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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
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restricted by out-of-date forms of Table; a conveyancing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.
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.
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