1. Lifecycle of the Billable Hour
Association of Legal Administrators
Russell Chimeno, CPA

2. Overview Hours (billable, non-billable, utilization)
Rates (realization)
Work-in-process, Accounts Receivable
Discipline (Timekeeping, Billing and Collecting)
Alternate Fee Arrangements

3. Hours 8 hours per day X 5 days per week = 40 hours each week
X 52 weeks each year
= 2080 hours each year

4. Hours Billable (Chargeable) Hours Non-Billable Hours
Hours related to client engagements
Non-Billable Hours
Administrative, Business Development, Professional, Personal

5. Rates Average in Houston Metropolitan Area
Solo Practitioner $250 per hour
2080 hours X
$250 /hour =
$520,000 year

6. Work-in-process (WIP)
Example: You work 20 hours on a matter for a client: 20 X $250 = $5000

7. Work-in-process (WIP)
You order a pre-bill (pro-forma), review and edit entries. You determine that all is correct and you request an invoice: 20 X $250 = $5000

9. Accounts Receivable
The invoice is generated and sent to the client. The client pays the invoice in full: 20 X $250 = $5000

10. Realization Billing Realization Actual Time: 20 hours
Amount Billed: 20 hours
20 ÷ 20 = 100%

11. Realization Collection Realization Hours Billed: 20 Hours Paid: 20
20 ÷ 20 = 100%

12. Effective Rate Effective Rate Actual Investment: 20 x $250 = $5000
Amount Collected: $5000
$5000 ÷ 20 = $250

13. Work-in-process (WIP)
Example: You work 10 hours on a matter for a client: 10 X $250 = $2500

14. Work-in-process (WIP)
You order a pre-bill (pro-forma), review and edit entries. You determine that of the three hours you spent researching the matter, you will only charge for one of those hours: Initially 10 X $250 = $2500 Now 8 X $250 = $2,000 (generating a write-down)

15. Accounts Receivable
The invoice is generated and sent to the client. The client short pays the invoice as follows: 6 X $250 = $1500 The client disputes two hours of the charge, you accept the payment in full (generating a write-off)

16. Realization
Billing Realization Actual Time: 10 hours Amount Billed: 8 hours 8 ÷ 10 = 80%

17. Realization
Collection Realization Hours Billed: 8 Hours Paid: 6 6 ÷ 8 = 75%

18. Effective Rate
Effective Rate Actual Investment: 10 x $250 = $2500 Amount Paid: $1500 $1500 ÷ 10 = $150

19. Totals Example 1 Example 2 Total
Recorded 20 hrs 10 hrs =30 x 250 =7500
Billed 20 hrs 8 hrs =28 x 250 =7000
Collected 20 hrs 6 hrs =26 x 250 =6500

20. Totals Billing Realization: Actual Time 30 Amount Billed 28
28 ÷ 30 = 93%
Collection Realization:
Amount Collected 26
26 ÷ 28 = 93%
Effective Rate
Actual Investment 30
Amount Collected $6500
6500 ÷ 30 = $216

21. Utilization
Example 1: Actually billed 35 hours last week Weekly billing requirement = ÷ 40 = 87.5%

22. Utilization
Example 2: Actually billed 35 hours last week Actually worked 43 hours last week 35 ÷ 43 = 81%

23. Discipline

24. Discipline

25. Discipline

26. Discipline

27. Discipline

28. Discipline Timekeeping habits Altman Weil Consulting Study
1/10 time lost if you don’t record until end of day
4 hours lost if you don’t record until end of week
15 hours lost if you don’t record until end of month
4 hours each week X 52 weeks = 208 hours per year

29. Discipline Timekeeping habits Attorney’s Master Class
Reconstructing hours end of day loses 5-10%
Reconstructing hours end of week loses 15-25%
(or 6 to 10 hours each week)
8 Hours each week X 52 weeks = 416 hours year

30. Discipline Timekeeping habits Altman Weil Consulting Study
208 hours year X $250 per hour = $52,000

31. Discipline Timekeeping habits Altman Werl Consulting Study
$52,000 X 30 years = $1,560,000 career
$52,000 X 35 years = $1,820,000 career
$52,000 X 40 years = $2,080,000 career

32. Discipline

33. Discipline Billing and Collecting
Set Aside Specific day(s) each month for billing
Bill Monthly while it is still fresh
Follow-up promptly – communication is key

34. Alternative Fee Arrangements
Economic relationship with client not based on hours-times-rates

35. Alternative Fee Arrangements
Fixed Fees
Value/incentive billing
Blended Rates
Contingency Fees

36. Summary Hours (billable, non-billable, utilization)
Rates (realization)
Work-in-process, Accounts Receivable
Discipline (Timekeeping, Billing and Collecting)
Alternate Fee Arrangements

37. Lifecycle of the billable hour