Starting a law firm is all about marketing, getting good, paying clients, and generating regular cash flow. Creating regular cash flow means that an attorney must practice the art of the art of the billable hour.

Though many attorneys are familiar with the billable hour, many law students may not understand the significance of the billable hour coming out of law school. The concept of the billable hour is simple: an attorney bills a client for the time spent on their case. But, what is time spent? Also, what is reasonable time spent? Is it simply when you think about the client’s case? Should an attorney consider the type of client and their ability to pay?

One reasonable interpretation of the billable hour is actual time spent on a file when an attorney’s time could be spent on something else or on a different file. This maybe obvious, but the failure to keep track of time spent on a file means lost money for a solo attorney. Lost money means no billing and lost cash flow. Not billing time can be the difference between a law firm making it and a law firm closing down.

Attorneys often spent time on things like meeting with a client, drafting documents, telephone calls, court hearings, preparing for a hearing, researching a client issue, and a variety of other tasks. When the attorney spends time on these things, he or she should keep a written record of all time spent on the file. For example, if an attorney spends one hour on a motion, and the attorney bills at a rate of two-hundred dollars ($200.00) an hour, he or she will make a written time entry on the attorney’s time-keeping software. If the attorney spends more time on the case, he or she will continue to enter written time records. Typically, at the end of a month, the attorney will send the client a bill showing the total time spent and how much it costs.

This billing arrangement is much like that of any kind of professional who is hired by the hour. However, attorneys are often working on cases over a long period of time. When starting and building a law firm, an attorney must always remember to keep track of their time. This is where good billing software is a must for opening up a law practice. Proper invoicing can make or break the firms regular cash flow. Also, many attorneys who graduate from law school and pass the bar exam may not realize that courts will often be asked to scrutinize the reasonableness of a bill. This is where proper time entry becomes extremely important. When starting a Law Firm, an attorney must always be cognizant of the billable hour in order for his or her practice to survive.