I want to offer you a valuable stocking stuffer for next year. For most lawyers billing hourly, the smallest profit generator is the billable unit recorded as one-tenth of an hour – the “point-one.”
When you engage in any large task, there is a small amount of lead-up time, and a transition-away time from that task to the next. Cognitively, the spool-up and spool-down into and out of each task takes somewhere between 2 to 3 minutes. The point-one billing increment helps capture this time.
Lawyers and law firms lose meaningful sums of money in small increments. Most lawyers don’t bill point-ones or have very few on their timesheet. Let me suggest why point-ones are valuable.
Suppose you are a law firm of 20 lawyers billing by the hour. Let’s conservatively assume 20 working (billing) days per month. Entering 10 point-one entries each day generates 20 billable hours each month.
Let’s assume only 11 months of billing, giving you a month of time away. At $200 per hour, you will bill $44,000 per attorney each year by billing 10 point-one units daily.
Multiply this sum by 20 lawyers and you reach almost $1 million ($960,000). If we adjust the gross revenue at 95% realization, then the adjusted net is $912,000.
Add a couple lawyers to the mix, and you have $1 million in revenue. Raise the hourly rate and multiply this sum over 10, 20 and 30 years of practice and the lost net accumulations is staggering. Your firm’s entire 401(k) and bonuses can be financed by point-ones.
A client cannot typically write down a sensibly written point-one time entry. This means the entry is going to stick. The actual realization of a point-one is necessarily the highest of any time entry.
Most lawyers and law firms don’t make the point-one a priority. It’s like ignoring the silver dollars on the floor while counting the paper money on the table.
The goal of any billing attorney should be to capture no less than 10 “point-ones.” This requires a small amount of patience, and contemporaneous time entry:
- Before making a phone call, one needs to review an email, paper, a calendar item, or something else.
- Before dictating or typing a letter, a review of something need be had.
- Before entering a meeting, something needs to be reviewed. After an event, notes need be taken, a follow-up item should be documented.
Once you get in the habit of identifying the small things, it becomes easier. There are tiny bits of time that routinely go unrecorded and ignored. You have to make small billing a habit.
Here is the trick. Every lawyer must contemporaneously enter their own time every few minutes during the day. You cannot capture several point-one entries late in the day or later in the week. You will forget. Time will slip through the cracks.
Contemporaneous billing is the critical human factor and a challenge for some attorneys who are sloppy and late billers. Delayed billing is self-deleted billing.
Candidly, late billers are bad law partners. (I once proposed withholding paychecks to punish chronically late billers who fail to enter their time before the billing cut-off). Writing time entries by hand that are later entered by someone else into the billing software is hugely inefficient (and someone reading this article just unsubscribed).
Anyone can type well enough to enter their own time in billing software. Firms that make exceptions are not doing anyone any favors. In addition to desktop billing software, you need a mobile billing app on your smartphone. Entering time into a phone when on the move should be routine.
It takes no more than 30 seconds to make a thoughtful time entry. The other five minutes and thirty seconds within the point-one time entry is the “invisible” interest you can earn on your own collections.
The point-one plan makes a marginal or weak lawyer profitable, and a solid producer becomes superlative. Billing multiple point-one entries every day is a small but powerful tool for achieving profitability; clients won’t write down that time entry.
That’s my stocking stuffer for you.