Often, legal firms like yours face time-consuming and inaccurate billing challenges. According to a 2023 survey by Thomas Reuters, the average law firm experiences an 18% loss in revenue due to billing inefficiencies.
If your legal firm uses manual revenue recognition and tracking methods, this statistic means that nearly one-fifth of your billable work isn’t converted into revenue. This may translate to hundreds or thousands of dollars in unrealized revenue.
The good news is that there’s a solution that can make all the difference. The right legal billing software can seal revenue loopholes in your legal practice.
In today’s article, we’ll look at what you need to consider when choosing legal billing software.
Understanding Legal Billing
Definition and Importance
Legal billing refers to the meticulous process of tracking, managing, and invoicing clients for the legal services provided by law firms. This process is a cornerstone of law firm operations, as it directly influences revenue and profitability. Effective legal billing requires a comprehensive understanding of the entire billing process, including time tracking, expense management, and invoicing. By mastering these elements, law firms can ensure that they are accurately compensated for their work, thereby maintaining financial health and operational efficiency.
Benefits of Legal Billing Software
Dedicated legal billing software offers a multitude of benefits to law firms, significantly enhancing efficiency, accuracy, and transparency. By automating the legal billing process, these software solutions reduce the time and effort spent on billing tasks, minimize the risk of errors, and improve overall client satisfaction. Additionally, legal billing software provides valuable insights into law firm finances, enabling legal professionals to make informed decisions about their business. This includes detailed reports on billable hours, expenses, and revenue, which are crucial for strategic planning and financial management.
Key features to consider with legal billing software
Here are the top features to consider when looking for the best legal billing solution for your firm:
User-Friendly Interface
An intuitive and user-friendly interface is crucial for legal billing software since it makes it simple to navigate. Legal software should be easily usable for both seasoned legal professionals and users without extensive technical expertise.
Look for a legal system with an intuitive design and straightforward navigation system that makes it easy for users to navigate between different functions and business processes, such as tracking billable hours, generating invoices, and managing client information.
An intuitive design also reduces the learning curve and boosts productivity. This will ensure that you and your team quickly adapt to the system and start using it efficiently as soon as possible.
Time Tracking Capabilities
Your legal business stays afloat by making money. And time is of the essence since most attorneys charge their clients based on billable hours. Every minute invested should result in income for the business.
Legal billing software should have multiple ways to track time, such as timers that let you start, pause, and stop during client calls, meetings, brainstorming, and other tasks. The system should also have manual time entry features and seamlessly integrate with your calendar and case management tools.
The system should allow you to track time from anywhere, whether you’re connected to the internet or not. Billable hours should automatically upload and sync once you regain internet access.
Additionally, you need to be able to access the time-tracking features on multiple devices, such as your PC, tablet, and smartphone.
These features see to it that you don’t lose any billable time and that you’re transparent with your clients.
Billing and Invoicing Customization
Legal billing can become complicated since most law firms implement various billing structures, such as flat fees, billable hours, retainers, and contingency fees. Sometimes, you apply various models for a single case depending on the attorneys working on the case and the type of work done.
One of the most important features to look for in legal billing software is the ability to automate billing. It should allow you to use multiple billing models simultaneously in one case and show which matters belong to which clients.
This should be a priority even if your firm only uses one billing model. Investing in a system that accommodates various pricing models means that it can accommodate your growth and expansion.
In addition, look for software that allows you to edit and customize your invoices to reflect your brand image or include various pricing models. For example, it should allow you to add your company’s logo and add or delete line items.
Customizable invoice templates should also have options for displaying specific case details, payment due dates, and clear descriptions of the work performed.
Expense tracking in legal billing
On top of time tracking, a legal billing system should help you track your law firm’s expenses. These features should let you track disbursements, such as such as travel costs, court fees, and document filing expenses. This allows you to pass on the costs to the client easily.
Set your sights on software that lets users categorize expenses, link them to their specific matters appropriately, and include them on invoices.
This feature should allow for real-time expense reporting, helping your attorneys and staff update expenses as they occur. This will boost expense tracking and help you in your budgeting and reporting.
Trust Accounting and Compliance
Many attorneys regularly handle trust accounts in their day-to-day activities.
Legal billing software must comply with legal accounting rules to ensure that client funds are managed correctly. This includes having a separate accounting system for managing trust accounts holding client retainers or settlement funds.
Find a system with features that can automatically generate trust ledger reports, track trust account balances, and alert users on any compliance issues.
Check whether the system complies with industry standards and regulations, such as the Interest On Lawyer Trust Accounts (IOLTA) and the American Bar Association’s (ABA’s) Model Rules for trust accounting.
Also, check for reporting capabilities to maintain trust account compliance
Reporting and Analytics
Once you’ve entered all billable hours and sent all invoices, you need insight into the bigger picture. This is where reporting and analytics come in. Yet, many law firms ignore this feature when looking for legal billing software.
Legal billing systems may generate basic reports. But what you need is software that takes reporting to a whole new level with centralized reports and analytics that eliminate data silos between billing, accounting, and business management.
