Big UK firms ramp up billable targets as ‘profit leakage’ increases

Avatar photo

By Thomas Connelly on

8

Nearly half by over 10% ⏰

The vast majority of big UK law firms have increased billable hours targets for their lawyers, new research has found, as they look to maintain profit levels in the face of rising write-offs.

A whopping 98% of UK outfits surveyed said they had increased target hours for lawyers, with nearly half (47%) doing so by over 10%.

The Legal Cheek Firms Most List 2023 provides a breakdown of billable hours targets across all the major outfits, with figures ranging from a high of 2,000 to a low of 800. It’s worth noting some firms choose not disclose these, while others say they don’t set them at all.

The rising targets come as almost two thirds of outfits (64%) said billing write-offs (work it accepts it’s not getting paid for) were on the rise. Nearly half (48%) revealed this had increased by 10%.

So what’s causing this “profit leakage”? Well, according to BigHand, the tech firm which carried out the research, the biggest issue is standard rate discounts (suggesting firms are facing greater pricing pressures), followed by write-offs and discounting to collect payment.

The 2023 Legal Cheek Firms Most List

The research found that much of this leakage is down to firms being unable to “prove the work done on each matter”, with nearly a quarter of UK outfits (24%) admitting to missing time or entering time late, and 21% confessing to missing or late disbursement entry.

“As a result,” researchers said, “too many firms are leaving themselves wide open to client demands for discounting and write-offs”.

In a bid to address this, 26% of UK firms said they plan to improve billable time entry over the next two years, while 24% will improve financial data visibility to gain insight into the issues that are leading to profit leakage.

A whopping 93% of UK respondents confirmed they now employ data scientists in response to client demand for greater financial transparency.

The findings were based on 800 responses from from senior legal finance roles, CEOs and managing partners at UK and US law firms with 100 lawyers or more.

For all the latest commercial awareness info, news and careers advice:

Sign up to the Legal Cheek Newsletter

Related Stories

Will legal tech doom the billable hours model for law firms?

Oxford University history student Lewis Ogg looks into the impact of legal tech on the way firms charge for their legal services, and calls time on billable hours

Oct 18 2022 10:23am
9

Reed Smith counts ‘sustainability hours’ towards billing targets

New 25-hour policy considered to be 'industry-first'

May 23 2022 9:34am

Revealed: Law firms’ average start work and finish times 2023

Legal Cheek’s exclusive research sheds light on the working habits of trainee and junior lawyers as firms continue to fine-tune their WFH policies

Nov 2 2022 9:24am
61