Are You Billing By The Hour? 5 Reason It May Cost Your Practice

hourly-billing

It’s hard to determine a right or wrong method when it comes to billing clients for your expertise and time. Ultimately, it all boils down to helping yourself retain the most dollars so that you can cover your expenses in the lean months.

One of the most common billing methods, especially for Los Angeles injury attorneys, is by the hour. The firm sends the client an invoice listing the billable hours worked by each lawyer and the hourly rate for that lawyer. While it may seem like a good strategy, this model has some disadvantages. First and foremost, clients expect much more than a list of the hours worked on their case. They want stellar services and real value. That’s just one of the many reasons that have determined many firms to call it outdated and ineffective.

Here are a few reasons billing by the hour might affect your practice.

1. The Billable Hour Model Hinders Efficiency

Most clients are eager to shift away from billable hours’ system, claiming that flat fees would improve the quality of legal services and supercharge efficiency. Law firms, on the other hand, are slow to adapt to the clients’ needs.

The billable hour model doesn’t allow you to focus on innovation. Every hour you spend on technology upgrade, takes away from your profit.

For instance, if you want to create a form template to streamline document creation using automation software, you might get penalized by the firm for wasting billable hours. But, if you create this system, you will improve the firm’s efficiency by reducing the time needed to create and process document. Unfortunately, under the billable hour plan, every hour must be spent on clients’ cases to maximize income.

2. The Billable Hour Is Not a Good Performance Indicator

Most law firms track by the hour and reward performance when a lawyer meets their hourly goals. But, delivering a task on time and meeting goals are not the only performances law firms should track and measure.

Client happiness, for instance, values more than a lawyer meeting their billable hour goal. A happy client may refer you to other prospects, bringing more cases to your business. Likewise, measuring the turnaround time of a case from start to finish is another great way to recognize achievement.

3. The Billable Hour Measures Time, Not Value

Good lawyers don’t stop working on a case when the day is over. Most of them keep a notepad in their bags or by their bedside to write down ideas for the cases. But, you can’t bill an idea that you had while taking a shower or taking the dog out for a walk.

The problem with the billable hour system is that it measures time, not value. You might spend 40 hours a week on a problem only to crack it in a moment. Clients want value, and they are ready to pay you big bucks if you can deliver it.

4. The Billable Hour Often Leave Clients in the Dark

There aren’t too many law firms that would spend the time and energy to analyze a case and let the client know about the costs. Most of them only give estimates of the legal fees due to the uncertainty regarding the number of hours they will have to spend working on the case. As a result, clients are often left in the dark, forced to take all the risk.

Not only that this approach can lead to tensions between the client and the lawyer, but it can also deter your ability to create apowerful connection with the client. You want your clients to be satisfied with your services to motivate them to tell other prospects about your amazing law practice.

5. Tracking Time Is Costly

If you are billing by the hours, you must track the time it takes each lawyer to complete different tasks for the client. That means recording and storing colossal amounts of data. Occasionally, a client might analyze their legal fees and request documentation to ensure that they weren’t charged extra. The logistics needed for tracking every billable hour could require more employers, increasing your costs.

At the end of the day, clients want more than a track of the hours invested in their case. They want value, efficiency, and authenticity. While the billable hour system may seem like a great way to boost your profit margins fast, it may affect your business in the long run.