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What Are Billable Hours? A Guide for Lawyers
The dilemma is this: you want to track your hours accurately, but you don’t want to have to put in extra work for it. Here’s a guide to how to get over that hump.
It can seem overwhelming to have to jot down every minute of client time, but, alas, if you don’t, you’ll be in an even bigger hole. Attorneys who wait until the end of the day to record their time lose 10-15% of their billable hours, and those who wait until the end of the week lose 25%!
The good news is, you don’t actually have to write the time down with pen and paper or even in Excel like the old days. You can track it automatically, integrate your timer with other applications (think: Word and Outlook), enter time from your phone when you’re on the go, and much more.
Automatic time tracking improves your firm’s profitability. Just as important: it helps maintain compliance, makes invoicing easy and accurate, and provides much-needed data about all aspects of your firm’s operations, from matter profitability to attorney performance.
Before we get into the specifics of how best to track, manage, and bill the time you spend on client work, let’s review what a billable hour is.
Why the billable hour matters
Reports state that many attorneys bill between 1,700 and 2,300 hours per year, so not tracking all your time accurately can lead to tens of thousands in lost revenue.
Second, law firms track the billable hours of each attorney. It’s best to track them accurately so that a firm can track team performance and understand which lawyers are bringing in dough and which are lagging behind.
Not only that, but the specificity in legal management software allows a firm to know how much time is being spent on phone calls vs. research, how many hours are spent on non-billable time, etc., so that a firm can do an autopsy of its workflow and make tweaks to enhance productivity.
What is a billable hour (and what isn’t)?
A billable hour is client time. It’s any activity that’s part of what an attorney, or a paralegal, needs to do to complete the work you have been contracted to perform for a client. This might include, but definitely isn’t limited to:
- Researching or performing due diligence for a client’s matter
- Correspondences or meetings related to a case
- Drafting briefs
- Filing paperwork
- Court appearances
On the other hand, a great deal of legal work falls into the non-billable hour camp. Non-billables are activities that support your law firm operations but don’t correspond to a direct client matter.
Let’s think about it from the perspective of what’s NOT a billable hour:
- Administrative tasks
- Training
- Responding to colleague emails
- Meetings with your team
- Networking events
Both billable and non-billable hours are important to track. There are a few things to be mindful of when specifically tracking your billables, though: time increments and descriptions.
Time increments
As you may know, it’s best to track billable hours by increments of 6 minutes. That’s because anything below that could mean you’re spending too much time on tracking time. However, anything longer than that and you may be short-changing your clients, who expect the time they are paying for to be used wisely.
Measuring time in increments longer than 6 minutes could also risk compliance violations since rule 1.5 of the ABA states lawyers are not allowed to charge or collect an unreasonable fee or an unreasonable amount for expenses.
Six minutes also works out nicely because it amounts to 1/10th of an hour. If you did client work for 1–6 minutes, you worked .1 hours, if you did client work for 7–12 minutes, you worked for .2 hours, and so on.
Here’s a chart to see a full breakdown of the hour, but let’s look at an example right here:
If you had an initial consultation with a client that lasted 8 minutes and your rate is $150 per hour, you used .2 billable hours.
And if that’s all the billable work you did that week for that client, you determine how much to bill by multiplying .2 x $150, which equals $30. So you would bill the client $30.
Demystifying the Billable Hour: How to Right-Size Your Rates
With prices rising so much over the last year (global inflation is forecasted at 8.8% in 2022), it’s the right time to look at your current rates and see if you’re charging enough to remain profitable.
Entry descriptions
Whatever software you use to track billable hours, when you label your task, pay at least a little bit of attention to what you write.
That’s because with legal management software, your time-tracking will be automatically integrated with invoice creation. When a client reviews their invoice, they’ll know how their dollars are being spent.
Here’s what not to write:
“Phone call”
Here’s what to write instead:
“Client intake call”
Do you need to track billable hours even if you charge flat rate/subscription/other alternative fee arrangements?
The short answer: yes.
The longer answer: yes, because even if you don’t directly bill clients for each hour you work, the time you spend on any given matter informs how you establish appropriate fees for legal services.
For example, if your firm offers an estate planning package for a set fee of $1,500, you anticipate a certain amount of billable (and non-billable) time invested into providing that service. As you track your time, you can measure hours worked against hours estimated. This helps you assess whether the matter is profitable… or if you need to adjust your pricing.
How do you track billable hours?
Billable hours don’t just log themselves. To capture billable hours, you need a plan in place. Three common solutions include the following:
- Calendar: Manually inputting tasks and hours into a calendar, whether it be daily, weekly, or monthly, is frequently utilized. However, it can be hard to keep organized and prone to errors. What’s more, it doesn’t connect to your practice management or billing software, creating a silo of information.
- Excel sheets: Easier to organize than calendar entries, Excel sheets are a faster way to track and count billable hours. However, they still require manual input and leave room for error if hours aren't logged immediately after each task. And again, this method silos essential time tracking information.
- Time tracking software: Time tracking software is increasingly part-and-parcel of law firm time tracking strategies. Time-tracking software can either be used as a standalone software solution or as part of an integrated practice management suite.
Power up your billable hours with Rocket Matter
The success of your law firm is directly related to how well you track and manage your billable hours.
Rocket Matter’s law firm time-tracking software has powerful tools to track those hours easily and accurately—from integrations with the apps you use, to a mobile app, multiple timers, and more. Rocket Matter adds automatic invoicing to save you time and rich reporting, allowing you to drill down on how to boost your efficiency.
See how our software leads to happier clients with flawless time tracking and time-saving organization when you start a free trial today.
Demystifying the Billable Hour: How to Right-Size Your Rates
With prices rising so much over the last year (global inflation is forecasted at 8.8% in 2022), it’s the right time to look at your current rates and see if you’re charging enough to remain profitable.
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