Failure to Record Time Overlooked Money Pit

I recently spoke with an executive whose company produces software to help lawyers record billable time. He discussed failure to record time as a “time leak,” because time is lost — and therefore not billed — when an attorney fails to make contemporaneous notations of work being done.

Surveys done by the company suggest that at least one in five timekeepers consistently fails to record time contemporaneously, and almost 80 percent record their time days or even weeks later. That is simply professional negligence.

Attorneys may try to defend the practice by saying they are too busy doing work for the client, or they weren’t in the office to input time into the firm’s system, or they always catch up on weekends, etc.

Such explanations for not making contemporaneous (or nearly so) time entries are reasons, but not excuses. The real impact of these lapses is simple: They cost lawyers money — thousands of dollars a year in revenue that is never billed. Forget about the issue of realization rate and collection. Your client will never pay, and you will never realize, what you don’t bill.

Lawyers who claim they have too little time generally allow themselves to be distracted by too many other tasks. The root cause of such procrastination is typically a failure to prioritize.

Because most law firms still bill by time increments, attorneys should not put off or ignore the important time management task of completing daily time records. These records should be prepared as the work is done. Daily time record reviews give any lawyer a chance to monitor progress in achieving billable hour goals.

A review of time records at the end of each week will reinforce the likelihood of reaching those goals or will provide the basis for analyzing a failure to meet them. And if you have followed my earlier advice about budgeting for the client matter, this review will enable you to know whether you are on target or if you are reducing the budgeted legal expenses and can brag a bit about that to the client.

The ultimate benefit to the law firm of having detailed all the tasks that make up a matter is that it provides the means to analyze the firm’s entire cost structure. That is vital for any number of reasons, from providing a roadmap for creating budgets to making it easier to address client requests for alternative billing arrangements. A firm cannot aspire to set accurate budgets and fees unless it understands operational processes and how each attorney determines firm profitability by his activities as revealed in daily time records.

Unfortunately, many attorneys seem to lack an understanding of that integration concept and fail to look beyond the immediate impact of their own billings. The broader implications of how fees, collections and compensation interact tend to diminish and be depreciated. Yet nothing is more important to the firm than removing time records from the individual context and focusing it on the firm’s financial life. Failure to achieve priorities in that sense has direct and negative consequences for all partners and makes the individual lawyer appear indifferent or unreliable to colleagues.

When significant rainmakers are guilty of failing to record their billable hours in a timely manner, the firm often ignores it; nevertheless, however important the rainmaker may be, his importance is diminished if the records produced are not accurate. There is a cost to the firm. The battle, if one were to occur, would find its way into compensation committee discussions.

Failure to achieve time record submission priorities demonstrates personal irresponsibility, and its consequences are very real.