Should Attorneys Earn Less because they work fast?
The billable hour is a problem in search of a solution at most law firms.
If a seasoned attorney charges $300 per hour for a service that only takes her an hour to complete but will take an associate in the same law firm three hours, should the seasoned attorney get paid less for the same work?
Everyone has the same amount of time in the day - that will not change. If a lawyer works efficiently, she shouldn’t be penalized for her expertise. It took years of practice to get to be that good at lawyering. That lawyer should be rewarded with extra pay, not less.
The Difference Between Fixed Fee and Value Pricing
The best solution to the billable hour is fixed fees. If it takes the expert lawyer one hour to do the work and an associate lawyer three hours, then the fixed fee reward is consummate to each one’s ability and expertise. That seems fair.
With the idea of a fixed fee, the work is valued at a price that everyone agrees on before the work has started. There are no surprises. Of course, life isn’t perfect. Sometimes, the work will take longer than expected. And sometimes, it will get done more quickly. This is what is known as “value pricing.” Everyone agrees on the value of the work before it has begun. Win-win.
If a lawyer uses time tracking on fixed fee work, he can understand the profitability of that work - especially in comparison to how the work was initially billed — which was hourly. By tracking time - the Effective Hourly Rate — a lawyer can properly set value-based fees for specific tasks. If the task takes longer than initially expected, the lawyer can charge more the next time — or she could lower the fee to attract more clients to a task that is easily executed.
Should Lawyers Bother with Timekeeping in a Fixed Fee Practice?
With LeanLaw software, you can easily track time anywhere and on any device: Laptop, mobile phone, Desktop, tablet. When you are able to track time contemporaneously, you will be more accurate. When you postpone recording the time you spent on a task, you lose that time: 10% the first day, 25% the day following. And the longer you wait after that, really, you’re just guessing.
To get an idea of how value based pricing can help you overcome the problem of the billable hour, schedule a demo with LeanLaw. LeanLaw software works with QuickBooks Online to take away all of the redundancies that plague law firm workflows and get you back on track with the work you enjoy doing.
A simple truth: no one enjoys timekeeping.
Published by
The LeanLaw Team
The LeanLaw Team is the legal-finance content team behind LeanLaw — the billing, trust accounting, and revenue-reporting platform built natively on QuickBooks Online. Drawing on years of work alongside law firms and the accountants who serve them, the team writes about trust accounting, IOLTA compliance, legal billing, and law-firm financial operations. LeanLaw is a QuickBooks Online Premium App Partner.
Related articles