
- Understanding billable hours is essential for the financial success of any law firm
- Balancing billable hours with the number of hours on contingency cases is vital for the firm’s operating expenses
- Law firms must have the funds on hand or in their savings to keep a contingency case alive
- One means of funding contingency cases is through billable hour cases
- Firms must ensure that they have enough billable hour cases on other matters to cover the expenses of contingency cases
- Always keep in mind that all cases involve client and case expenses, which should be paid for by the client when incurred
- The retainer balance should be replenished when it reaches 50% to ensure that funds are “in trust” to cover the ongoing expenses of the case
- When lawyers work solely on contingency cases, the firm is not billing clients for billable hours, which means no funds are coming in to cover the operating expenses of the firm.
- Nothing But Numb3rs offers billing services and takes care of IOTA accounts for law firms throughout the United States to ensure financial excellence.
Understanding billable hours is vital to the financial success of any law firm. Balancing these hours with contingency cases, retainer accounts, and client expenses is necessary to keep a law firm’s finances in order. By working with Nothing But Numb3rs, legal practitioners can rest assured that their billing system is being handled professionally and thoroughly. This will allow you to focus on what you do best – representing your clients and advocating for justice.
JoAnna Laiscell, August 15, 2023
