Missed time entries and inaccurate expense reporting can cost law firms a lot and can lead to them having a bad reputation. To avoid such mistakes, they need a specialized solution that can automate routine tasks and help them avoid errors.
This is where legal billing software can help. These solutions can help create a reliable billing system, track billable hours precisely, create invoices, and more.
In this article, we will explain what legal billing software solutions are, what core functionalities they offer, what key benefits they provide, market trends, and how to choose one for your organization.
Legal billing software is a specialized solution that is aimed at helping law firms and attorneys simplify their routine tasks, such as managing case-based expenses, generating invoices, tracking billable hours, and more. It is different from legal accounting software, which primarily helps with income and expense tracking and tax preparation.
Law firms can benefit from these features to track time spent on activities like case research or brief preparation, while solo practitioners can easily create and send professional invoices to clients.
Core Functionalities Of Legal Billing Software
Below, we have outlined some of the key functionalities of legal office billing software that can help businesses optimize their processes:
Invoicing
Most law practice billing software supports the Legal Electronic Data Exchange Standard (LEDES) format and the Uniform Task-Based Management System (UTBMS) codes, both of which standardize the invoice creation process. They use approved time and expense, and matter-specific rules to automate the invoice creation process. This significantly reduces errors in calculations and keeps managers informed if there is any overspending on a single case.
Expense Management
It helps staff record costs related to each case. Using the software, they can keep track of filing fees, travel expenses, expert fees, and more. These costs are automatically marked as billable or non-billable, and all receipts and invoices are stored digitally, which could help in case of any dispute over contract terms. Additionally, these solutions can also be integrated with third-party accounting applications, such as QuickBooks and Clio software.
Reporting And Analytics
These platforms produce detailed reports for several metrics, for example, on hours worked, billed vs collected amount, billing realization rates, and trust balances. These reports also help firms with collection cycle tracking by showing if any invoices were delayed and calculating the unbilled time.
Time Tracking
It enables lawyers to log per-matter hours using timers, calendar links, or by automatically capturing drafts and calls. They can also add fees and hourly rates into the system, which saves them from manually calculating the total cost a client has to be billed.
These are some of the key benefits of law firm invoicing software:
Audit Ready Record
It helps keep a digital record of all transactions and deductions. Firms get access to information, such as who was in charge of creating the invoice, when the invoice was sent, and when receipts were attached and when they were not.
Scalability
Legal billing tools come with customizable templates, automated approval rules, and smart workflows. All these features and more make it possible for organizations to handle increased billing volumes and scale without worrying about the software’s capability to support the expansion.
Operational Efficiency
With features like batch-billing and approvals, firms can handle more transactions without needing to hire more team members, which ultimately improves their bottom line.
Improved Cash Flow
Features like automated reminders, LEDES-compliant invoices, and online payment methods ensure firms get paid on time by their clients. This ensures a steady flow of cash keeps flowing into the business, so firms can focus on acquiring more clients and investing in growth.
Choosing legal billing software entirely depends on what scale you are operating on and what functions of your firm you need to automate and streamline the most:
Assess Your Firm’s Needs
Choose software based on what type of law firm you have. For example, if you are a solo lawyer who’s just starting, you’ll need a simple application that can track your work hours and accept online payments from clients. On the other hand, if you are a small-to-mid-sized law firm, you’ll need a platform that could help you with matter-level profit reports and bulk-invoicing tools.
If it gets difficult for you to decide which software to choose just by looking at their features, you can always get a trial or a demo to understand how they’ll fit in your workflows.
Consider Your Firm’s Future Plans
You need to consider how many attorneys and lawyers will be using the software to handle billing for clients. Keeping this in mind will help you choose software that will scale as your firm grows.
You should also consider the type of practice areas you want to expand into that might require stricter data security protocols. For example, in cases involving Mergers and Acquisitions (M&A), intellectual property matters, and government and defense contracts, going with an on-premises solution is better instead of a cloud-based option.
Keep In Mind Other Solutions Your Firm Uses
Most legal firms already use tools, such as accounting software, legal practice management software, document management software, and Customer Relationship Management (CRM). If you are using any of these, you should check whether the billing software you are considering integrates with the existing applications you are using.
Consider Your Regulatory/Compliance Environment
Legal firms have to ensure reliable trust accounting. Not all legal billing software offers the best level of trust accounting. While selecting, you should check if the solution will help you stay compliant with all the industry regulations set by Interest On Lawyers' Trust Accounts (IOLTA). Doing so will help your firm avoid any penalties or fines.
Artificial Intelligence (AI) has changed and is continuously changing how legal billing software helps law firms. These platforms are now equipped with AI-powered tools that pull billable activity from meetings, emails, and documents to create auto-suggested time entries. AI is also being used to review invoices line-by-line, identify billable and non-billable items, highlight incorrect entries, and more.
Additionally, a report from Thomson Reuters Institute indicates that AI is being used extensively in legal workflows. It has been especially helpful in identifying where firms are losing revenue by analyzing realization rates, billing data, and silent write-offs.
Another trend that firms are rapidly adopting is reliance on the LEDES format. A report shows that 62% of law firms use e-billing systems, with LEDES being the most commonly used format.
Moreover, electronic payment methods, such as cards and Automated Clearing House (ACH), are now a core part of legal software. The adoption rates are also high, with 83% of law firms already accepting credit and debit card payments.
What Real Users Say About Legal Billing Software
The single biggest benefit users have reported is the ability of these platforms to automate invoicing and billing. This has been extremely helpful as it saves legal firms from unnecessary write-downs and ensures they get paid on time, which directly has a positive impact on their revenue and cash flow.
Another thing users have noted about these solutions is that they centralize multiple functions of a law firm in a single space. For example, firms have been using legal billing software by integrating their accounting and practice management software, which saves them a lot of time.
The legal billing platforms have evolved over the last few years and are continuously evolving. That is why you must have a good understanding of what modern solutions offer and how they can help you run your law firm in a better, more efficient way.
When evaluating solutions, you should be able to tie back each of the software features to one of your problems. For this, we recommend you consult every stakeholder in your firm to ensure you buy software that complements everyone in your team.