Billable and Collected Time in Clio
Transcript
Paul Carlson:
Clio firms that pay as a percentage of collections often need to explain the difference between the total dollars reported on the activities page versus the collections reported from the collections report. In this example, we just went from $1,000 billable time to $300 of collected time.
Usually, once a firm starts to pay on production, timekeepers know how to run this report. Actually, we encourage them to run their monthly activities report to see how they're progressing towards internal billable dollar goals. Here, we had a timekeeper, did a good job today, had their $1,000 of billable time, but collections are only $363, so let's take a look at all the different ways where we can lose billable dollars.
On this client, here's their invoice, and so the first thing that happened is, when the invoice was created, the partner's $1,000 time entry had a $200 discount applied, so we lost $200 there. Then, when the invoice was completed, a credit note of $300 was applied to the entire invoice, so we lost an additional $300, and then we sent out the invoice and the client pays $500, which leaves $300 that's not collected. Through this process, we lost billable dollars through a discount, a credit memo and then unpaid balances or accounts receivable.
Let's take a look at this spreadsheet to see the math breakdown. Here we have the $1,000 of the partner's billable time and, to show some of the allocation metrics, I added $300 from partner B. Billable time before any changes was $1,300. When the invoice was created, we added a $200 discount to that partner's time entry, so, after that discount, the most they had available to collect is $800. When the invoice was created, an overall credit was added to the invoice of $300.
The way Clio allocates credits is it's applied linearly across all timekeepers, and so, because partner A was the larger timekeeper, they absorbed $218 of the credit and partner B will absorb $81 of the credit, but notice that Clio does not allow us to choose who the credit is applied to. The credit goes on the invoice. It's a linear allocation, so, after that, we had an invoice of $800 that, if the clients pay everything, timekeeper A will receive credit for $580 of collections. We receive a payment from the client for $500, and there's our $363 in collections from partner A, and that's what we see on the collections report, and then partner B gets their credit. Right now, we have $300 in accounts receivable, so, when the client pays that amount, partner A will receive credit for an additional $218.
Let's see here. We walked through the idea or the concepts that we lose billable time from discounts, credits, and partial payments. One other place you can lose some time is some firms will retroactively edit time entries, so this time entry may have gone in as a $1,000 of billable time, but, in their billing process, they will go back and edit this and make this into two-time entries so we would leave $600 as billable and mark $400 as non-billable that timekeepers can go back and run this report after the fact and see that the $1,000 has now turned into $600 of billable time, but usually they don't, and then we talk about the other places where we can lose time.
Another note on this is, from this revenue report, we can see the credit note that was applied to the partner's time. We do not see the discount. The discounts are largely invisible within Clio management reports, and so we encourage firms to stay away from discounts as much as possible.
With that, an overview of how to connect the billable dollars' value to the collected time value on the collections report that your timekeepers see the larger number and they're expecting bonuses based on the billable dollars. If you're running your firm well, we pay bonuses based on collected time. Thanks much. Bye.
