13 Comments

  1. Avatar Paul Spitz says:

    I have to take issue with your “utilization rate” of 2.2 billable hours out of an 8-hour workday. If I have time, I’ll look at the report, but quite frankly, assessing utilization based on billable hours is deeply flawed. It ignores the reality that many lawyers do flat-fee and contingency work. I can file articles of organization and prepare operating agreements (using a template I created 3 years ago) for 5 LLCs in an hour, and charge a flat fee of $1000 for each. That means I’ve earned $5000 in one hour, while my hourly rate is only $275. If I charged by the hour for that work, each client would only pay me $55, and I would have made only $275.

    • Avatar Sam Glover says:

      You’ll find the report takes flat fees into account. It’s very well done.

      • Avatar Paul Spitz says:

        This is what it says:

        “While many law firms are switching to alternative fee arrangements like flat fees and value-based billing, the billable hour continues to account for the majority of billings recorded in Clio for most practice areas. Notable exceptions include Immigration, Criminal, Wills, and Bankruptcy.”

        For immigration law, 75% is flat fee. For criminal law, about 50% is flat fee. For bankruptcy law, 35% is flat fee. For wills, about 35%. They also don’t include estates with wills, which seems odd, and they separate business from corporate, also odd. They have separate categories for conveyance (purchase) and conveyance (sale), and I have to question what they mean by conveyance. Are they talking about sale of real property? If so, why not say so?

        So what they have done, beyond the weird categories, is lump in areas where flat fees are used quite a lot with areas where flat fees are used very little. Does that tend to skew the data? Or should the people doing immigration, criminal, bankruptcy, and other flat fee work just take my attitude, which is that the findings in this report have absolutely no relationship to how I practice law?

        • Avatar EarlyMedievalSerf says:

          It appears that lawyers aren’t using clio’s weak accounting system but rather are using a more robust a feature filled system like Quickbooks. Clio can’t print out checks but Quickbooks can. Why enter the same data twice into two different systems? I keep track of all finances in Quickbooks, but run all billing through Clio, and I imagine that a lot of lawyers are doing the same. Especially since small businesses usually operate on a cash accrual basis, unpaid bills have no effect for accounting purposes. I can’t write off unpaid bills on a cash accrual basis.

          • Avatar Paul Spitz says:

            I’m one of those. I use Quickbooks for accounting. I create detailed invoices using Clio, and that’s how I bill my clients, but I maintain a parallel set of invoices in QB, without as much detail, so that I can track income, A/R, expenses, etc. properly. It’s a little cumbersome, but not that bad.

            • Avatar EarlyMedievalSerf says:

              That’s basically what I do too. All of my personal injury cases in Clio show a $0 recovery but quickbooks shows my actual income. If I ever get audited I’ll show them quickbooks which is what is used to do my taxes. My Clio accounting info is useless to me.

      • Avatar Alex says:

        It is well done. I do have the same issue with how they’re counting flat fees. I found Clio’s interface for flat fees to be cumbersome, so I ignore it and don’t characterize matters as flat fees when they are in fact flat fee matters.

        Basically, a flat fee matter in Clio is something you bill for once and collect the entire amount at the time of billing.

        I have clients where I do stages of litigation and charge a flat fee associated with the stage. For those clients, it’s easier not to characterize the matter as flat fee. Instead, I do trust deposits and then bill against them as “activities” for a fixed amount. Clio actually trained me to do it that way. When I do that, it either shows up as 1 hour of time, or no hours. Not sure why.

        Upshot: I do flat fees, but it’s not characterized that way in Clio. Their report would miscontrue my data. But I may be a weird edge case.

        • Avatar Paul Spitz says:

          Characterizing a flat fee arrangement as hourly billing, with only one hour billed, isn’t accurate though, and it would undercut the validity of the report. I mean, I would love to bill $2000 an hour, but that isn’t how it works. So if we record flat fees as hourly billing, then I’m happy to report billing only 2.2 hours of work a day, if that means I’m making $4500/day.

  2. Avatar myshingle says:

    Merely because hiring another attorney will make you more efficient doesn’t mean that you ought to hire another lawyer. It depends upon the reason why the lawyer is working 2.2 hours a day. If the lawyer is not efficient and spends 5 hours/day on admin and decides to hire an associate, unless the lawyer can use that freed up time to drum up more business, he’s now going to have 2 lawyers feeding on the same billable hour. That’s my criticism of the report – it doesn’t focus on overall revenues and profitability. Even comparing the increase of billable hour to increase in the CPI fails on that level because even if billable hours haven’t increased, the cost of practicing law is so much less than it once was that lawyers may still effectively have the same earnings.

    • Avatar EarlyMedievalSerf says:

      My opinion is that lawyers aren’t using Clio’s weak accounting programs to keep track of their finances, which explains why the data shows an incredulous 2.2 hour a day utilization rate.

  3. Avatar EarlyMedievalSerf says:

    I am a full time clio user and I have been for nearly four years. I reviewed this report a few days ago, and while some areas of the report are likely accurate, other areas are wholly inaccurate because of the the old adage: “garbage in, garbage out”.

    In particular, the utilization rate of 2.2 billable hours out of an 8 hour is flawed. I know that Clio’s accounting system totally sucks and it’s like 1/100th of what QuickBooks can do. I almost entirely bypass Clio’s system and only record payments of bills when I have to just to get rid of a past due bill that’s already been paid, and I don’t record any of my flat fee or contingency payments into Clio. According to Clio, I probably have a 10% utilization rate!

    Clio is great for managing clients, calendaring, linking matters, notes, keeping track of time, etc, but it’s not a good accounting program. I’ve never been able to keep my bank account balances according to Clio the same as Quickbooks, and I gave up trying after a few days, and never looked back now that I have QB.

  4. Avatar JLenon says:

    Weighing in with Clio’s perspective on some of the discussion here. I’m enjoying the deep review lawyers are applying to this work.

    On page 12 of the Legal Trends Report (LTR), we talk about using “outlier detection” as part of our analysis. This is a measured approach to data science that looks statistical oddities and evaluates whether to include them.

    For example, if a law firm had $0 recovery yet years of invoices, like the example mentioned by EarlyMedievalSerf (EMS), that would be an outlier representing something wrong with that particular entry in the data set. While it may be indicative of a real issue – EMS’ dislike of some features in Clio – it is clearly wrong to include it for billing analysis. Similar logical outliers were pruned from the data set used in the LTR.

    Instances like Alex’s were not included from the beginning when looking at billable hours. Charging a flat fee per segment is a common use for Activity Descriptions in Clio and were easily applied as proper flat fees in our analysis.

    We had the same concerns when first generating this report. The numbers vary greatly from what is self-reported elsewhere. However, it is the variance that is especially important about this report.

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