Billable hours - why it STILL matters

Working with law firms, I am often asked about the best KPIs to track weekly. You can't improve what you don't measure. One of the best is…..billable hours. 

Although I know there is much controversy about tracking time, hear me out. Besides client billing, with billable hours being the foundation of client invoicing, what if your clients are all on fixed fees?

I will argue it’s still an important KPI to track as:

• Profitability Analysis: Billable hours are central to understanding a firm's revenue and profitability. Comparing billable hours to costs helps firms make informed financial decisions.

• Productivity Assessment: Tracking billable hours allows firms to understand how lawyers spend their time, identify bottlenecks, and improve efficiency.

• Performance Evaluation: Law firms use billable hour metrics to evaluate individual lawyer performance, providing insights for growth and development.

• Resource Allocation: Understanding how billable hours are distributed across practice areas and people helps firms allocate work effectively and ensure they have adequate resources.

• Fee Structure Optimization: Firms can make data-driven decisions to optimize their pricing models by analyzing hours, even with flat fees, to ensure they are appropriate.