The struggle for mid-sized firms: working harder, billing more – but collecting less

It is a trusted source for legal professionals seeking unbiased data on law firm performance and the key factors driving changes in legal practice.

The report is one of the most extensive analyses available in the legal industry, offering valuable insights for mid-sized law firms.

The 2024 Legal Trends for Mid-Sized Law Firms report covers several aspects of mid-sized firms, such as performance trends, strategies for enhancing payment collections, and views on artificial intelligence (AI).

What is a mid-sized firm?

To begin with, let’s define what is meant by a “mid-size law firm.”

The term can be interpreted differently, but this report refers to firms with a staff of 21 or more people. In contrast, firms with a staffing level of 20 or fewer are labelled smaller firms.

Where does the report data come from?

The report uses a variety of methodologies and sources to provide the most accurate insights into the current state of legal practice and pathways for future expansion.

We analysed aggregated and anonymous data from thousands of legal professionals, segmented by firm size, to identify differences in the use of technology between mid-sized and smaller firms.

Our findings provide valuable insights into how technology is used by legal professionals and its impact on firm performance.

We surveyed between 31 May and 20 July 2023, covering 1,446 legal professionals segmented by firm size.

The survey participants comprised lawyers and support staff, including paralegals and administrators, who were involved in the management aspects of their practice.

Between 13 and 22 June 2023, we surveyed 1,012 individuals who have previously hired solicitors or may require legal services on attitudes, opinions, preferences, and behaviours concerning the legal profession.

Key findings

Stronger performance in realising billable hours but struggle collecting payments

Law firms must monitor the timeliness and consistency of their payment collections.

Far too many firms find their revenue held in “lockup” — the period in which billable work has either not been invoiced or collected.

Lockup comprises three main components, measured in days:

• realistion lockup: unbilled revenue, called “work-in-progress lockup”
• collection lockup: uncollected revenue, commonly known as “debtor lockup”
• total lockup: the combined revenue held in both realisation and collection lockup

Typically, mid-sized law firms demonstrate more promptness in issuing invoices than smaller firms.

Conversely, smaller firms excel in collecting outstanding payments compared to mid-sized firms.

We also see that using some Clio features significantly reduces lockup, including Clio Payments, bulk billing and Clio for Clients.

Online payment methods receive payments at more than double rate of traditional methods

The average realisation and collection rates among mid-sized law firms in 2023 were 83% and 84%, respectively.

These numbers look great on their own but reveal substantial room for improvement upon closer examination.

Approximately 17% of billable hours remain unaccounted for in client invoices, while 16% of billed amounts go uncollected.

For mid-sized firms, the need to expedite payment processing is particularly pronounced.

Given their typically higher workload and overhead costs compared to smaller firms, inefficiencies in collections could mean significant revenue loss, jeopardising essential financial obligations like payroll and rent.

Introducing online payment options alleviates client payment friction and accelerates payment receipt for law firms.

This benefit is especially notable for mid-sized firms, where the adoption of online payments results in payment speeds more than twice as fast as traditional methods.

Read more: how mid-size law firms can stay ahead in the market: roundtable discussion

Mid-sized and smaller firms share similar attitudes towards AI

Lawyers in mid-sized and smaller firms remain cautious about AI, questioning its reliability. However, AI adoption is already prevalent, with nearly one in five (19%) legal professionals using it.

Different perceptions lie at the heart of mid-sized and smaller firms’ reservations about using AI in legal practice, some of which may be opportunities—particularly among smaller firms.

Interestingly, mid-sized firms’ scepticism about AI conflicts with client expectations, putting them at a disadvantage.

Clients are notably more optimistic about AI’s benefits than lawyers in mid-sized firms. Clients are much more likely to believe that the benefits of lawyers using AI-powered software far outweigh the costs (32%, compared to 16% of lawyers in mid-sized firms).

Watch: the changing landscape for mid-sized firms in 2024

2024 legal trends for mid-sized law firms

With the rapid evolution of new systems and technologies in the past year, mid-sized firms are presented with significant opportunities for growth and efficiency, opening up a realm of possibilities.

However, to capitalise on these opportunities and maintain competitiveness, mid-sized firms must navigate today’s complexities inherent in their diverse organisational structures within today’s legal landscape.

At Clio, we are dedicated to understanding and addressing the distinctive requirements of mid-sized and large law firms.

We are committed to providing the tools and assistance essential for your firm’s advancement and growth, with ongoing investments in enhancing product functionality and creating thought leadership materials explicitly tailored for mid-sized law firms.