Find Out How Much You’re Overbilling Your Clients

Ask someone how much they worked last week, and they will probably overestimate the number by 5–10%, according to a study published by the Bureau of Labor Statistics. And the more someone thinks they worked, the greater their overestimate is likely to be, says the Economix blog at the New York Times.

Humans (well, American humans, at least) have really inaccurate memories when it comes to the time they spend working, in other words. We aren’t nearly as busy as we think we are, according to sociologist John Robinson, even if we feel like we are working all the time.

Lawyers are even worse when it comes to remembering billable time. Viewabill, a service that allows clients to see what their lawyers bill in real time, says that waiting until the end of the month to record your time means you are probably overbilling your clients by about 23%.

Delayed Billing Adds Inaccuracy — And Cost

That number comes from Viewabill’s aggregated data. By comparing timely entries to delayed entries, co-founder David Schottenstein estimates firms that keep time regularly are saving their clients as much as 23%:

Viewabill thinks its software changes behavior through transparency because clients can see the time as it is entered. If you know your clients can see what you bill in real-time, you are less likely to record all your time at the end of the month. (Again, Viewabill’s aggregated data bears this out.) Schottenstein says Viewabill is like an empty police car next to the freeway. Even if clients don’t check in very often, they could — and they can see when time was recorded no matter when they check-in. This strongly encourages lawyers, to change their behavior.

After this article was originally published, Viewabill added some context to its numbers on Twitter in response to questions from @DiligenceEngine and @abziegler:

@abziegler @DiligenceEngine @samglover case-by-case, but CalBar suggests block billing = 10-30% overbilling.

— Viewabill (@Viewabill) February 10, 2014

@DiligenceEngine @abziegler @samglover It also tends to correlate with amounts slashed by judges in fee disputes. Ex: http://t.co/vf69T1HFpS

— Viewabill (@Viewabill) February 10, 2014

You don’t need Viewabill to ensure your timekeeping is accurate, of course. But you do need to record your time as you work. The more frequently you record your time, the more accurate it will be. If you wait until the end of the month and then reconstruct your time, you are probably overcharging your clients.

“Capture More Time!”

Related: How to Keep Track of Your Time

Many timekeeping products claim to help lawyers “capture more time.” Time Matters, for example, cites “[c]aptur[ing] billable hours and client expenses while you work to prevent revenue leakage” among its benefits. Rocket Matter says you can “Forget about losing track of precious billable time or expenses.” Amicus Attorney says it will help you “capture more billable time.” You can see similar claims from most practice management and timekeeping-and-billing software.

The idea is that, by making it easier to record your time, you will record it more frequently, so that you are less likely to miss things. This makes perfect sense, and it does turn out to be true, according to Schottenstein.

If you bill more frequently, you are likely to capture time you would miss if you tried to reconstruct your time at the end of the month. But, he says, your bills will still go down. That’s because you probably aren’t missing 23% of your bill. The time you overestimate you spent is almost certainly greater than any missed time you might catch with more-frequent timekeeping.

Teaching Old Lawyers New (Timekeeping) Tricks

Whatever the benefits of real-time timekeeping, some firms really don’t want to do it. Or at least some influential partners at those firms don’t want to. Faced with clients who wanted them to use Viewabill, two large firms (one a prominent employment law firm based in San Francisco, another a large employment law firm in DC and Cleveland) mounted a spirited defense that included spreading a bunch of uninformed FUD about the cloud.

Why? Well, assuming the lawyers at those firms aren’t trying to pad their bills by 23%, the most likely reason is that, as one firm admitted to Schottenstein, 80% of its billers do not put in their time until the last two days of the month. Apparently, they are willing to fight for their right not to change. You can’t always teach old partners new tricks, even if it means overcharging clients.

But clients are not yet insisting on real-time timekeeping and transparency. They probably will, eventually, no matter how hard the holdouts try to convince them not to. Eventually, those firms will be forced to accept greater billing transparency, and those partners will have to change. If that 23% figure is anywhere close to right, corporate clients will not stand for end-of-the-month billing for long. Sooner or later, they will make real-time billing a condition of representation.

How About Alternative Fees?

If waiting until the end of the month to record time means you will be overbilling your clients, then you probably ought to stop it and start billing in real-time.

A partial solution might also be to stop using time to measure the cost of representation — at least when you don’t need to. If you quote flat fees or use subscriptions, unbundled services, or alternative fee arrangements, you can stop tracking time altogether. No timekeeping, no padding (inadvertent or otherwise).

Except sometimes hourly billing really is best, so don’t give it up entirely. Just use other options when they make more sense.

And when you do bill by the hour, consider doing it in real-time. Don’t wait for your clients (or ethics boards) to find this article and start asking questions.

Originally published 2014-09-11. Updated 2014-09-14. Republished 2019-12-30.

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