A Note from Shireen Hilal
This article was written a few years ago, but profitability matters in any economy. It’s one of the fastest ways to make more money because firms don’t necessarily need to win more work to improve profits per partner.
Profitability erodes in small ways before anyone feels the full impact: a discount here, unbilled time there, poorly worded time entries cut during bill review, a write-off after the client pushes back, and invoices that sit too long before anyone follows up. Leaky buckets are an expensive way to gather water.
In the article, I focus on several ways firms can protect more of the revenue they already have, but a few quick hits:
- Make client expectations clearer earlier: Have a consistent intake and onboarding process. Budget conversations, clear scopes, billing thresholds, and feedback loops reduce surprises and help clients see value before invoices become disputes.
- Treat timekeeping as value communication: Unrecorded time is lost revenue, and vague time entries make it harder for clients to understand what they received. Train people on what good entries look like, make daily time entry easier, and help timekeepers understand how their habits affect realization.
- Put structure around invoicing and collections: Invoice on time, use retainers thoughtfully, create escalation paths, and give teams scripts for difficult collection conversations so payment issues aren’t handled awkwardly or inconsistently.
If your firm is growing revenue but it still feels like too much is slipping through the cracks, I’m happy to be a sounding board. Meanwhile, the full Law360 article is below.
As Published in Law360
With layoffs continuing across sectors, missed corporate earnings and an unpredictable economic forecast, law firms are feeling the pressure.
Clients are pushing for more value with lower budgets and challenging outside counsel with profitability obstacles, ranging from scope creep to write-offs to collection issues.
Associates and staff operate under concerns of job security, while partners wrestle with maintaining impeccable service while increasing revenue.
The historic expectation in law firms has been for professionals, from partners to staff, to navigate largely on intuition, crafting on-the-fly strategies from the top of the revenue funnel — e.g., business development — to the bottom, e.g., handling write-offs.
But law firm teams are stretched thin and weary; they need better guidance to not only enhance firm profitability and efficiency, but also to bring them increased time and certainty.
Firms' mission to their clients is clear: to offer value and transparency in every interaction. For internal teams, it's time to establish systematic processes — from creating channels that measure client satisfaction to handling pushback on bills — and arm teams with the tools they need.
For partners in particular, the narrative needs to change. It's not merely about chasing higher top-line figures, but understanding the power of bottom-line management. After all, leaky buckets are an expensive way to gather water.
The lack of a structured process erodes profitability, almost imperceptibly, percentage point by percentage point: Clients seek fee discounts, which trims rates; associates don't bill all their time, creating another reduction; poorly-worded time entries are discarded by partners reviewing bills; and finally, clients request write-offs that further diminish revenue received.
The truth that's often overlooked? While firms are engrossed in the revenue race, they can push far more revenue to the bottom line. Driving profitability involves reimagining processes to create an ecosystem where strategic financial oversight meets evolved client relations, teams are empowered to do better instead of more, and value to clients is clear and uncontested.
Client Relationship Management: An Evolved Approach
It's common practice for individual partners to oversee and nurture their client relationships. This autonomy fosters a personal touch, building stronger, more genuine bonds between the firm and its clients.
However, autonomy should not come at the cost of structure and guidance. By equipping partners with the right tools and frameworks, firms can both ensure satisfaction for current engagements and create a lever for repeat business.
The following tips can help you create a structured approach to managing client relationships that respects partners' autonomy, while fostering best practices to avoid write-offs and increase client predictability and satisfaction.
Include a budget conversation in your intake process.
This will help you — the partner — plan your time and resources and avoid surprises down the line.
Map out how much time you can spend on each phase of an engagement, especially if you are billing hourly, and be sure the client's expected outputs are reasonable given their stated budget.
Maintain open billing communication.
If you are billing hourly, ask your client if they want to be informed when you hit specific thresholds to eliminate shock upon receiving their month-end bill.
Note: This is why value-based or flat-fee billing can be preferable, but regardless, predictability needs to be part of your value.
Have a clear statement of work.
Train partners on having a clear scope for each engagement that outlines what the firm will be doing and the expected outputs or known deliverables.
Where applicable, you should also outline what is not included, and what you need the client to provide in the way of resources or time. This acts as a safeguard against scope creep — i.e., additional projects outside of the original, anticipated scope of work — and ensures a true meeting of the minds on expectations.
That said, plan for the unexpected.
Even with a meticulously prepared scope of work, the dynamic nature of legal matters means that work can evolve. When unanticipated shifts occur, it's not the change itself that makes the difference, but how the change is managed.
Transparent communication with clients is paramount: Proactively address the changes; discuss potential implications to outcome, timeline and budget; and recalibrate expectations to prevent disputes and write-offs.
Put ongoing feedback mechanisms in place.
Happy clients pay and come back, so embed structured feedback mechanisms to get a clear sense of client satisfaction levels.
For long-term relationships, use pulse surveys — surveys that ask the same questions at regular intervals, e.g., every six months — to gauge ongoing satisfaction and identify rising issues before they escalate further.
Upon an engagement's completion, use post-mortem surveys to help you understand whether you delivered value as compared to expectations.
