The Revenue Cycle
Every dollar of revenue at a law firm moves through a pipeline:
Work Performed → Billed → Collected
(WIP) (A/R) (Cash)
Work Performed (WIP, Work in Progress) — An attorney records time or an expense is incurred. This is the potential value of the work at standard rates.
Billed (Invoiced, A/R) — WIP items are placed on an invoice and sent to the client. The billed amount may differ from the WIP value due to write-downs, discounts, or adjustments.
Collected (Cash) — The client pays the invoice. The collected amount may differ from the billed amount due to write-offs, credits, or partial payments.
At each stage value can be lost — those losses are measured by realization rate and collection rate.
Operating Models
Hourly — Work billed by the hour at an agreed rate.
Fixed Fee — A flat amount for a defined scope of work, often billed on a schedule or upon completion of milestones.
Contingency — Fees contingent on the outcome of the matter (e.g., percentage of settlement).
Key Roles
Responsible Attorney — The attorney assigned to a matter who oversees the work. Metrics are often grouped by responsible attorney. In LeanLaw, all matters have exactly one responsible attorney.
Originating Attorney — The attorney who brought the client or matter to the firm. Used for business development credit. In LeanLaw, a matter can have none, one, or multiple originating attorneys but most law firms have exactly one.
Timekeeper — The person (attorney, paralegal, or staff) who performed the work and recorded a time entry.
Billable Items
Billable items are the individual units of work or cost that flow through the revenue cycle. There are three types:
Time Entry — A record of hours worked by a timekeeper on a matter. The billable value is calculated as Hours × Rate. Time entries can be billable, non-billable, or associated with a fixed fee.
Fixed Fee — A flat-fee charge tied to a matter, billed either on a scheduled date or upon completion of a milestone.
Expense — A cost incurred on behalf of a client (e.g., filing fees, travel, expert witnesses).
All three types share common traits: they belong to a matter and they can be placed on an invoice. They have a billable state which is either wip, or interim, or final. The interim state covers items on invoices that are not yet finalized (in draft or review). Billable items also have a date and an amount.
Invoices (Billed)
An invoice is a bill sent to a client, converting WIP into accounts receivable. An invoice always belongs to a single client but can include billable items from one or more matters for that client.
For reporting, two dates matter:
Invoice Date — This is the invoice date on the actual invoice. It doesn't matter when the invoice or if the invoice was delivered to the client. This is the anchor for most dashboard calculations: days to collect, aging, collection rate scope, and realization rate are all measured from the invoice date.
Due Date — When payment is expected. Used to determine whether an invoice is overdue and to calculate overdue days.
An invoice can progress through workflow states (draft → approved → review → final) and tracks a balance that decreases as payments are applied.
Anything on an invoice is considered Billed.
Payments (Collected)
A payment is a QuickBooks record applied to an invoice. Each payment can represent two things:
Collected — cash received from the client. This is the portion that reduces the invoice balance.
Write-off (credit) — a non-cash reduction of the amount owed, recorded when the firm decides to forgive part of the balance.
A single payment record can include both a cash amount and a credit amount. When the dashboards refer to "collections" or "collected amount," they mean only the cash portion. When they refer to "write-offs" or "bad debt," they mean the credit portion.
The payment date is when the cash was received. Days to Collect is measured from the invoice date to the payment date.
Adjustments (Writedown, Credits, Writeoffs)
There are multiple ways an invoice amount can be adjusted. The type of adjustment will determine how it is reflected in reporting:
LeanLaw adjustments
Writedown: A writedown is a reduction of the time (or rate) of a time entry on a draft invoice. The writedown reduces the amount Billed.
Credit: An invoice credit can be added to a draft invoice in LeanLaw and reduces the amount Billed before the invoice is finalized.
QuickBooks adjustments
Tax: Taxes are sometimes added by QBO to an invoice, adjusting the Billed amount
Positive adjustments: Anything other than tax that that changes the invoice balance will adjust the Billed amount
Negative adjustments: Any negative adjustments are considered Writeoffs. This might seem odd, but a very common way to do writeoffs in QuickBooks is to add a negative line item against the Bad Debt account.