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.

The Problem

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.

The Solution

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.

1. 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.

2. 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.

3. 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.

4.  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.