Actively listen to this feedback, address concerns promptly, and use the insights to enhance your offerings and service delivery.
Articulate responsibilities for client relationship partners.
Every firm assigns a client relationship partner, often the originating attorney. Instead of leaving this pivotal role linked to your current and future revenue undefined, delineate the firm's expectations and solicit input from your top rainmakers to ensure these guidelines are both relevant and resonant.
Time Value: Elevating Timekeeper Practices
In an industry where time equates to money, the way timekeepers track and comprehend their billable hours is crucial. Many firms, however, see poor timekeeping habits as unfixable, leading to unbilled time — read: lost revenue — and opaque entries — read: lackluster value.
The solution is change management that instills ownership in timekeepers. It's not merely about billing more, but ensuring timekeepers understand that unrecorded hours negate their hard work and that their entries reflect their value. To maximize time value, you can do the following.
Hold timekeeper training on what "good" looks like.
Clear and well-worded bills not only help clients understand the value they're receiving, but also reaffirm their decision to hire you, making them confident and proud of their choice.
All timekeepers, from paralegals to partners, should be trained on crafting effective time entries. Encourage each practice area to share relevant before and after examples to illustrate the difference.
Partners who handle bills have limited time for reviewing them, and that time is better used strategically evaluating upselling and cross-selling opportunities and assessing progress, not editing individual line entries.
Create a program that makes daily time entry a priority.
Delaying time entry by just a week could potentially lead to an omission of a staggering 25%-50% time worked.[1] What other industry allows this percentage of slippage in their operations? Bottom line — daily time entry needs to be a priority for your firm.
Understanding that most people loathe entering their time, create a program consistent with your culture that makes contemporaneous time entry easier, e.g., software that allows for mobile timekeeping, dedicated time entry staff, etc.; ties compliance to an aspect of compensation, e.g., monthly assistant minibonuses for ensuring their attorneys' time is entered, and timekeeper bonuses that are reduced or enhanced depending on behavior; and uses messengers that matter to communicate the program and its importance, e.g., individual practice group leaders.
Empower timekeepers with their data.
While utilization measures an individual's capacity, realization reflects the time that actually gets billed. A disconnect between the two can reveal inefficiencies, scope creep or even misaligned billing practices.
Give your timekeepers access to their time data and ask them to keep an eye on realization in addition to simply their billable hours, empowering them to contribute to improving profitability and ensuring satisfied clients within the parameters of their own role.
From Service to Settlement: Invoicing and Collections
The moment of truth for any service delivery comes at the point of invoicing and collection, so processes that support payment practices are critical.
As described in more detail below, adopting wise retainer practices, punctual invoicing, and robust but empathetic account receivables policies can streamline collections while reinforcing the firm's commitment to its clients.
Get ahead of issues by utilizing retainers strategically.
For legal practices that involve financially stressed clients who are more likely to miss payments — e.g., family law, bankruptcy, etc. — consider not only taking a retainer but also having it apply to the last bill instead of the first to ensure that you are paid for all your work.
Of course, check your specific jurisdiction's rules on holding retainers first.
Prioritize timely invoicing.
Consistent and prompt invoicing keeps cash flow stable and underscores professionalism. Aim to invoice as soon as the agreed-upon milestones or hours are met. You can't expect clients to pay on time if you don't invoice on time.
Have policies in place that provide programmatic guidance.
Review your accounts receivable on a regular schedule and create clear guidelines on escalating unpaid invoices, from notifying responsible partners, to communicating delinquencies to clients and defining when you stop work if payments are not received.
Standardize collection processes.
Streamline your collection process with predefined email templates and call scripts. This ensures consistent, professional communication, reduces administrative burden, and guides your teams through uncomfortable conversations.
Create email and letter templates and phone call discussion points to be used at specific intervals — e.g., 60 days past due — to help busy teams send prompt and meaningful communications every time.
Teach empathy, and learn from the data.
If a client expresses difficulty in settling an invoice, exhibit understanding, and consider proposing a structured payment plan. This not only aids in collecting dues, but also nurtures the client relationship.
Importantly, take this moment to also review whether you could have, or should have, known earlier — what flags did the firm miss at the time of intake or throughout the engagement that can serve as an early warning signal next time?
Conclusion
Clients are grappling with constrained budgets and looming threats of an economic downturn; they rightfully demand billing predictability, indisputable value and avenues to voice their feedback.
By reinforcing your systems and championing transparency, you do more than just enhance the bottom line — you elevate the professional journeys of your dedicated teams and solidify the trust your clients invest in you.
Both law firm professionals and their clients merit an evolved approach, where profitability harmoniously coexists with their well-being and confidence, echoing an unwavering commitment to excellence.
Shireen Hilal is the CEO at Maior Strategic Consulting.
The opinions expressed are those of the author(s) and do not necessarily reflect the views of their employer, its clients, or Portfolio Media Inc., or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.
[1] https://www.americanbar.org/groups/gpsolo/publications/gp_solo/2014/july-august-2014/tasty_solutions_timekeeping_billing_and_accounting/; https://www.bill4time.com/blo g/poor-time-tracking-habits/.
