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by Eileen O'Loughlin,
Market Research Associate
Last Updated: December 7, 2016


Tracking billable hours using paper-based methods, or even spreadsheet programs such as Microsoft Excel, can be tedious and time-consuming. What’s worse, these methods create lots of potential for human error. Even after you’ve calculated billable hours, you’ll still need to generate invoices and stay on top of client accounts.

Accurate tracking of billable hours ensures a steady flow of revenue for your law firm or private practice. To automate the billing process and make sure billable time isn’t slipping through the cracks, you’ll need dedicated legal billing software. There are many different types of software that can streamline time tracking and billing for lawyers and legal departments. This guide will help you understand the major categories and features.

Here’s what we’ll cover:

Best-of-Breed Options vs. Practice Management Suites
Common Functionality of Legal Billing Software
What Type of Buyer Are You?

Best-of-Breed Options vs. Practice Management Suites

Because billing is foundational to a law office’s operations, there are a number of stand-alone solutions on the market. Time tracking and billing modules are also integrated into more comprehensive practice management software suites. A practice management suite is a single system that manages all areas of your law practice.

If you need extensive case management, document management or contact management functionality in addition to time tracking and billing, you should definitely look into practice management suites. Some suites even integrate time tracking capabilities throughout the system’s modules. For example, you can track time in a document management module without having to use a timer.

If all you need is a better way to track billable hours, look into the many stand-alone solutions on the market created for this purpose.

Common Functionality of Legal Billing Software

Functionality of legal billing software can be divided into three categories: time tracking; bill preparation and payment; and general ledger.

Time Tracking Functionality

Calendar Calendar may be included, or software may integrate with a calendar application (e.g., Microsoft Outlook). Events created in your calendar can automatically feed into calculations of billable hours. In some systems, calendar information can be used to fill in gaps in billable time.
Multiple fee schedules/billing arrangements Allows users to bill time in hourly, contingency, transactional, user-defined, flat fee (monthly, annual or user-defined), retainer fee and split fee increments.
Billing rates by timekeeper level Allows users to bill by timekeeper level: e.g., individual attorney, partner, associate, practice area type and client levels. Primarily used by larger firms.
Automated time capture Draws on calendar data, documents and tasks to fill in gaps in your billable time.
Stopwatch timers Users can set timers to track each minute of billable time.
Activity codes Allows users to assign activity codes to billable time, including the codes established by the American Bar Association (ABA). Users can also define their own codes.
Expense tracking Allows users to track expenses associated with clients’ accounts.
Missing time reporting Allows the system to report on gaps in your billable time.

Time records in Actionstep

Bill Preparation and Payment Functionality

Client invoicing Automatically generates client invoices based on the billable time recorded in the system. Bills can be delivered via email, or electronically in Legal Electronic Data Exchange Standard (LEDES) format.
Customizable invoice templates Allows users to customize invoices with their firm’s logo.
Past due notices Automatically notifies clients when bills are past due. Some systems can also calculate late fees automatically.
Low retainer reminders Sends automatic notices when clients’ retainer fees are getting low.
Credit card processing and EFT Some systems allow users to accept credit card payments. Other systems allow for electronic fund transfer (EFT) payments via automated clearing house (ACH) processing as well as PayPal gateways.

General Ledger Functionality

Client account balances Users can record invoices and payments and maintain account balances for all clients.
IRS filings Automatically prepares IRS filings on the basis of information stored in the system.
Trust accounting Allows users to manage trust accounts for clients and even author checks within the system.
Interest on Lawyer Trust Accounts (IOLTA) Accounting IOLTA, which helps raise money for legal aid for those in poverty via interest earned on client funds, entails special accounting requirements that you can manage with your software. The software protects against accounting mistakes and automatically records paper trails in case of an audit.
Financial reporting The system can automatically generate reports on information such as outstanding balances and client inactivity.

Recording payments in Rocket Matter

What Type of Buyer Are You?

The type of legal billing software you choose will depend, in part, on your specific needs as a buyer. For example:

  • Solo practitioner. If you have your own practice, you’ll really only need the most basic time-tracking capabilities. While features such as automatic time capture are obviously useful to all attorneys, they’re confined to expensive systems that might not be the best fit for solo practitioners.
  • Small firms. Small firms should think critically about whether to go with a stand-alone billing solution or a practice management system. If you have special accounting, mobile access and/or payment needs, you may need to invest in a more robust solution.
  • Large firms. Large firms will need extensive functionality for managing individual time-keepers and clients. Reporting features are also crucial for large firms to identify revenue opportunities. Finally, some legal billing systems include capabilities like those found in customer relationship management systems, which can be necessary for managing lots of clients.

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