pricing

Your Client’s AI Is Reviewing Your Legal Bills. Can You Explain What It Will Find?

For years, law firms have danced around the issue of how artificial intelligence (AI) will change the delivery of legal services. Much of that discussion has focused on drafting efficiencies, research capabilities and whether we will still need junior lawyers (we will).

On 8 October 2026, the Financial Times reported (Voice of experience: in-house legal teams face pros and cons of AI) that IAG was using AI-enhanced software to review the invoices of its panel law firms. According to the article, this is no mean feat, with approximately 50,000 panel-firm invoices being scrutinised each year.

In essence, the AI-enabled software assesses time spent, as well as lawyer seniority, on the matter and compares these against IAG’s database of previously instructed likeminded insurance matters. Any invoice that is unexpectedly high is returned to the service provider with a ‘please explain’ note.

“How well is this going?” for IAG you might ask. The company states that it has achieved a return on investment exceeding 800% in a little over a year.

What IAG’s experience tells us

Other than scaring us all to bits, what does this IAG story tell us?

Firstly, it tells us that AI is now very much part of in-house’s oversight program. Secondly, while IAG’s reported oversight is merely evidence of how one in-house team operates, it provides concrete insight into how Australian in-house teams are looking to use technology to help assess external legal expenditure at scale.

So what does this mean?

Well, for Australian law firms, the significance of this development extends beyond the headline number. It raises a practical question about whether the way a matter is staffed, managed and billed will withstand increasingly systematic client scrutiny.

Importantly, the commercial implication is straightforward:

A law firm’s invoice is now part of a wider body of evidence about how that firm delivers work.

This is why partners need to agree the intended team and explain where senior input will add value before the matter commences (at Engagement Level), so the client understands the reason for your leveraging and its likely effect on cost ahead of an invoice they may receive 3 months after the matter has closed.

How confident are you that your firm’s pricing and resourcing decisions would stand up to this scrutiny?

At GSJ Consulting, we help law firms move from price taker to price setter. Get in touch to discuss how you can build a stronger pricing proposition before your client’s AI starts asking the questions.

When it comes to how much you can charge clients, the size of your firm matters!

The size of your firm has no bearing on the amount you can charge clients.

Now if you have read the above quote and thought to yourself “of course the size of your firm has no bearing on the amount you can charge clients, clearly Smith has lost it again!“, then bear with me.

In a recent matter before the Central District of California, the Honorable Michael W Fitzgerald disagreed with the notion that the size of a law firm should have no bearing on the amount you can charge clients when he stated:

“it is simply unreasonable to award big law rates to a four-person firm representing mom-and-pop warehouses.”

In what is otherwise far reaching commentary on the history and application of the billable hour (well worth a read in itself), Fitzgerald’s ruling is troubling; not least because it is based on a premise that bigger means better — and better means more expensive. Now that could be true. But it doesn’t make it so.

Conversely, should I, as a client, be happy to pay more because the attorney acting on my matter works in a firm that has seven floors over one that has one? Surely the answer here is “no”, I’m paying for outcomes over inputs.

But that’s not the case here. If we follow Fitzgerald’s reasoning in this case, the real drivers of price: (a) Perceived expertise and relevance; (b) Client experience and accessibility; and (c) Outcome certainty and risk management, are certainly consideration, but no longer primary.

rws_01

𝗧𝗵𝗲 𝘃𝗮𝗹𝘂𝗲 𝗼𝗳 𝘀𝘁𝗼𝗿𝘆𝘁𝗲𝗹𝗹𝗶𝗻𝗴

𝗛𝗼𝘄 𝗺𝘂𝗰𝗵 𝗶𝘀 𝗮 𝗵𝗮𝗻𝗱𝗯𝗮𝗴 𝘄𝗼𝗿𝘁𝗵?
In this case, a staggering A$15.3 million.

𝗧𝗵𝗲 𝘃𝗮𝗹𝘂𝗲 𝗼𝗳 𝘀𝘁𝗼𝗿𝘆𝘁𝗲𝗹𝗹𝗶𝗻𝗴
Unlike most handbags however, this one has a story to tell.

It was the very first Birkin bag.

Designed by Hermès executive Jean-Louis Dumas in 1984, following a chance encounter on a flight with actress and singer Jane Birkin (hence the name), the bag was used daily by Birkin for nearly a decade before she donated it to an Aids Charity auction.

What the sale of this bag evidences though is how value extends beyond material worth. Value is not the $$$ signs you seen on the price-tag; it’s about the stories we tell, the history we preserve, and the emotional connections we forge.

The sale of this bag is a powerful reminder to professionals that authenticity and narrative can elevate your service offering from ordinary to iconic.

It is your powerful – and likely only – differentiator. It is what clients are willing to pay for.

