Key trends shaping the future for lawyers in 2024
From finance optimisation to artificial intelligence (AI), we'll explore how technology impacts your firm’s operations and how to improve your collections and billing processes.
Introducing the Legal Trends Report
The legal industry is changing rapidly as technology and consumer demands evolve. Law firms must understand the key trends impacting the profession to stay competitive.
To help you do this, Clio's annual Legal Trends Report provides an in-depth analysis of the changes taking place in the industry.
The report is based on insights from legal professionals, lawyers and experts in the field and focuses on five distinct areas:
- process optimisation
- customer experience
Key terms to learn
Utilisation rate: how much of a solicitor’s eight-hour day gets put towards billable work
Realisation rate: how much of a firm’s billable work gets included in client bills
Collection rate: how much of a firm’s bills get paid by clients
Steady growth, but collections need improvement
Law firms continue to experience steady growth, with utilisation, realisation and collection rates appearing healthy.
However, collections have grown less steadily, with room for improvement in how firms collect client payments.
Legal professionals are opening more files and billing more than ever. On average, they are working over 40% more cases and billing 70% more compared to 2016.
To remain successful, legal professionals must take steps to make sure payments are collected promptly and accurately.
Online payments are a quick and easy way to improve your collection rates.
Clio Payments is a secure and streamlined payment solution that empowers clients to effortlessly boost collection rates by providing convenient online payment options.
According to the Legal Trends Report, firms using Clio Payments get paid twice as fast.
It’s important to educate your clients about payment terms early and set reasonable expectations.
By laying out a timeline for when invoices will be sent, and payments are due during the initial consultation, you can better manage expectations and avoid confusion over fees or payment deadlines.
Measuring cash flow management with "lockup"
"Lockup" measures how long it takes to receive payments for services rendered. It’s an essential factor in understanding the health of a legal practice.
The time it takes from invoicing clients to collecting payments can significantly affect cash flow – especially for smaller firms.
Our analysis indicated the median realisation lockup is 38 days, with a 45-day median collection lockup.
These calculations indicate a total lockup of 97 days, meaning at any given time, firms have performed over three months’ worth of work that has either not been billed or not collected.
Many factors can influence lockup times, including:
- the firm's size
- the billing cycle's frequency and duration
- customer payment habits
For example, larger firms might have more complex billing cycles or need to invoice multiple customers simultaneously, whereas smaller firms may require more resources to help with shorter lockups.
Fortunately, there are ways to reduce your lockup period:
- streamlining your billing process with technology can allow you to predict better when payments will be received
- incentives such as discounts or early payment rewards can encourage quick client payments
- cloud-based legal practice management software like Clio can automate administrative tasks such as billing and follow-ups
Clio customers report they can achieve significantly lower lockup times than traditional methods, with some achieving same-day collections!
Who's to blame for long lockup periods?
While the cause of delays can be challenging to pinpoint, there are steps you and your clients can take to reduce the length of lockup periods.
41% of solicitors say clients don’t pay on time, and 24% said too many don’t pay at all.
However, clients tell a different story; 15% say they never received a bill, and 28% say they waited a noticeably long time to receive their bill.
Fortunately, strategies are available for both sides to help reduce these delays.
Encouraging customers to pay electronically has significantly reduced friction when settling legal bills, resulting in faster payments.
Investing in technologies like AI-enabled payment systems can automate processes and streamline overall operations within a firm.
Three key factors significantly impact firms’ realisation rates:
- email bill sharing: firms that directly email bills from Clio experience a remarkable 25% higher realisation rate than firms that don't (91% versus 73%)
- outstanding balances summary: firms using this feature to follow up on unpaid bills witness a 26% higher realisation rate than those that don't (88% versus 70%)
- bulk billing: firms employing bulk billing enjoy a substantial 21% higher realisation rate than firms that don't use this feature (94% versus 78%)
AI and the future of law
Advances in AI are already impacting how law firms operate.
AI-powered tools are making operations more efficient and competitive, automating tasks that used to require hours of manual labour and freeing up time for you to focus on other areas of your practice.
AI can also process data faster and identify patterns more effectively, enabling you to make more informed decisions regarding litigation or corporate transactions.
Despite the potential benefits of AI, lawyers seem reluctant to embrace this technology fully.
Interestingly, the public holds a different perspective. Clients are more inclined to believe that:
- AI's advantages outweigh the drawbacks (32% vs 19%)
- the justice system could be enhanced with AI (32% vs 19%)
- courts should incorporate AI (27% vs 17%)
- AI improves the quality of legal services (32% vs 21%)
Despite some hesitancy, 19% of lawyers currently use AI and a significant 51% express interest in adopting it. And 71% of legal professionals who want to use AI plan to do so within the next year.
Leveraging AI-enabled payment systems and cloud-based practice management software can reduce lockup times and improve billing processes while providing top-notch customer service that meets their client's needs and expectations.
These new technologies will be essential if law firms want to thrive in 2024 and beyond.
Find out more
Don't miss out on the Legal Trends Report – read it now to learn more about how technology is transforming the legal world.
Learn more about Clio’s cloud-based legal practice and client relationship management software.