There has been an interesting flow of news stories lately about BigLaw firms cracking down on late time keeping. Hughes Hubbard plans to cut the salary of attorneys by as much as 20% if they don’t get their time items in on a timely basis (their definition being “within 5 days”). Simpson Thacher is doing something similar. Akin Gump’s managing partner Steve Pesner recently penned an email to his team on the subject that was unforgettable—“For those of you who think you are exempt from doing time sheets on a daily basis, I’d suggest that you re-evaluate your importance and get ready to prove that (a) you are busier than I am on legal work, (b) you are busier than I am on client development work, (c) you are busier than I am on firm work and (d) [redacted] and I do not have better things to do with our time than beg you to be responsible … and incidentally, it is my understanding that the job market is not so good right now in case you did not know.”

While these might seem like rude and forceful reactions I, for one, don’t think that these are overreactions. The timely recording of billable work enables three critical outcomes for a firm: the precise collection of billable time, the rapid collections of receivables and real time analysis of staff utilization. As you can imagine the bottom line effect in a BigLaw firm is significant, ranging in the millions each year. While the dollars are smaller, the effect on a small firm is more dramatic.

Take for instance the precision of time collection. I’ve heard higher estimates, but in my experience (at NexFirm), a timekeeper can lose as much as .3 hours per day by delaying the recording of entries to the end of the day as opposed to making them in real time. To be conservative, let’s round it down to .1, or six minutes per day. At $400 per hour, it is $10,000 per year in lost revenues. For a firm of three, call it $30,000 of pure profit out the window. I think any small firm would find this to be a meaningful amount.

Utilization management can drive even larger profitability gains. In the business of legal services, each minute that ticks away is gone forever and can no longer be monetized. Using real time entry data, a managing partner at a small firm can more efficiently allocate work to those who are not busy. If these efforts result in an additional .1 of billable hours per attorney per day, tack on another $30,000 of profit to our theoretical three person firm.

Sending bills out to your clients on time starts by having all of your time entries in the billing system, and drives a shorter cash collection cycle. It’s a bit harder to put a dollar amount against this benefit, but if you run a small firm you are undoubtedly well aware of the need to drive cash collections.

Encouraging your attorneys to track their time entries in real time can pay big dividends. To make this happen, create a billing environment that is user friendly and easily available. Create a culture that encourages real time recording of entries; start by explaining the importance of these efforts to your team, set a good example by doing it yourself and provide reminders and policing that prevent timekeepers from getting off track.

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http://abovethelaw.com/2010/12/hughes-hubbard-is-the-latest-firm-to-crack-the-time-keeping-whip/

http://abovethelaw.com/2010/11/akin-gump-partner-pens-email-fantasy-about-firing-delinquent-time-keepers/

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David DePietto is the founder and CEO of NexFirm. He can be reached at ddepietto@nexfirm.com.