Johann Wolfgang von Goethe once said: “Many people take no care of their money till they come nearly to the end of it, and others do just the same with their time.”
There is an old adage that time equals money. But unbilled time doesn’t equal money until it is billed and collected. Accordingly, our cash flow report #4 in this series of posts is: Work In Progress: Is your WIP increasing or decreasing?
What does your WIP report say about time that you have banked? Is it trending larger or smaller or staying about the same? If your WIP is increasing, is it due to time being put into contingency files that have the potential of paying off at some point in the future? Or is it building because you have not been billing regularly? One of the signs of a lawyer in trouble is their burgeoning unbilled WIP. They come into the office and log time – but there is no real value in that time and they know the reaction that they will get from clients if they try to collect. So it builds…
Accordingly, on files that can be billed monthly, you are doing yourself a disservice (and potentially digging yourself into a financial hole) if you fail to bill for the work done. By way of a benchmark, your WIP over 180 days as a percentage of your Total WIP should be within 20 to 40%. Any more than that and the value of your WIP is diminishing since it loses value over time.
Follow Goethe’s advice and take care of your (unbilled) time as you would of your unspent money.