Can You Really Ditch Timesheets If You’re Not Billing Hourly?

Last week, I attended the National Solo and Small Firm Conference in Philadelphia, held in conjunction with the ABA’s GP/Solo Division annual meeting (you can see my post about the meeting here). Not surprisingly, some of the speakers touched on firm finances, including billing practices. Alternative billing was mentioned only briefly (at least in the sessions I attended), but both speakers I heard mention the subject said that switching to alternative billing doesn’t mean you can give up keeping track of your time.

One speaker said that you should continue to keep timesheets, at least in the beginning, while the other said that ALL lawyers, regardless of their billing method (including contingency cases), MUST keep track of their time, because time is the measure of a lawyer’s value, and because the only way to measure profitability is by measuring time.

While I have, on occasion, advocated continuing to keep timesheets when you first switch to an alternate billing method, I can’t agree that all lawyers must keep timesheets forever. It may be helpful to compare newer billing methods with older ones by looking at timesheets as one factor, however, the suggestion that time is the measure of a lawyer’s value and that profit has to be measured by time is far too narrow a lens to use when looking at any lawyer’s practice. After all, lawyers have the same amount of time as anyone else.

Measuring time alone is a false way of establishing a lawyer’s value, and it does a disservice to lawyers. It isn’t the lawyer’s time that’s valuable, it’s the knowledge and experience that they bring to a client’s problem or situation, and the manner in which they apply that knowledge and experience. The value has nothing to do with the length of time a lawyer is working on a particular task or matter.

Here’s an example that I hope will help illustrate why the assertion that keeping timesheets is the way to measure profitability for lawyers is misleading. When I was practicing law full time, my practice focused on litigation – mostly insurance defense – and our firm billed hourly on most matters. The lawyers in my firm took a lot of depositions. Ideally, immediately after the deposition would have been the best time to begin dictating the deposition report to the file/client, but the reality is that depositions can be draining. Often, after concluding an hours-long deposition, it was difficult to get any other substantive work done, whether on that file or any other.

One of my colleagues coined the phrase, “post-deposition malaise” to describe that phenomenon. And it’s one of the reasons many of my colleagues disliked depositions. Depositions were not only difficult billing themselves, but the energy drain meant that a deposition day was often one in which the lawyer was behind in billable hours because the end of the deposition also meant the end of the ability to bill much of anything for the rest of the day.

A lawyer determining profit based upon timesheets alone would count and record the preparation time, possibly the travel time, the time to take the deposition, and the time to prepare reports, letters, discovery demands, etc. that resulted from the deposition.  But even lawyers that keep track of administrative time wouldn’t assign that low-energy, accomplish-nothing, ‘post-deposition malaise’ time to that file. That time is simply ‘dead’ or non-existent time, in timesheet/hourly billing terms. It wouldn’t appear anywhere. So the calculation of ‘profitability’ on that particular file is inflated because it doesn’t take into account the additional time the lawyer needs to regroup after the deposition.

Of course, there are other activities in any practice that produce the same effect. As I’ve said before, all hours are not created equal. Some hours are more difficult or complex, or require more energy and more presence than others. Some require us to think on our feet. None of those things are taken into account when the lawyer’s value (and/or the lawyer’s fee) are based solely on time. And the down-time never appears on a timesheet.

A lawyer that switches to an alternative billing arrangement but continues to keep timesheets to determine whether the new billing arrangement is more profitable is probably going to be relying on an inaccurate calculation – even assuming that the lawyer is excellent at capturing and recording time.

While there may be some reasons to keep timesheets, particularly in cases in which the court will determine the fee, it is inaccurate to state that the only way a lawyer can determine profit is by determining the amount of time spent on a matter. Time is only one ‘cost’ or ‘input’ and it isn’t a measure of value for the lawyer’s services or for the benefit derived by the client.

One final note – the suggestion that contingency fee lawyers should keep timesheets in case they need to prove what was done (for example, on a quantum meruit basis if the fee is to be shared with a subsequent lawyer, etc.) also misses the mark. For the few instances that would require such ‘proof,’ would it be worth the time and effort it takes to capture and record time on every matter?

The file itself, including the attorney’s notes, correspondence, pleadings, etc. should be ample evidence of the work performed on behalf of the client – assuming that the file is well documented. Wouldn’t most lawyers be better served using their time to communicate with clients and advance the progress of the matter than to meticulously record time in those cases in which their fee is determined by some other measure?

Billing issues have become big talk recently. I look forward to your comments.