How Can You Measure Law Firm Productivity?

Law Firm Productivity

Measuring law firm productivity is the first step in identifying areas for improvement. After all, you can’t address a problem if you don’t know it exists.

To measure and improve your law firm’s productivity, you need to start by gathering data and analyzing key metrics.^[1]

Utilization

Utilization rates measure how much of a lawyer’s time working ends up on an invoice. With the help of your practice management system’s integrated time tracker, you can calculate utilization by dividing the number of hours that wind up on client bills by the number of hours worked.

Having this number can help paint a picture of each lawyer’s level of efficiency.

Realization

Realization rates measure productivity by determining how much of the work a lawyer bills for actually gets paid. To calculate, divide billed hours by hours collected.

Every lawyer should have a goal of reaching a realization rate of one hundred percent.^[2]

Accounts receivable aging

Tracking accounts receivable and those accounts that are aging—and for how long—as tied to each lawyer also helps give a bird’s eye view of trends that may need to be addressed.

WIP fees

Work-in-progress (WIP) fees should be tracked, too. This can help a firm see whether or not fees captured by a lawyer are making it onto an invoice each billing cycle.

This matters because timely billing ups the likelihood of clients paying promptly.

Solutions

While some of these metrics—such as realization rates and accounts receivable aging—are traditionally seen as a measure of how satisfied clients are with a lawyer’s services, they may also be an indication of billing issues.

If a lawyer isn’t sending out bills soon after rendering services, then clients are less likely to pay. The same goes for sending out confusing bills or not accepting credit cards.

Instead, firms should seek to leverage all the automation that technology can offer and streamline as much of their billing process as possible. This may help improve performance and metrics—and it will certainly help further identify any potential problems.