Daily time summaries by lawyer are also an important part of cash flow reporting. To make this analysis accurate, all lawyers in the firm should be accounting for all of their time every day – billable, firm administration or management, marketing, mentoring, continuing education, pro bono, vacation, etc. Doing so will allow firm management to look for aberrations or time summaries that don’t make sense or indicate poor time management or failure to meet minimum billable time requirements.
But once you start accounting for all your time, how do you know how you stack up? Here’s a quick way to determine how many hours you should be billing. Take your desired annual personal gross (pre-tax) income (say $150,000). Collected billings will need to be approximately twice that – $300,000 – assuming expenses are about 50% of gross. Factor in bad debt at 10%. This indicates that you will need to bill approximately $330,000 per year in order to end up with a gross income of $150,000. There are approximately 231 working days per year (365 minus 21 days vacation, 104 weekend days, and 9 statutory holidays). Therefore, you must bill approximately $1,400/day ($330,000 ÷ 231). If you bill at $250 per hour, you must log 5.6 billable hours per day – every day – to reach your income goal. Daily time summaries will do a lot to help you stay on track.