The idea of being a data-driven business can sound intimidating – something best left to PhD statisticians and data scientists. But monitoring data at your firm doesn’t need to be difficult, and it can bring real benefits. Derek Fitzpatrick explains

The typical law firm already deals with an abundance of data every day. From the documents and resources required to manage a case, to tracking all the time, bills and accounts that contribute to your firm’s financial viability, it can be tough keeping it all in order, even on a good day. But the real challenge is being able to make sense of all that information from a management perspective.

The average lawyer completes only 2.4 hours of billable work in any given day

The most effective data insights are the ones that provide really simple, clear perspective on your most important business metrics – especially the ones that have the potential to impact the profitability of your firm. The ability to identify and track your firm’s most critical data points will help you assess the overall health of your business in real time, and give you the means to plan for improvements.

Since legal is a service-based profession, the only real means of generating income at a law firm is to perform billable work on behalf of your clients. Even if a firm bills clients primarily on a flat fee or contingency basis, knowing how many hours go into each case will determine whether those cases are profitable.

Data - woman holding a phone connecting to a chain of information blocks


But while many law firms have annual billing targets for their lawyers, many small and medium-sized firms aren’t equipped to track progress toward those goals, especially on a regular basis: day to day, week to week, or even month to month. One problem is that firms don’t have the systems in place to monitor this type of information firm-wide. Another is that lawyers already have enough on their plate.

Below, I outline some simple steps for setting up systems to record and track your data, and suggest some key metrics all firms should be monitoring.

1. Create a system of record

To track any type of data insight at a firm, you need to start by creating a system of record.

You could choose to record on paper, but even the most advanced artificial intelligence software won’t be able to analyse information written on a sheet of paper – especially if it’s tucked away in a loose coordination of filing cabinets, desk drawers and travelling briefcases (which seems to be the situation for many practices out there!). And manual processes can become a burden, especially when dealing with large volumes of data from multiple staff.

Investing a little bit up front now can pay huge dividends – in both time and revenue

Conversely, today’s software technologies offer powerful, affordable and efficient means to track, store and visualise data at scale. And cloud-based technologies allow you to access this information securely online, from anywhere.

Most law firms are already using digital solutions for diary management and time-tracking (and every firm is, of course, using email). Where most law firms can improve, however, is in tying all of these systems together to keep track of all casework, calendar events, documentation and billing records in one central case management platform. This not only helps create efficient and organised workflows that help ensure data accuracy across the firm, but also creates the means to measure and manage the work at scale.

Working from a single platform also reduces data entry. Any work performed can be pulled directly into an invoice, which then updates a record of accounts when they get paid. And all of that data becomes extremely easy to export into reports for further analysis and review.

2. Decide which data to record

The next step to becoming more data-driven is to determine what information needs tracking, and on what timescale (every day, week, month etc).

The following is a list of critical data insights that have the potential to impact the future success of any firm.

Utilisation rate

Utilisation rates measure how much time is spent performing billable work compared to the time that’s available in any given day. A low utilisation rate indicates that a firm may be spending too much time on non-billable tasks compared to revenue-generating work.

Industry data suggests that the typical firm doesn’t spend enough time on billable work. According to Clio’s 2018 Legal Trends Report, the average lawyer completes only 2.4 hours of billable work in any given day: just 30 per cent of an eight-hour workday (and even less if a typical workday is more than eight hours).

It’s one thing to be busy, but it’s another thing to be busy doing the type of work that ultimately contributes to your firm’s success. Things like writing invoices, collecting bill payments and updating client ledgers, while essential, all take time away from doing actual billable work. If utilisation rates are a problem at your firm, it might be worthwhile to track how non-billable time at your firm is being spent, so that you can find ways to make those activities less of a time-drain.

Realisation rate

Realisation rates measure how much of a firm’s billable work actually makes it to an invoice, after discounts and deductions. The 2018 Legal Trends Report shows that 74 per cent of lawyers discount at least sometimes, most often out of sympathy for the client. And these discounts and deductions often aren’t tracked in any meaningful way. If your firm is regularly discounting its services, it might be worth considering more transparent estimations or flat-fee structures to avoid shocking clients last minute with prices which are higher than they were expecting.

Collection rate

Collection rates measure how much of a firm’s billed amounts actually get paid. The 2018 Legal Trends Report shows that the average firm forfeits 14 per cent of billings to clients who don’t pay, which can have a huge impact on firm revenues. If this is a problem at your firm, finding ways to set up more affordable payment plans can be a way to collect when the ability to pay is a problem.

Average case value and seasonality

Looking at average case values and tracking them over time to assess seasonality can be a powerful insight that will help you plan when to invest more in your marketing efforts, when to schedule holidays and when to bring on new staff. If you keep a record of total billings for each case handled at your firm, average case values can be calculated based on different practice areas, case types or even client profiles.

Client satisfaction

Assessing customer satisfaction on a regular basis can give you direct feedback and advice on how to improve services at your firm. Acting on these insights will not only improve satisfaction in time, but also help you earn repeat business and referrals down the road. Yet the 2018 Legal Trends Report shows that 37 per cent of firms don’t collect feedback, and 42 per cent do so only casually.

Tracking satisfaction on a numerical scale helps quantify feedback over time. The net promoter score (NPS) is a customer satisfaction measure used by businesses in every industry. In addition to providing quantitative scoring data, collecting NPS data also gives you the means to gather written feedback in a formalised manner. To determine your firm’s NPS, you’ll need to assess how likely your clients are to recommend your services, based on a score of 0 to 10. Subtract the per cent of 0 to 6 responses (your ‘detractors’) from the per cent of 9 to 10 responses (your ‘promoters’) to determine your score.

There are many satisfaction survey tools available, the majority of which are relatively inexpensive and very easy to use.

3. Maintain consistency firm-wide

A system is no good if nobody uses it. It’s even worse if your team uses it incorrectly or inconsistently. Be sure to train your team on what information needs to be documented where, and consider assigning a regular review on data inputs to ensure timeliness and accuracy.

Knowledge is the first step to action

Spending your time tracking down numbers likely isn’t what you looked forward to when you first decided to study law. And too much time managing your firm is counterproductive to putting more time toward your clients.

But investing a little bit up front now can pay huge dividends – in both time and revenue – down the road. With a system of record in place, and the know-how to review your most important data insights, you’ll be on track to understand more about what will define your firm’s success for the years to come.

The Law Society endorses Clio, a leading provider of cloud-based case management software, as a best-in-class solution for UK law firms.