The Gazette 1984

GAZETTE

SEPTEMBER 1984 Time Recording and Time Costing by A. S. Weatherhead, Solicitor, Glasgow. This is an edited version of a lecture given to the Dundee Faculty of Solicitors on 25th April. It was published in the.Journal of the Law Society of Scotland, and is reprinted here with kind permission. W HEN considering how to present this subject I have some difficulty in knowing how I should treat it. It is

They have I think confused time costing with the standar- disation of solicitors' charges. I believe, first, that the cost of any particular transaction carried out by Firm A is unique to that firm although it may be similar to the cost of a similar transaction by another firm and, second, that the fee to be charged for a particular transaction is, in the words of an eminent English judge, 'an exercise in assess- ment, an exercise in balanced judgment, not an arithmetical calculation'. May I now briefly develop further time costing as an aid to management, before describing how to set up a system. It is inevitable that in doing this I shall have to touch on what is involved in the management of a practice and this is a large subject in itself — a subject which we probably do not pay nearly enough attention to. It is something we know that commerce and industry have to work at but not our professional practices. Needless to say I do not agree. If work in our offices is to be carried out as cost effectively as possible it is essential to delegate work to (he lowest level of competence possible. Partners should not be doing what could be done perfectly competently by unqualified but skilled assistants. I know that this is not easy to arrange, but our clients cannot afford to have a Rolls-Royce when all they need is a good Ford. Many of us have managed our firms — that is, taken certain policy decisions on intuitive guesses, and some people are good guessers or perhaps just lucky and some are not good guessers. It is much better surely to have some facts on which to make decisions about where you are going or how you should go. If you know what a job has cost, you will know whether the fee will produce a profit or a loss. If there is a loss you may decide that the people doing the work have been inefficient, idle or so overworked that they are in a guddle; or that some of the work could be done just as well by an unqualified person at a lower salary and therefore at a lower cost. You may decide to try to expand your work in an area or discourage it in another. Time costing will produce the factual framework for these decisions. Work in progress is usually something which is ignored by those solicitors who account on a cash or fees rendered basis and which is calculated by those who have it in their accounts only so far as they need it to satisfy the Inland Revenue. And yet without realistic work in progress figures from time to time it is very difficult to know whether a firm is really growing or whether it may be contracting. A mere increase in fees rendered or cash received cannot of itself give a fair picture. For a full appreciation of a firm's financial position and of the parts of it, it is important to know the extent and value of the work in progress at least at the start and end of the financial year and preferably from month to month. Time costing can provide this information. There will always be good reasons why some work should be done at a reduced fee or even at a loss — you may be spreading your bread on the waters! It is, however, important to know what the subsidy is. Time costing will tell this. !217

a very big subject and I have been operating one form or other of time costing system in my firm since about 1970. Should I presume that you have all read the Law Society booklet entitled Time costing and Time Recording published in 1982 (price £1.00) but perhaps do not understand it? Do you think time costing is a panacea for all ills and want some practical guidance about how to go about it? I have decided to follow a middle course which will give something to those who do not know anything about the subject and may be of interest to those who are already into it. I shall try and indicate why 1 think time recording and time costing are important; just what they are; how you go about doing them; and what their relationship is to fees. There will I am afraid inevitably be many gaps but these will perhaps provoke discussion. I do not entirely agree with everything in the Law Society booklet and I would therefore like to make two preliminary points. First, what I have to say may not be entirely the gospel according to the Law Society; and, second, there is more than one way of implementing a time recording and time costing system. Having said this, however, I believe that time recording and time costing have become essential for all practices in Scotland — whether that practice is a court practice whose fees are restricted by out-of-date forms of Table; a conveyancing and executry practice which has relied on the Society's Table of Fees and in particular the scale fee or percentage fee; or a commercial practice where the fees may require to be negotiated with a client with clout. Competition tends to squeeze margins and whether we like it or not we are going to have greater competition both within the profession and from outside. With inflation we have already experienced pressures on profit margins in practice. These will not get less and therefore the proper management of our practices becomes essential. It is vital for the proper management of our practices that we have the information to manage them effectively — each of us needs to know not only what it costs to run our practice but also what it costs us to deal with each case, matter or transaction and the relationship of that cost to the chargeable fee. Time recording and time costing are the best-known management tools to do this for us. It is, however, important to be clear that time costing is different from fee charging, although the first can help the latter and with sophisticated time costing systems it is possible to build in figures which in many cases will produce a draft fee note. I shall refer briefly later to fee charging, but fundamentally time costing is a system which endeavours on some scientific basis to ascertain what it costs a particular firm to do a specific job. It is basically a management tool. As I have mentioned, I have some reservations about the Law Society method of taking cost/expenditure figures from different firms and using averages to recommend hourly rates for charging across Scotland.