Utilization Rate Calculation: Maximizing Your Firm’s Productivity

By Mary Elizabeth Hammond

Utilization rate calculation is a critical KPI, which when calculated correctly, gives you insight into your firm’s productivity, workload, and profitability. With utilization rate insight, you can plan your workday more efficiently and run your firm to maximize billable hours. 

In this article, we’ll cover:

  • An overview of utilization rate and what it means for your firm
  • How to calculate utilization rate
  • What a good utilization rate looks like
  • Tips on increasing your utilization rate
What is Utilization Rate and How Does it Relate to Law Firms?

A utilization rate measures workload and productivity—it’s used in many businesses but means something different in the legal world. In a law firm, “utilization rate” is a KPI that shows how much time you spend on billable versus non-billable tasks. A high utilization rate indicates that your team members spend most of their time on billable work—which means higher cash flow. 

How to Calculate Utilization Rate?

To calculate the utilization rate for your law firm, divide the number of billable hours by the total number of hours worked. Utilization calculation can account for various time frames such as daily, weekly, or monthly work. It can also be calculated for a specific attorney or a firm as a whole.  

To put this into practice, if your firm has worked four billable hours in an eight-hour work day, the utilization rate for your firm for that day would be 50%. 

What Can You Learn From Your Firm’s Utilization Rate?

 

A utilization rate reveals where your time is being spent. The more insight you gain into your firm’s inner workings, the better you can make data-driven decisions and increase profitability. 

For example, suppose you calculate the utilization rate for each attorney in your firm and infer that one has a significantly higher rate than the others. This may expose a workflow or time-management issue. 

What is a Good Utilization Rate?

Utilization rates can vary based on several factors, including practice area, firm size, attorney experience, and geographical location. Researching industry data trends can help give you an idea of how other firms in your practice area spend their time, what their productivity looks like, and how your firm compares. 

According to research from Statista, the average utilization rate for law firms in the U.S. in 2021 was about 31%. 

4 Tips on Improving Your Law Firm’s Utilization Rate

 

1. Capture Time Accurately

 Accurate time tracking is the first step toward improving your firm’s utilization rate. Time tracking can be tedious and leaves a large margin for human error. Research from the American Bar Association found that lawyers who wait until the end of the day to log their hours can lose up to 10% of the billable time—that means losing profits too.  

Track every billable minute to boost your firm’s utilization rates. Legal time tracking software allows attorneys to consistently and accurately track time and increase billable hours. With a case management solution such as MyCase, legal professionals can easily keep tabs on billable hours with automated time tracking prompts and timers. 

2. Automate Your Invoicing

Reduce the time spent on non-billable and time-consuming tasks, such as invoicing for a potentially higher utilization rate. Legal invoicing software streamlines the process by auto-populating invoice templates based on billable work and sending out automated reminders. 

According to the 2021 Industry Report, 21% of surveyed legal professionals said their firm saved 6-10 hours a month using software with invoicing features. 

3. Reduce Roadblocks to Receiving Client Payments

73% of 2,000 surveyed legal professionals claimed that getting paid was a challenge for their firms. Without the proper tools, payment management and reporting can become time-consuming and reduce your billable hours—lowering your utilization rate. 

Your firm can reduce payment roadblocks by providing online payment options. Accepting credit, debit, and Automated Clearing House (ACH) options are becoming the industry standard and provide clients with a quick and easy way to pay you. 

In the 2021 Industry Report, 77% of surveyed legal professionals stated that their firms use online payment processing software, and 61% claimed that their firms collected more money using it

The LawPay and MyCase integration allows you to provide a secure and seamless payment solution for your clients. You can organize online payment options, set up payment plans, get detailed transaction information, issue refunds, and ensure every transaction is secure. 

4. Integrate Software Systems

Relying on automation and integrations to take care of non-billable tasks will ensure they get done consistently and quickly. For example, the MyCase QuickBooks integration can save your firm time by easily inputting and managing bookkeeping tasks into the MyCase platform. This accounting integration eliminates the need to work out of two separate platforms, which will help improve efficiency and boost utilization rates.

Utilize the Right Tools to Increase Your Utilization Rate 

Understanding your firm’s utilization rate will help you make informed decisions that can increase your firm’s profitability. 

MyCase can help boost your firm’s utilization rate by reducing time-consuming administrative work and increasing time spent on billable hours. MyCase users can automate non-billable tasks, get financial insights, and easily communicate with clients from a single platform. Try a risk,-free 10-day free trial—you can cancel any time, for any reason.  

 

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