With comprehensive reporting and analytics features, you can see how your attorneys spend their time, the number of billable hours recorded, your client balances, and the relationship between productivity and revenue.
Such a system helps you eliminate messy and complicated spreadsheet calculations that are prone to inaccuracies and lead to confusion.
With metrics such as billing trends, outstanding invoices, case profitability, and trust account balances, you can spot inefficiencies, improve overall financial management, and make data-based decisions for your practice
Client Portal and Payment Integration
Find a legal billing system that helps you boost your clients’ satisfaction by giving them 24/7 access to a client portal where they can see their invoices. This feature allows your clients to review their invoices, case information, and trust account details, any time anywhere.
On top of that, the system should be integrated with billing and payment solutions, like Stax Bill, to allow clients to make online payments whether via debit or credit cards, ACH transfers, or e-checks. Payment gateway integration ensures that the payments are processed securely and quickly.
You should also be able to set up automated payment reminders and recurring payments to further streamline the payment process for both you and the client.
Security and Data Privacy
Legal billing software handles sensitive data from clients. This calls for strong data security measures such as password protection, data encryption, and multi-factor authentication to safeguard personal and financial details.
Also, review the software provider’s data handling policies, such as data backup procedures, server location, and access controls. Evaluate their compliance with data privacy regulations, such as the General Data Protection Regulation (GDPR) and the California Consumer Privacy Act (CCPA).
Ensure the provider offers regular software updates and vulnerability assessments to further enforce the system’s security against external threats.
You should also have frequent data backups and several recovery options to help protect your law practice in case your files are corrupt, lose your data, or misplace your documents.
Additional Considerations
Here are some other considerations you need to make when looking for legal billing software:
Integration with Other Legal Tools
Since you probably have other tools you use to streamline other workflows in your practice, it’s important to find a legal billing tool that integrates with them to enable the smooth flow of data and improve efficiency.
Key integrations to consider include:
Practice management software – Integration with practice management software helps your firm handle the entire case from intake to invoicing all under one ecosystem.
Document management platforms – This helps your firm automate document creation and tracking, allowing your lawyers to link documents directly to billable hours and cases for better invoicing.
Accounting software – Integrating with accounting tools like Quickbooks and Xero can streamline your firm’s financial management by automatically syncing billing and expense data.
CRM systems – Integration with CRM tools helps law firms enhance operational efficiency and ensure better client service by linking billing data with client profiles. This reduces the errors associated with manual data entry and helps you save time.
Scalability
When choosing the best legal billing software, you need to confirm the scalability of the system to ensure it can accommodate your growing business needs as you scale. Since switching between billing systems can be expensive in terms of money and time, you need a system that sticks with you for the long term.
As you grow, your firm might hire more lawyers, paralegals, and support staff. As such, you need to consider the number of users the system can accommodate.
The software should also handle a higher volume of cases, invoices, and payments without compromising performance as your client base and workload grows.
In addition, evaluate whether the software provider provides additional tools or customizable features that can adapt as your firm’s needs evolve.
For example, you might need higher storage limits, more sophisticated reporting tools, and enhanced client management options as your needs grow.
Cost and Pricing Structure
The cost and pricing of legal billing software may vary depending on the provider and the range of features offered. Here are some considerations to make when evaluating the cost and pricing structure:
Subscription vs one-time fee – Many legal billing platforms adopt the subscription-based model, which typically gives you access to cloud-based storage, software updates, and support. Others may offer one-time fees for on-premise systems.
User-based pricing – Some software providers may charge based on the number of users using the system. This means that you have to calculate the number of users in your firm to understand the financial implications of the software.
Feature tiers – Providers may structure their pricing based on features. Basic plans will give you access to basic features, such as client billing and time tracking. Advanced plans may have more advanced features like integrations, trust accounting, and custom reporting.
Free trials and demos – Before becoming a subscriber, it’s important to ask the provider whether they provide free trials and demos to help you get real-world experience with the software and evaluate whether it meets your firm’s needs.
Pricing transparency – Pricing transparency is important since you don’t want to encounter any hidden fees. Look for a provider that is clear on the initial and recurring investment to avoid pricing surprises.
When considering the system’s cost and pricing, it’s important to first come up with a budget since you don’t want it to overeat into your profits. Ensure it fits your budget and balances the investment with the value it brings to the firm.
Also, keep in mind that the costliest system in the market isn’t necessarily the best software for your practice. Ask yourself whether the software meets your business needs.
Conclusion
Finding a good legal billing system is an important step to streamline your law firm’s billing processes and maximize revenue. Important features to consider include a user-friendly interface, time-tracking capabilities, billing and invoicing customization, expense tracking, and reporting and analytics.
Also, consider the system’s integration with other tools in your tech stack and its ability to accommodate your growth. Remember, you want to invest in a tool that you’ll use in the long term.
Most importantly, don’t just go for the costliest or most popular system. Prioritize your needs and choose one that will contribute to your firm’s success.
