Whether you manage a small firm whose operations are shaped by a strict budget, or a large firm where financial decisions adhere to the best interests of major stakeholders, your bottom line matters - and every member of your firm should be actively contributing to its optimization. Billing attorneys are, of course, at the top of this list; which is why misrepresentations of your primary billers’ true production values are inherently detrimental to the firm’s collective success.
It’s unfortunate, but far from a secret within the legal community, that not all billable charges are actually collected upon. For a variety of reasons (including client bankruptcy, write-downs, etc.), few billers collect 100% of their outgoing charges - indeed, the attorneys who bill the most may even be spending beyond the aggregate of their actual collections, a practice that will inevitably drain your firm’s capital. This risk is amplified if your bonus payout structures and accounting allocations are dependent upon billing results, and even minor discrepancies between charged amounts and actualized collections can rip your financial infrastructure at its seams.
For those readers who are unfamiliar with legal billing structures, I’ll break down the relevance of this distinction using a recent example from one of our favorite clients. A partner and pillar at a thriving California Workers’ Comp firm reached out to us with a dilemma that may sound familiar to legal accountants and peers in WC:
“I need to run reports on which clients tend to decline or cut payments, per attorney. This aids in strategizing our marketing efforts and in deciding which clients need to get more love than others. It also goes hand in hand with the reviews I do of the attorneys. Attorneys earn recognition for billing over a certain threshold; so if they have to bill 230 but end up billing 290, they receive bonus credit for the latter. That’s great for them, but not for me if the client has a low effective billing rate.”
What she was asking for, essentially, was a frame through which she could compare clients and review billing attorneys based on their respective margins between intended and actual payments collected. Most Legal Practice Management systems overlook the necessity of such reports; MerusCase, on the other hand, makes it a priority - and we were happy to help our client find what she needed.
We’ve always equipped our clients with a diverse suite of features oriented towards measuring and tracking productivity, including our Operating A/R Dashboard. This Dashboard provides a brief but hard-hitting overview of actual payments collected, which can be used to delineate periodic trajectories or identify clients with high risks of defaulting on payments.
Our latest update to MerusCase (Version 4.1) takes this data visibility to new heights with a dramatic expansion of Allocation Mode. In the past, we’ve given MerusCase users a tremendous amount of flexibility in allocating payments to their respective charges. Although this flexibility remains in Version 4.1, we have implemented algorithms that recognize and suggest proper allocation paths for each payment - so accounting personnel only need to verify suggestions in order to finalize allocations.
To supplement this new feature, we have introduced several comparative Report modules that allow for a detailed look into payment collection patterns. For each of these Reports, you may view recorded data on a single user by selecting their name from a drop-down menu, or view a comparative report on all users by ignoring the drop-down altogether.
- A/R Receivables (per user): how much each staff member has billed vs. how much has actually been collected upon that charge; organizes your data based on invoice periods - so that you’ll always have a live, real-time update of all collections made towards invoices from your chosen date range.
This report will distinguish your successful billers from negligent collectors.
- Cash Flow by Billing Contact (Payor) - summary of all charges and payments filed against each billing contact - with distinction made between expenses and fees, and clear specifications of any associated write-downs.
This report will allow you to assess the financial value of each of your billing contacts, so that you can make an informed decision before burning any bridges.
- Cash Flow by User - summary of all hours and fees recorded vs. hours and fees billed, including receipts and write-downs; like with all cash flow reports, data is independent of invoices and instead reflects non-exclusive payment aggregates.
This report will provide a deeper look into your payment funnel and pinpoint the blockages within each biller’s collection system.
- Cash Flow by Attorney Responsible - how much each attorney has invoiced vs. how much each has actually collected, with distinction between fees and expenses and a clear demarcation of associated write-downs.
This report will highlight major sources of write-downs and failed payments, so you can eliminate the transactions that aren’t paying off.
If you’re a current MerusCase client and would like more resources to guide you through our new and ongoing features, check out MerusCase Insider for release notes, feature breakdowns, and more. If you’re not yet with MerusCase, but want to learn more about our services and uniquely comprehensive LPM system, check out our website, leave your contact information in the Comments section below, or give us a call at (510) 550-5000.
