BOMBSHELL ANALYSIS: LAW ACCOUNTING! WHO TOOK YOUR 5/6TH? QUICK MATHS
A Mathematical and Temporal Journey With the “Standard Tenth of an Hour” Practice in Legal Billing.
Napoleon said, “I care not who makes the laws, as long as I count the votes.”
Stalin said, “It’s not the people who vote that count, it’s the people who count the votes.”
I tried to research to locate who may have said what I thought first before me and could not find. (only the two quotes above)
So this thought may be entirely mine. With respect to law firm accounting, practice guidelines for attorneys especially in BigLaw, and legal billing (and more in life)…
AI Counsel says, “No one counts as much as he who counts.”
Many know, but did you know?
Many thought of it, but have they thought it through? Have you?
WARNING
LET ME OPEN YOUR EYES TO AN UNDER-THE-RADAR “QUIRK” OF LEGAL BILLING
YOUR EYES WILL NEVER BE ABLE TO UNSEE, NOR YOUR MIND UNTHINK AFTERWARD
TO MAKE YOU A SMARTER CLIENT AND SHARPER CONSUMER OF LEGAL
Hypothesis: Attorneys’ bills are inflated.
Premise: There are hidden costs even inside the already large bills.
Lawyer billing imposes a “standard” 1/10th of an hour minimum billing increment.
1/10th of an hour is 6 minutes.
Under this arrangement, if you utilize 1 minute (60 second) of service, you will pay for 6 units in exchange.
That is a difference of 5/6th of a “standard” minimum going to firm for which no services are given to you.
Practically speaking, any movement at all by lawyer (call, email, text, thought even) will require a minute at least.
And so every “stray minute” (or fraction thereof) of time a lawyer spends, it generates a return for them (and a bill for you) of 6x (like we like to say in the investment business) return.
Conclusion: There are minutes of legal bills which are inflated 500 times and for which no service is provided and therefore attorneys bills are inflated.
That is not shabby at all. Perhaps you would like to receive a 6x return on your work.
To further clarify the maths, a 6x return is not 6%.
A 6x return on investment is 500%.
“Who cares? This is only a stray minute here and there.” Stay with me please.
THE MATHS
If lawyers bill in 1/10 of an hour minimums or 6 minutes for every 1 minute this means in reality that if they can bill 60 one minute tasks each rounded up to 1/10 of an hour producing
360 minutes of bill for only 60 minutes of real
Mathematically:
1/10 (what you are billed) - 1/60 (service provided) = 1/12 differential
or in decimals
0.1 (billed) - 0.0166667 (provided) = 0.0833333 (repeating 3s)
Over 60 iterations repeated
60/12 or 5
0.0833333 × 60 = 5
This “extra embedded factor” represents sheer profit for nothing at all. Well for the “relationship” or the '“access” perhaps.
And since these are driven by a time metric,
which the beneficiary controls,
what incentive might there be on the part of beneficiary
TO MAKE AS MANY OF THESE HAPPEN AS POSSIBLE?
Stray “minutes,” imperceptible. Pennies.
Yet as I have demonstrated a huge 500x all profit profit center for a business?
Is this why Harvard BUSINESS School once called the large law firm “the greatest profit center in the history of business”?
THE BENDING OF TIME AND MATH
Here is where it gets really interesting.
Attorneys can time travel.
You read that right.
Remember, the metric for valuation of traditional legal services is a metric of time.
More time = more bill. Bills can be very motivating for service providers — bill aversion for clients.
[And the service provider, not customer, has full control usually of the time metric (and hence the bill) but I digress.]
SO IN TERMS OF TIME
A lawyer who spends 1 minute on a task can be accounted to have spent 6 minutes.
X60
If a lawyer (or lawyers) spends one minute under this metric sixty times, it will be accounted that they have spent 360 minutes.
So 6 HOURS has been accounted, even as 1 HOUR may only have been spent.
X60 x X3
If they do this exercise (6 hours for 1) three times in a day that is 18 hours in one day at the actual time cost of only 3 real hours in time.
X60 x 600
Extrapolating this across large distributed systems of lawyers, hundreds or even thousands of lawyers in one group with this same criterion, let us say in a month one of these minutes is not done 60 times but let us say 600 times. It will be accounted that 3600 minutes were spent by this group.
So 60 HOURS has been accounted, even as only 10 HOURS would have been spent.
[Even just among 4 attorneys, this amount represents only 2.5 hours in a month, nothing.]
[Among 40 lawyers, in a month, the fraction of time is even smaller, yet if all in a joint undertaking, the net return remains large.]
Just imagine this happening in one year, say 60000 times which is only 5000 in a month, among 500 lawyers is just 10 times in a month (2.5 single minutes in a week) for each lawyer. YET 60000 singular minute minimums augmented by 500% equates to 360,000 minutes — OR 6000 TOTAL BILLED HOURS! (1000 real hours, 5000 nonreal hours)
Not a bad Balance Sheet Item
6000 hours even at the low low price rate of $250/hour = $1,500,000
COGS = 250,000
LAWYERS THUS TRAVEL THROUGH TIME, (BILOCATING?) ‘SPENDING’ 500x HOURS AND HOURS OF TIME THAT ACTUALLY WAS NEVER ACTUALLY SPENT! (But was billed)
“LEGAL BILLING BENDS TIME”
BOTTOM LINES ON LEGAL BILLING BOTTOM LINES
I know what you must be thinking,
“Who cares? It’s only a minute!” (It is five minutes)
“What, are they going to send out 6 minute bills out to 60 clients?”
or
“What, are they are going to do 60 1 minute (6 minutes) entries in one client bill? That would be crazy.”
Agree.
But you have to think not in the isolate, but in the aggregate.
Systems of law practice BigLaw, or individual persons therein, and I am not saying anything actual, only hypothetical, *could* *if they really wanted to*
Tinker with firmwide practice policies to encourage any/many minor actions of its lawyers for even just a minute,
Encourage practice policies which include additional fractionals of time which benefit them economically (i.e. do not spend 24 minutes (which is 4 x 6 minutes), always spend 25 minutes instead (which is 4.1 x 6 minutes, generating a bill of 30 minutes instead of 24, just for the extra fractional minute)
Promote email usage by attorneys, as each of these is usually two (2) [the send and reply or the receive and reply] and however brief, if only a “thx” comprise a 5 minutes premium minute. One could imagine that EMAIL is the perfect vehicle for facilitating the system above as it is one of the task which is random, brief, (and we all know) highly re-curring. An attorney who stops what they are doing to spend “just a minute” on an email 6xs (500%)s their work instantly and throughout the day and night……DING, DING, DING.
Some firms make it only for the “initial minimum” but not all , and there is great opacity in overall practices for the obvious reason that lawyer bills are privilged.
Moreover, among large corporate clients, a time entry by lawyer of “only” 6 minutes (.10 in lawyer billing convention) often elicits a positive reaction from client “he billed me so little”, if forgetful of the billing minimum rule and not realizing that that .10 is really a 0.0166666.
Extrapolating these calculations and principles (and giving them further thought yourself) to hundreds or even thousands of clients served by hundreds or even thousands of lawyers worldwide is at least worth considering or reconsidering the 1/10th of an hour billing “standard minimum”, as it appears to add up to real money indeed.