Link to article: https://lnkd.in/gfsrSmMK

Key Takeaways from the 2025 Law Society Financial Benchmarking Survey

The latest Law Society (England and Wales) Financial Benchmarking Survey has sparked significant discussion on social media today. The findings highlight some critical financial challenges for mid-sized law firms, particularly in terms of profitability, chargeable hours and cash flow management.

📊 Top 3 Key Findings:

1️⃣ Fee Earners’ Costs vs. Fees Charged

  • The median hourly cost of a fee earner (based on 1,100 chargeable hours) was £123.40, while the median hourly fees per fee earner stood at £133.01.
  • 🔴 93% of fees earned are being used to cover costs, leaving minimal margin for profitability.

2️⃣ Shortfall in Chargeable Hours

  • The average recorded chargeable hours per fee earner increased slightly to 773 hours (up from 765 in 2023).
  • ⚠️ However, this is still well below the 1,100-hour target—a shortfall of over 300 hours per year per lawyer.

3️⃣ Increase in Lock-Up Days

  • Year-end lock-up days (including work in progress and debtors) rose from 143 to 146 days.
  • This trend indicates longer cash flow cycles, which can put pressure on a firm’s financial stability.

🚨 What Should Law Firms Do?

These figures underscore the urgent need for better financial planning, sustainable profitability strategies, and operational efficiency. Some key focus areas include:

✔️ Improving revenue streams—exploring retainer-based models for better income predictability.
✔️ Enhancing productivity—have a robust and actionable business development plan for all lawyers!
✔️ Optimise cash flow—reduce lock-up days by streamlining billing and collections processes.

🔗 Full Report: Read the Law Society Financial Benchmarking Survey 2025

📢 Looking to bridge the 300+ hour gap per lawyer? Or interested in strategies for growing a profitable legal practice sustainably? Let’s talk! Get in touch today.

rws_01

richard@gsjconsulting.com.au

Billable Hours Per Week at Mid-Sized Law Firms: What the Data Reveals

A recent report, “Strategic Sector Insights for the Legal Profession 2025: Mid-Sized Firms”, published by The Law Society and MHA, reveals a striking trend:

👉 More than 50% of mid-sized law firms report that their lawyers bill less than 25 hours per week on average.
👉 Less than 3% of lawyers at these firms bill anywhere close to the full 40-hour workweek.

While it’s unrealistic to expect lawyers to bill every hour they work, these numbers highlight why alternative pricing models are a key priority for firm leaders in 2025.

⚖️ What does the future of legal pricing look like? If you’re exploring value-based pricing, subscription models, or hybrid fee structures, let’s talk!

📩 DM me to discuss innovative pricing strategies for law firms.

Billable hour expectation for Associate Attorneys

I recently posted about the ‘Billable hours target for first-year lawyers at selected [Australian] law firms‘ and one of the most read posts on this blog is from way back in August 2016 – ‘Why asking someone to work 2,000 billable hours a year will kill their spirit‘, so when the Managing Partner Forum recently published the above results (admittedly from mostly American Managing Partners) from an audience polling question at one of its webinars on the issue of billable hour expectation for Associate Attorneys, I thought I would share it.

It’s interesting to note that nearly 70% of respondents expect their Associate Attorneys to bill over 1700 hours a year, with almost 10% expecting over 1900 billable hours per year.

That’s a lot of billable hours! And if we consider the ‘10-20-30-40 Leverage Rule‘, then the implication is very bleak for junior lawyers!

And as I say to those entering the legal profession who need some understanding of how many hours they need to work to meet their billable hour target, take a look at Yale Law School’s ‘The Truth About The Billable Hour‘.

While I am all for the profit motive, I maintain that if owners and managers of law firms want to understand why they have a high attrition / burnout rate in their teams, take a close look at what expecting someone to bill 1700 hours a year is actually doing to them!

rws_01

𝐁𝐢𝐥𝐥𝐚𝐛𝐥𝐞 𝐡𝐨𝐮𝐫𝐬 𝐭𝐚𝐫𝐠𝐞𝐭𝐬 𝐟𝐨𝐫 𝐟𝐢𝐫𝐬𝐭-𝐲𝐞𝐚𝐫 𝐥𝐚𝐰𝐲𝐞𝐫𝐬 𝐚𝐭 𝐬𝐞𝐥𝐞𝐜𝐭𝐞𝐝 [Australian] 𝐥𝐚𝐰 𝐟𝐢𝐫𝐦𝐬

As we start out on 2025, the 𝑨𝒖𝒔𝒕𝒓𝒂𝒍𝒊𝒂𝒏 𝑭𝒊𝒏𝒂𝒏𝒄𝒊𝒂𝒍 𝑹𝒆𝒗𝒊𝒆𝒘 (AFR) has helpfully published a table today (14.01.2025) – ‘𝐁𝐢𝐥𝐥𝐚𝐛𝐥𝐞 𝐡𝐨𝐮𝐫𝐬 𝐭𝐚𝐫𝐠𝐞𝐭𝐬 𝐟𝐨𝐫 𝐟𝐢𝐫𝐬𝐭-𝐲𝐞𝐚𝐫 𝐥𝐚𝐰𝐲𝐞𝐫𝐬 𝐚𝐭 𝐬𝐞𝐥𝐞𝐜𝐭𝐞𝐝 𝐥𝐚𝐰 𝐟𝐢𝐫𝐦𝐬’ – that makes for very interesting reading.

