What metrics does your firm use to determine efficiency and profit? Two commonly used metrics are “realization rate” and “collection rate.”
According to the 2018 Legal Trends Report, “realization rates” are the number of billable hours actually invoiced in relation to hours logged, and “collection rates” are the number of hours invoiced in relation to hours actually paid. This 2018 study found that realization rates average 81%, and collection rates average only 85%.
This means law firms are missing out on 31.2% of hours expended.
Let’s say a firm has 1000 hours logged in its time tracking system for a given month. At $200 per hour the firm would be owed $200,000. But the average realization rate of 81% means that only 810 hours actually get billed. Then with an average collection rate of 85%, the law firm only collects 688.5 hours. At $200 per hour that totals to $137,700. This means a loss of $62,300!
Why Would a Firm Bill for Less Time Than It Actually Performed?
There are often several factors that weigh on realization rates, including:
- A junior attorney who is less efficient spent more hours than is reasonable
- Accidental duplicate work
- Accidental time entries, such as an entry for “4.0” when “0.4” was intended
- A senior attorney performing junior attorney tasks
Why Are Collection Rates So Low?
Clients who are solvent may not pay the full amount billed for many reasons.
- The description of work done is vague
- The time spent appears to be too high
- Previous billing has been inaccurate, and the scrutiny level is higher and trust level is lower
- The description of entries has typos or is poorly written
How Does BillerAssist’s AI Solve These Problems?
BillerAssist from Effortless Legal uses AI and machine learning to solve many billing problems, and thereby increase both realization and collection rates.
- Time and expense entries are flagged if they appear to high or too low
- Billing rules can be set per matter and are flagged with a color code if violated
- Allows your users to tailor their work in advance to only what the client will likely be paid
- Detects duplicate entries
- Uses your firm’s own data to make its determinations
- Learns from your changes, in order to stay up to date all the time
- Uses your existing billing system, no need to migrate or change systems
- Easy to use interface that encourages timekeepers to constantly track their time
- Auto-populated descriptions of work to speed up time entry and review
- Increases your firm’s realization and collection rates, while decreasing write-offs
- Allows local counsel to log in and see only what they should see and log their time using the same rules and technology
- Maximizes income through predictability of client payment
BillerAssist uses cutting edge Machine Learning and AI to provide a data driven solution to your billing. It uses your successfully paid invoice data to learn how to assist you with each billing entry. This patent-pending automation saves law firms thousands of dollars and many hours of review time.
“BillerAssist is the most efficient legal billing website I have ever used!” said a practicing lawyer in Michigan who was one of the test users.
“The BillerAssist application drastically reduced the time it took me to clean up my clients’ bills and increased our realization rates at the same time”, said another test user who is a practicing lawyer in Illinois.
For more information, please visit our website at https://efortlesslegal.com or visit our booth at the ABA TECHSHOW 2019 and learn more about how you can increase your revenue and profits using BillerAssist’s AI and Machine Learning!