Despite a wide set of hazy connotations and popular misconceptions surrounding artificial intelligence (AI), this emerging tech sector has solidified its presence across professional service industries - and law is no exception. Indeed, the primary introduction of artificial intelligence to the legal community took place at an international conference held nearly 30 years ago, predating the invention of the worldwide web1. Since then, growth in AI has appeared to stagnate, with few real-world applications reaching the market. The reality is, however, that AI has been thoroughly researched and developed while in incubation, and the egg is finally about to hatch.
In 2014, for the first time ever, an AI program passed the Turing Test, which measures a computer’s ability to “think” well enough to be indistinguishable from an actual human during a two-way conversation. In 2016, the world’s first AI lawyer “Ross” was hired by a firm. These shifts have generated concern amongst legal professionals who, despite reassurance from AI manufacturers, are afraid of being replaced in the workforce.
Upon weighing the promises of AI companies against the potential of their products, it’s clear that there is some prudence behind these fears - but there is also, definitively, a new avenue for incoming legal workers to capitalize and win.
What is AI?
Artificial intelligence, also referred to as “cognitive computing”, is essentially the science of equipping computers with a learning ability that resembles human cognition. What separates AI from other streams of interactive, adaptive technology is that AI programs “think” - they build upon their own knowledge without additional stimulation from programmers. Most development in AI is oriented towards learning, reasoning, problem-solving, perception, and language-understanding2.
What tangible applications will AI have in the practice of law?
Initially, AI will be used to optimize and expedite two of the processes that generally tend to hinder law firm efficiency: research and e-Discovery. According to the ABA Journal, AI manufacturer NexLP (NexLP) is developing a program that searches for patterns, trends, and progressions within mass amounts of data, and uses predictive coding mechanisms to determine which pieces are relevant to the case or issue at hand. In less technical terms: it’s like studying from a textbook where all the answers to exam questions are highlighted, annotated, and explained conceptually.
NexLP’s Story Engine program operates similarly, but analyzes patterns from an unstructured and very nuanced datasource: conversations. This AI uses its progressive understanding of speech patterns to “summarize conversations, including the ideas discussed, the frequency of the communication and the mood of the speakers… [and then] build models to analyze behavior and find signs of fraud and litigation”3.
As AI technology advances in capability, scope, and reliability, NexLP founders Jay Leib and Dan Roth foresee more strategic applications for their data-crunching algorithms. Using litigation analytics, data anomalies, and expenditure reports, they plan to devise a program that will perform risk assessments and predict future litigation, empowering attorneys to invest in the most promising cases and optimize their use of data in storytelling.
How will AI impact you?
Ultimately, there are two key points to take away from this. First, although AI will be infinitely beneficial to the legal industry as a whole, its repercussions for job security may not be so pleasant. Programs like those being developed by NexLP will eliminate much of the “dirty work” that currently gets allocated to legal secretaries, assistants, and librarians - and unlike your favorite co-workers, AI programs won’t require sleep, supervision, or salaries. Many AI manufacturers insist that the goal of AI is not to replace legal staff members but instead to transform their roles. Other experts contest this possibility4, claiming that the actualization of AI will reduce firms’ operating costs so dramatically that junior associates and those working below them will be eliminated from big firms.
Though either eventuality is worth considering, it’s likely that reality will fall somewhere in the middle: junior and entry-level roles will be restructured, and those who are unable to adapt may be terminated. This introduces the second major takeaway: there are things you can do to prepare for (and capitalize upon) the functional integration of AI into law practice.
First of all, make sure your firm is equipped with the best in legal-tech - you can’t afford to remain stagnant when your competitors are racing ahead. Invest in a Legal Practice Management software that will act as a precursor to AI by implementing innovative and intelligently flexible automations in your document management, billing, calendaring, and correspondence systems.
Once you’ve fulfilled this basic obligation to your practice, focus on building your technical portfolio - especially if you’re a newer entry to the legal workforce. Find ways to contribute to your practice that leverage your personality and soft skills - not just your professional competencies. Market your firm and build long-lasting client relationships upon the appeal of positive human interaction; keep up with tech tools that may give your practice a competitive edge (and land you a role as a decision-maker in your firm); or explore a career in AI arbitration - as the industry develops, there will be a surging need for policies and governance to dictate its fair use.