Friday afternoon, prebills. I’ve sat next to enough owners doing these to know the rhythm, and an estate planning solo in the Detroit area is the one at the top of my mind. She’s got the month’s time in front of her. 62 hours on the big litigation matter at $500, and she’s editing. The .04 for one call the client probably thought was a favor. The 1.2 for research took longer than expected because she did it herself (no assistant to delegate it to). A .6 she can’t remember or justify, so it comes off. By the time she sends the bill, it’s down to 54 hours. She’s happy to say she billed $27k on that one, but her work said it should have been $31k. The $4k wasn’t “written down” in the traditional manner, because it never appeared on a bill to be written down from.
I was guilty of doing this myself when I started out. I justified it by giving it a name: client relations. I thought it was a cool name. But it’s actually just a rate cut. Being the numbers guy, I was embarrassed to say I never ran an analysis on what it cost me.
The billed numbers and the hours are real. The mistake is in the meaning of the total. It sits there as a record that a price was attached to some of the hours. It doesn’t say anything about the hours that were cut before the price on the bill was set or about the portion of the price the client decides later to leave unpaid.
Clio’s Legal Trends Report puts numbers on both of those stages. At solo and small firms, about 14% of all billable work never gets invoiced. Then, what does end up on the bill, another 10% on average gets left unpaid. Stack that, and $1k of work becomes $860 on a bill, which only collects and deposits $775.
She wishes she charged what was on her rate card. But in reality, what she was actually charged was “banked per hour.” Both of those numbers were set by her, but only one of them was set on purpose.
Here’s what the billing report can’t tell her. Two matter types, same $27k, and the report says they’re equal. Composite firm, rounded numbers.
Matter A is her flagship. Hourly litigation is the work she built her firm on.
She worked 62 hours at $500. $31k. After her “review,” she billed 54 hours. $27k. Then, after the client does their own edit (haircut), she ends up with $24.3k banked. Per owner hour = $24.3 / 62 = $392
Now Matter B is the work she tries to avoid at all costs. Fixed fee: 10 matters at $2,700 each.
She worked 40 hours and billed $27k. That’s just the fee. Nothing for her to edit. She collects the full $27k at signing, and her banked per owner hour is $27k / 40 = $675.
***Before anyone reads that as a case for fixed fees, run the same ten matters in a month where just 2 of them go sideways. Worked 70 hours. Billed and collected $27k banked per owner hour is $27k / 70 = $386
It’s the same $27k a third time, but this time the fixed fee is paying less than the litigation. Here’s why I am an advocate for hourly billing. The report didn’t move, right? The hours did, and the report doesn’t have a column for hours against a fixed price. I have been writing the case against fixed fees for years. Even in the”value pricing” craze we’re in now. Here’s my argument: a fixed fee just relocates the write down. On hourly work, the write down usually comes at bill review, where at least you can see yourself doing it. On a fixed fee, it happens the day you quote $2700 for 10 matters that were never going to cost the same, and every hour past the estimate is a write down you take in advance without a prebill to catch it. Every matter is different. Every single one of them. The fixed fee prices them as if they are all the same, all of the time.
Leaving the pulpit now.
The 40 hours won the first comparison here, and the form doesn’t get the credit. The reports treat them as equal. What she would see, if she runs it, is the one she likes the least and the one she protects the most trade places on nothing but the hours. The price is left hanging because she never tied the hours to it.
Where the $4,000 went
The write down always happens in 3 places.
First is at her desk while the time goes in. She takes a call and enters it as .8 because they had a little small talk during the actual 60 minutes of the call. Never counted, so never counted as a loss. The small talk was part of the call. Bill it under “client relations” if you want, but bill it.
Second is bill review. The Friday example above. The owner is selling herself short to avoid client conflict she fears, and in my experience, it wouldn’t actually happen. In reality, it’s a discount offered after the work was done and never solicited by the client, so it doesn’t carry any of the information a discount would normally carry. Please don’t discount. The missing information in this case is what the owner was afraid the client wouldn’t pay for. Again, no column for that on the report.
Third is at collection: the invoice on a closed matter comes in short, but she’s okay with that because the matter’s over and the relationship isn’t, and she doesn’t want to reopen a closed file to argue about $900. But that’s not okay. It becomes a habit and routine. And without changing your rate card, your prices go down.
Add the three up, and the firm has quietly repriced itself 22% below the rate card. It still says $500, and she keeps believing $500, and she prices the next hire and the next matter off a number that stopped being true.
There’s a second force I wrote about in an article last week: delay. Delay compounds this one. The longer the work sits, the more of it dies in old WIP.
The number to pull this afternoon
Here’s what your reporting should show if the billing system was set up by someone who knew what they were doing and cared about your success: Billed by month. AR aging. A realization percentage for the whole firm. What it can’t show is banked per owner hour, by matter type. The inputs are all there. Your calendar has the hours, billing has the bill, the bank has the cash, but nothing currently connects any of it.
Worked hours = hours recorded before bill review, by matter type.
Banked = cash received on those matters, after the last short payment.
Banked per owner hour = banked / worked hours
Run it for one month and one matter type. Then run it on the matter type you like the least. I’ve shown dozens of owners how to set this up. Once they ran it on one matter for one month, none of them stopped. All of them implemented this practice wide.
There’s a point when bill review stops being “client relations” and becomes the firm repricing itself. Where that point sits for a given firm and which matter type crosses it are stage 1 RIDA™ findings. This letter doesn’t make it.
We are currently building the engine to do it for you, though. Coming in Q4 2026.
Remember this: billed is what your firm asks for. Banked is what you get back. In a firm with one owner and a fixed number of hours, that gap is a pay cut the owner takes at their own desk, sometimes in tenths of an hour, on the work that fills your calendar, at a rate nobody printed. The matter type you’re protecting is often the one that pays you the least once those two numbers meet, and the lack of reporting that keeps them apart is why it stays that way.
The hour you billed was paid at a rate you never agreed to.
If the number you pulled is smaller than you thought. The Growth Intelligence Scorecard reads your firm’s revenue structure from the numbers you already carry. About four minutes, in your browser, no meeting. growthprolegal.com/scorecard
This is not legal advice. This is not accounting advice.
The matter figures are composites drawn from engagement work, rounded and labeled as such. Market figures are from the Clio Legal Trends Report, paraphrased and attributed.
Sources. Clio Legal Trends Report (realization and collection benchmarks).
The analysis in this letter is produced under Revenue Intelligence & Decision Architecture (RIDA), the proprietary economic discipline B.L. Sheets & Co. runs on and runs for the firms it serves. The doctrine, the case record, and the engagement formats are at blsheets.co.