Accurate tracking and budgeting for individual matters are core components of legal project management and directly impact your law firm’s overall profitability. As a result, your law firm’s continued and future success is at risk if your legal staff regularly exceeds the monetary and time budget for individual matters.
While five minutes here and ten dollars there might not seem like much, even small cost overruns can create a big problem for your firm’s sustainability. Developing sustainable practices requires a realistic budget, especially if your fee structure includes flat fees. To provide transparent, logical pricing while protecting your firm’s financial future, consider these seven tips for staying on budget.
1. Account for overhead costs in your law firm budgeting plan.
For consistently profitable revenue month over month, consider your law firm’s fixed overhead costs when determining matter budgets. Determine the cost of operations, such as rent, utilities, internet, software, marketing, bar association dues, professional service fees, and other regular ongoing expenses tied to running your law firm.
The final total of these costs should be factored into the fees you assess for legal services. It can also help you identify opportunities to streamline your operational budget.
2. The unexpected can happen at any time. Add a “cushion” to your budget to ensure even unexpected expenses are covered
After tallying the fixed expenses your law firm is responsible for every month, allot an additional amount to your budget to cover variable costs. This “cushion” can be used to cover expenses that pop up out of the blue, such as an extra hour or two spent updating a legal document.
Expecting the unexpected keeps incidental expenses from coming out of your pocket without the need to send clients an extra, unwanted bill. This is especially important for your law firm’s bottom line if you’re offering fixed fee services, for which clients pre-pay a single rate.
3. Keep track of individual expenses for individual matters with legal time and billing software
Tracking matter-related expenses accumulate helpful information for creating matter budgets. This data helps you identify patterns in your law firm that can impact your fee structure and ultimately improve your profitability. Flexible expense tracking tools should allow you to use both broad, firm-wide categories (i.e., “court fees”) and matter-specific tags (i.e., “Davidson Estate Planning”) to keep expenses organized.
For optimal law firm matter management, attorneys and other legal staff should track all individual expenses within each matter. This detailed information may seem challenging to collect, but legal time and billing software makes it as easy as a button click.
Efficiently itemizing each expense for your budget benefits your legal firm and everyone involved in the matter. When nothing is unaccounted for, your legal firm doesn’t end up on the hook for unexpected or undocumented costs.
At the end of the month, having an outlined and organized list of matter expenses will keep your legal practice at its peak revenue while ensuring clients’ bills are informative and accurate.
4. Add a profit margin and mark-up for profitable law firm budgeting
To protect your law firm’s growth, year after year, add a percentage to represent your profit margin to matter budgets. This mark-up ensures your revenue is consistent and that attorneys are fairly compensated for their work. Additionally, a healthy profit margin makes it possible to continue serving legal clients in need of your services.
5. Keep track of every minute worked on a matter
Keep track of billable and nonbillable hours spent on individual matters. Attorneys and staff should track every minute they work on a matter so that they can be appropriately compensated for their time.
Such detailed time tracking sounds laborious, and many attorneys will wonder why to bother with the extra effort. But the extra effort pays off in the long run—understanding how long matters actually take will improve your legal project management and allow you to create more realistic matter budgets for future matters.
6. Track time and expenses on the go
Whether it’s gas, car rentals, mileage, extra fees, or anything else related to working from the court house, carve out space in your budget for travel time and expenses.
But relying on manually collecting and entering receipts into your time and billing software is cumbersome, not to mention prone to human error. (How many attorneys and legal staff have misplaced envelopes of receipts they’d been waiting to enter?) A better option is using mobile-friendly time and billing software. When attorneys can conveniently track expenses incurred on the go, fewer expenses fall through the cracks, and it becomes easier to avoid going over matter budgets due to untracked expenses.
7. Use legal time and billing software to set, track, and follow matter budgets
Legal time and billing software, like TimeSolv, makes better law firm budgeting as straightforward to create realistic matter budgets and efficiently track individual matter expenses. With detailed reporting features, there’s no need for legal staff to waste billable hours on budget analysis, either.
Making flat-rate, fixed fees for clients is simple with TimeSolv’s project management tools and projected estimates calculator. Create a projected budget, timeline, and task list, and include unexpected expenses that may affect your bottom line—all within a single window.
Attorneys’ plates are already full without dedicating hours to law firm budgeting. Rather than spending time doing financial calculations, legal time and billing software allows attorneys to focus on serving their clients efficiently.
Exceed Your Clients’ Expectations—Not Your Budget
In addition to invoicing, time tracking, and expense tracking, TimeSolv helps you meet your customers’ expectations with matter estimates. Quickly determine the tasks and resources necessary to achieve your clients’ goals and assign value to those items to create a clear, comprehensive projection about the total matter cost.
Your legal staff will enjoy a clear plan of action to guide their tasks, which guards against unprofitable fixed fees due to spending too many hours on a single matter. Meanwhile, your clients will experience less anxiety about the final cost of their legal matter.
Take the guesswork out of your profitability and ensure financial success for your law firm at every turn with comprehensive legal time and billing software that includes all the resources you need for successful law firm budgeting and legal project management.
TimeSolv does all of these things and more to improve law firm budgeting:
- Time tracking
- Detailed expense reports
- Budget projections
- Create invoices
- Mobile-friendly time and expense tracking
- Matter Estimates
See first hand how TimeSolv helps you set, track, and stick to matter budgets without sacrificing billable hours. Start your 30-day free trial today.