Biglaw, Billable Hours, Boutique Law Firms, Quote of the Day, Small Law Firms

From Biglaw to Boutique: Where Does the Time Go?

For attorneys who bill by the hour, one of the less enjoyable aspects of the job is recording time. Associates know that all too often their worth might be measured by their billable hours. Of course, big and small firms alike tolerate the timesheets because they are the firms’ lifeblood. Recording time enables firms to generate their invoices. The inherent purpose of entering time is to generate this request for payment. But an invoice can and should do much more, especially for a small firm or solo practice....

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For attorneys who bill by the hour, one of the less enjoyable aspects of the job is recording time. For many associates, entering time is a necessary evil done only under coercion. The process also can be fraught with pressure. Associates know that all too often their worth might be measured by their billable hours.

Of course, for big and small firms alike, we tolerate the timesheets because they are our firms’ lifeblood. Recording our time enables our firms to generate their invoices. The inherent purpose of entering our time is to generate this request for payment.

But an invoice can and should do much more, especially for a small firm or solo practice….

Requesting payment obviously is important. But there are also several other purposes an invoice should serve.

Small firms and solo practices often compete with their larger counterparts on price. Billing entries and invoices are the ideal place to communicate to the client the value the lawyer is providing. Each entry should have enough detail to not only justify the time claimed, but also to show the value received. The more descriptive your billing entries, the less likely the client is to question or balk at the time incurred.

Invoices also can be more than the sum of their parts. Over and above each individual billing entry, the entries on an invoice can also serve, collectively, as a monthly progress report. A client should always have a pretty good idea what is happening in litigation by virtue of the invoices alone. Ideally, your invoices will show concrete progress towards a discrete goal, such as resolution through trial or settlement.

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Of course, it’s much easier to use the invoice to emphasize the value provided when the client is actually getting good value. Many clients feel beholden to their attorneys, but resentful. This sometimes is a function of the client not understanding exactly what work the lawyer is doing. More precisely, sometimes the client does not understand or agree with the value proposition underlying what the lawyer is doing for his money.

It’s not a shocking secret that many associates are under pressure to bill a lot of hours. Unfortunately, that can certainly tempt some attorneys to commit billing fraud. Others routinely bask in the broad gray area. Recording time is subjective and attorneys have a lot of leeway in how they choose to account for and bill their time. Attorneys doing the same work for the same amount of time may view and calculate their billable time very differently. The range of subjectivity gets even bigger when the time is not recorded contemporaneously.

Sophisticated corporate clients often have in-house counsel who have worked in law firms and understand the dynamics inherent in firms. Many are acutely aware of the inevitable pressure to maintain high billable hours. Inevitably, that pressure leads to higher average bills even if an ethical line isn’t crossed. I’m hardly the first to note that the pressure for billable hours is counter to clients’ financial interests.

Running a small firm or solo shop often involves a very different set of concerns and pressures. Although I have a lot of self-imposed pressure to generate new business, I feel less pressure to maximize my billable hours and my associates don’t have billable hour quotas or bonuses tied to billable hours.

To many people, especially non-lawyers, recording work in six minute increments seems somehow absurd. It’s such an artificial increment that I can’t help but agree on some level. Still, I’m not sure there’s a great alternative.

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Regardless, my own distaste for entering my time isn’t because I think it is absurd or unfair that I have to account for my work with such precision and in such small increments. To the contrary, when entering my time I’m generally reminded and humbled that my clients are willing to pay as much as they are for a few minutes of my effort. Despite that motivation, the main reason I don’t look forward to entering my time every day is because the process is so time-consuming. (And, unlike some, my firm doesn’t view recording time as a billable event.)

Recording time is itself time-consuming precisely because I’m aware that my invoices are such an important communication with my clients. Like it or not, admit it or not, requesting and collecting payment is a critical element in any relationship between attorney and client.

Gone are the days when a firm could send the monthly invoice with the single line item, “legal services rendered,” and the amount. But even if I could do that, I wouldn’t want to miss the chance to show my clients the value I try to provide. A goal of my firm is that our clients actually have a positive visceral reaction upon reviewing our invoices.

Idealistic? Sure. But if you work hard, and you’re proud of your work, then there’s no reason your invoice can’t communicate those perceptions. If your client still simply disagrees, then your problems are bigger than billing and communication.

Tom Wallerstein lives in San Francisco and is a partner with Colt Wallerstein LLP, a Silicon Valley litigation boutique. The firm’s practice focuses on high tech trade secret, employment, and general complex-commercial litigation. He can be reached at tomwallerstein@coltwallerstein.com.

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