Underbilling is a major and yet unnecessary drain on a firm’s finances, so why does it happen so often?
Every minute of billable work that goes untracked is money left on the table. When attorneys forget to log their time, round down their entries, or overlook billable administrative tasks, the financial impact adds up fast. Add to that complex insurer guidelines that demand both accurate work categorization and strict compliance, and underbilling poses a real threat.
We’ll discuss some of the most common causes of underbilling, the hidden cost, and how to improve time tracking to recover revenue that would otherwise be lost.
Why Does Underbilling Happen?
Underbilling quietly eats away at a firm’s revenue, disrupts cash flow, and ultimately weakens its ability to operate efficiently. It’s a major and yet unnecessary drain on a firm’s finances, so why does it happen so often?
High Case Volume & Constant Multitasking
Attorneys juggle multiple cases daily, often switching between tasks so rapidly that smaller billable moments – like quick calls or email reviews – go unrecorded.
Failure to Log Small Time Increments
A five-minute phone consultation or a brief document review might seem insignificant, but when left unlogged, these can add up to hours of lost revenue every month.
Manual or Inconsistent Timekeeping
Relying on memory or end-of-day note-taking leads to incomplete records. Attorneys often underestimate the actual time spent, resulting in systematic underbilling that undermines a firm’s efforts.
Adjuster Pushback on Billing Entries
Insurance carriers are meticulous about invoice reviews. Any vague or improperly categorized entry is likely to be rejected or written off.
Strict Billing Guidelines from Insurers
Many carriers require precise task descriptions and unique format adherence. Non-compliance can lead to reductions or outright rejections of billed hours.
Attorneys Self-Editing Before Submission
To avoid disputes, some attorneys proactively discount their own time – without realizing they are significantly eroding the firm’s revenue potential.
The Hidden Costs of Underbilling
Rounded time entries and unlogged emails might not seem like a big deal at first, but even small instances of unrecorded time accumulate over months. This unbilled time can quickly cut into profitability and the cash available to support firm operations.
Underbilling doesn’t just impact immediate revenue; it creates a ripple effect across the entire firm. When logged hours don’t reflect actual work performed, firm leaders can’t accurately assess profitability per case or make informed resourcing decisions. This distortion can lead to inefficiencies in staffing and workload distribution, ultimately affecting the firm’s ability to scale.
If reported hours don’t align with workloads, attorneys may be assigned more cases than they can realistically handle, leading to stress, errors, and burnout.
Inconsistent billing practices also create friction with insurers, increasing the likelihood of disputes, write-offs, and administrative delays.
Over time, this may erode trust with clients and insurers, making it harder to justify fees and compounding lost revenue.
How to Improve Time Tracking Accuracy
Avoiding underbilling starts with better tracking systems and habits. Here’s how to tighten up your firm’s time tracking:
- Automated Time Capture: Use software that logs billable work in real time, tracking calls, document drafting, and filings without relying on memory.
- Task-Specific Time Entries: Align your billing categories with insurer-approved formats to meet expectations and reduce disputes.
- Detailed Billing Descriptions: Clear, precise task explanations help prevent confusion and invoice reductions.
- Timers for Short Tasks: Set up auto-start timers for emails, phone calls, and quick research to capture billable moments that might otherwise be lost.
- Routine Time Audits: Daily and weekly reviews help catch missing billable entries before they turn into unpaid hours.
Capture More Time with CARET Legal
CARET Legal simplifies time tracking and billing to prevent revenue loss. With real-time timekeeping, all billable work – including emails, calls, and document preparation – is accurately logged. Structured time entry templates, automated invoice generation, integrated payment processing, automatic task timers, and the ability to turn calendar events into time entries mean no minute goes unbilled. Interested in seeing how CARET Legal can help your firm prevent lost hours and revenue? Schedule a demo today to see the platform in action.
