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Collections by Timekeeper for Actionstep Flat Fee Matters

Collections by Timekeeper for Actionstep Flat Fee Matters
Collections by Timekeeper for Actionstep Flat Fee Matters
Written by
Paul W Carlson, CPA
Published on
Dec 13, 2023

Paul W. Carlson, CPA (00:00):

This video introduces a process that provides collections by timekeeper data for firms with flat fee cases out of action step. A CFO for law firms that one of the key metrics I look at in monitoring timekeeper production is the amount of time we're collecting on each person. It's an objective number because it's tied to dollars that come in the door from clients. Billable and billed time you can play games with. Collections are the truth because it's actual dollars that came in the door. So let's go look at a couple of notes on how the process works, and then we will jump into action step. So here we have kind of like the goal that we're using for this example. We have a flat fee case type that costs $4,000. So the financial flow, the flat fee is deposited to trust or into operating as a general retainer. You want to test a general retainer process before you just jump into it.


Time is recorded on the matter, and at a milestone or completion point. We create an invoice and action step and we allocate time entries within that invoice and invoice payment process. So a couple caveats. The collections numbers are only reported when you make a payment on an invoice. So we have a flat fee case that comes in January. We have January, February time entries. The collections number is going to pop when that invoice is marked as paid in action step in late February, early March. For estate planning firms or firms with short turnarounds on flat fee cases, that delay is okay. If the firm has cases that take 18 months to a couple of years to wrap up, the collections numbers may not be so useful. And that in the invoice that we create, an action step is for internal use only. That it's going to have manual allocations, it's going to have flat fees added to it.


So the invoice is purely to drive action step reporting. We would never give it to the client. So let's take a look at a couple example cases. So here we have a matter that's under budget that the attorney used three hours to complete their portion of the case instead of the budgeted five. And so we have a $700 windfall. So to allocate that time, I create a flat fee amount within the invoice. And when you're making the invoice, there's just a button that says add a flat fee. And that flat fee is fully allocated to attorney A. So when we click over to fee allocation page, attorney A is receiving $1,750 credit for their time, even though they only put in $1,050 of time entries for the case. And then the paralegals receiving full credit for their time. So that one's pretty quick. Sometimes you can take a couple minutes to figure out exactly what flat fees you want to use and how to allocate,


To make this faster, some firms, there's a difference is less than 10%. The adjustment will just go by default to the attorney, or by default it'll go to the firm owner and they don't even try to allocate. That's the small Delta. Then we have the other side of the situation. So in this case, the attorney took 10 hours to complete their work instead of the allocated five. So total fees on the case is $5,750. We only receive $4,000, so we need to pull out $1,750. So what we do when you create the invoice, you add a discount that will bring the fees down to the amount actually were paid by the client.


Then on the fee allocation page, when you're creating the invoice, you can manually type in whatever dollar amounts you want for this fee allocation. So when I made the invoice, I made the paralegal hold. They received a 100% credit for their time. The attorney's time, they only received credit for $1,750 of their work. So they put in $3,500 of billable time, but on a collections report, they're only going to receive credit for $1,750. So that couple examples of how this workflow works. It takes extra time at creating those invoices, but when you can run this collections report and see exactly who in the firm is producing, you have a tool that you can begin to guide the firm. Thanks.