Best Practice Tips: Law Firm Billing Software – Cloud-Based vs. Desktop

Asked and Answered

By John W. Olmstead, MBA, Ph.D, CMC

Q. I am the managing partner of a 12-attorney firm in Toledo, Ohio. Our firm is evaluating new billing software and we are looking into some of the cloud-based solutions. We are currently using a desktop program that we have been using for 15 years. The program handles our billing as well as our accounting. We have kept up with the updates to the program and the software has worked well for us. Several of our younger attorneys have used a couple of cloud-based billing programs in other firms and are trying to convince the firm to change over to one of these programs. They believe it is easier to enter time sheets and the software is easier to work with. What are your thoughts?

A. I agree that the subscription cloud-based billing programs are easier to learn and use. In part this is due to limited function and capabilities. However, user simplicity is only part of the equation. The bigger question is whether the software will meet your needs. Many of the cloud-based programs were designed for solo practitioners or very small firms with limited reporting requirements. While these programs are getting better and inheriting more features they are still not up to par with the older desktop programs. Limitations include:

• Billing, performance, and management reports are limited.
• Some systems have a basic accounts receivable report but do not having aging reports.
• Some systems do not have an aged unbilled work in process report.
• Effective rate and realization reports are non-existent in most of the systems.
•  Billing only — no integrated accounting. Have to use a separate accounting program such as QuickBooks and links from the billing program to other accounting programs often has issues.

By the time you add in the cost of additional accounting software that you have to buy and maintain, and factor in the number of users, subscription cloud-based solutions can get expensive for a firm such as yours that may have 20 users. The cloud-based billing software alone may cost $50-100 per user per month — in your case one thousand to two thousand dollars per month. This cost will be offset by savings on hardware, IT support, user training, managing software updates, etc.

Cloud-based subscription billing software is getting better every year, is the wave of the future, and is a good solution for solo attorneys and very small practices. However, it may not have the functions and features that you need in your 12-attorney firm. Analyze the reports you are using now and what you need out of your system and then compare your requirements against the capabilities of each cloud-based system that you are considering.

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John W. Olmstead, MBA, Ph.D, CMC, (www.olmsteadassoc.com) is a past chair and member of the ISBA Standing Committee on Law Office Management and Economics and author of The Lawyers Guide to Succession Planning published by the ABA. For more information on law office management please direct questions to the ISBA listserver, which John and other committee members review, or view archived copies of The Bottom Line Newsletters. Contact John at jolmstead@olmsteadassoc.com.