Other than the expected billable hour targets for first year lawyers and comments on alleged “under-billing” practices at major Australian law firms, what caught my attention in the article was this comment:

“𝘖𝘯𝘭𝘺 𝘰𝘯𝘦 𝘧𝘪𝘳𝘮 – 𝘏𝘢𝘮𝘪𝘭𝘵𝘰𝘯 𝘓𝘰𝘤𝘬𝘦 – 𝘤𝘢𝘭𝘤𝘶𝘭𝘢𝘵𝘦𝘥 𝘪𝘵𝘴 𝘵𝘢𝘳𝘨𝘦𝘵𝘴 𝘥𝘪𝘧𝘧𝘦𝘳𝘦𝘯𝘵𝘭𝘺, 𝘸𝘪𝘵𝘩 𝘢𝘯 𝘦𝘲𝘶𝘢𝘵𝘪𝘰𝘯 𝘣𝘢𝘴𝘦𝘥 𝘰𝘯 𝘳𝘦𝘷𝘦𝘯𝘶𝘦 𝘳𝘢𝘵𝘩𝘦𝘳 𝘵𝘩𝘢𝘯 𝘩𝘰𝘶𝘳𝘴 𝘣𝘪𝘭𝘭𝘦𝘥. 𝘓𝘢𝘸𝘺𝘦𝘳𝘴 𝘢𝘵 𝘵𝘩𝘢𝘵 𝘧𝘪𝘳𝘮 𝘢𝘳𝘦 𝘦𝘹𝘱𝘦𝘤𝘵𝘦𝘥 𝘵𝘰 𝘣𝘳𝘪𝘯𝘨 𝘪𝘯 𝘧𝘰𝘶𝘳 𝘵𝘪𝘮𝘦𝘴 𝘵𝘩𝘦𝘪𝘳 𝘴𝘢𝘭𝘢𝘳𝘺 𝘪𝘯 𝘤𝘭𝘪𝘦𝘯𝘵 𝘧𝘦𝘦𝘴.”

I might be wrong, but in the event that Hamilton Locke charges clients by the billable hour, then I highly suspect this also translates into a yearly hourly target…

…In the event that HL charges clients fixed fees or some other type of fee arrangement, then I accept this calculation probably sets it apart.

rws_01

’12 Days of Pricing’ by ChatGPT

As we roll into the holiday season, I thought I would share with you the ‘12 Days of Pricing‘ presentation as authored by ChatGPT.

12 Days of PricingDownload

As always, get in touch if you need help with your business development strategy and activities.

Richard & GSJ

📩 richard@gsjconsulting.com.au

10 Key Findings from the ACC CLO Survey 2024

The Association of Corporate Council (ACC) – the worldwide association that promotes the interests of in-house counsel – recently published its ‘10 Key Findings from the ACC CLO Survey 2024‘.

While I have not read the full report, there are some very interesting take-outs from the Executive Summary, including:

  • 58 percent of [in-house] departments have been impacted by law firm rate hikes
  • 42 percent of CLOs say their legal department received a cost cutting mandate over the past year
  • 23 percent of in-house say that rate increases have been difficult to manage
  • only 9 percent are “very confident” in their organization’s ability to mitigate emerging data risks
  • The top 3 issues that keep CLOs up at night are not what you would think [well, maybe one of them!]
  • The importance of ESG would appear to be a little over cooked – but…
  • …I’ll leave you with this one: 63 percent of CLOs say they are seeking to develop greater business acumen among the lawyers in their department – Good luck with that one!

Check out the link above to read more and as always if need any help feel free to get in touch.

rws_01

Where do AFAs rank in the cost savings pyramid?

If you have been wondering where Alternative Fee Arrangements (AFAs) sit on the ladder of cost-saving for in-house counsel, wonder no more. This post [By-the-Hour Billing Torments Legal Departments. So Why Aren’t More Demanding Alternatives?] by Hugo Guzman on law.com yesterday (14/11/2023) will answer all your queries:

  • 66% of respondents said they plan to bring more work in-house as a cost-control strategy
  • 39% plan to shift work from big law firms to smaller ones,
  • 33% plan to leverage the use of technology and AI.

And, drum-roll

  • Expanding AFAs ranked fourth, at 28%.

Not sure how everyone else interprets that data, but it looks like a very sad state of affairs to me.

Feel free to reach out to me if you want to discuss what this might mean to your business or law firm.

rws_01