Law firms often compensate their partners,  of-counsel and at times staff members based on their contribution to fee income. Collected funds are distributed based on parties roles such as value of time spent, originating attorney, responsible attorney, working attorney, etc. CosmoLex provides comprehensive set of calculations for collected fee income allocation. However, it is very important that users understand the overall process and carefully plan for implementation as this can be quite involved due to very nature of these calculations.


CosmoLex allows distribution % to be set per matter and produce "Collected Fee Income Allocation Report" for any date range. This report can be used for a variety of needs: Productivity measurement; facilitates apportion fee allocation to timekeepers by origination/work/collection activities. Timekeepers are allocated portion of earned fee based on their share of contribution to the fee while other parties (originating attorney, matter owner, working attorney) are allocated based on gross fee collections for each matter. You can even choose to include Fixed/Contingency fee matters for fee allocation to Timekeepers (see below).


Setup Default Allocation %

You can set up various default allocation % so you do not need to specify same for each and every matter.

  1. Under Setup > Firm Settings > Financial Settings, in section “Collected Fee Allocation Settings” you can specify following default values. These are just default settings and can further be overwritten.

    • Originating Attorney’s Default Fee Allocation

    • Responsible Attorney’s Default Fee Allocation

    • Timekeeper’s Default Fee Allocation

  2. To provide unique allocation % for Timekeepers: Under Setup > Timekeeper; Edit the Timekeeper and under “Advanced Settings > Fee Allocation”, you can provide specific allocation % for each Timekeeper. Or you can just choose to use the default set in the section above.

Setup Matter Parties, and Allocation %

Once your default values are set, now you can specify parties to each Matter and further override their allocation % if needed. For this go to under Matter section, select the matter > c lick   edit > go to “Advanced Settings > Fee Allocation” tab.

  1. First, check the box to enable fee allocation. If you do not enable, this matter will not be part of the distribution report.

  2. To override Timekeeper allocations from the defaults set earlier, click on “View Timekeeper Allocation”. Click on “Individualized % of Timekeeper” and specify custom allocation % just for this matter. Please note, if you do not specify any %, then default value would be obtained. To remove a particular Timekeeper from a particular matter distribution, you can set its allocation as 0%.

  3. Click on “View Matter Parties Allocation” and specify parties, their roles, and allocations%. Total allocations can not exceed 100%.  Working Attorney Role is normally used to pay earnings out of Fixed Fee or Contingency Invoices.


How to Generate Collected Fee Income Allocation Report

  • Go to Report > Collections and select “Collected Fee Income Allocation Report”. Specify report parameters and generate the report in PDF or Excel format.


Understanding Key Terms Of The Report

  • The report is always generated for a date range. The system analyzes all the invoice payments applied in this date range, irrespective of the Invoice date.

  • Any type of Retainer payments are not considered “Invoice Payments” and will not be part of this report.

  • If any invoice discount is applied, it is basically being born proportional to each person’s contribution/role.  If you wish to allocate discount only to a particular timekeeper, you can enter a flat rate timecard with negative amount for that timekeeper and include it in the invoice prior to applying payment. This will effectively reduce invoice total and reduce compensation of only the selected timekeeper.

  • Billed Fee: This is the fee portion of the Invoice. If the Party is Timekeeper, it is the total billed fee of this particular Timekeeper. If the Party is any other role (i.e. Originating Attorney, Responsible Attorney, etc), then Billed Fee is the total billed fee of the Invoice.

  • Collected Fee: When Invoice payments are applied, first liabilities and cost are paid.  The fee is considered the last item to be paid on the invoice. Collected Fee is basically Fee Collection in the report time range. If Party is the Timekeeper, it is the collected fee allocated to the Timekeeper’s Billed Fee portion. If Party is any other role (i.e. Originating Attorney, Responsible Attorney, etc), then Collected Fee is the total collected fee of the Invoice.

  • Allocation %: These values are derived from various user entered settings as detailed above.

  • Allocated Fee: This is the allocated amount based on the collections and allocation %.


To search for fee allocation enabled matters, you can search on the matter landing page. 

  • To do this, in the drop-down menu choose Fee Allocation Enabled, and in the search field type in either True or Yes and click search.
  • To see matters that do not have fee allocation enabled, type in either "False", or "No" and click search.

 

How To Allocate Earnings Off Fixed Fee/Contingency Matters (Feature added 02/18/2017)

  • If your firm tracks timekeeper efforts (by capturing timecards, though unbillable to the end-client) for Fixed/Contingency Fee matters, CosmoLex provides you an option to compute fee allocation to Timekeepers based on individual's contribution. 

  • To enable inclusion of Fixed/Contingency Fee distributions based on contributions, Under Setup > Firm Settings > Financial Settings, in section “Collected Fee Allocation Settings” check the box for "Include unbillable timecards value of Fixed/Contingency Fee matters in Collection by Timekeeper & Income Allocation Reports"

  • Once the checkbox is enabled, all future fixed/contingency fee invoice generation will capture unbilled timespent till the invoice date and use it as part of fee allocation calculations in the "Collection by Timekeeper" reports as well as "Collected Fee Income Allocation" reports. If you wish to apply this logic to previously generated invoices, you may need to delete those and recreate those so unbilled timecards can be included.


How Fixed Fee/Contingency Matters Fee Allocation Works

Fixed/Contingency fee matter's fee allocation to timekeeper's is complicated to understand. This is because actual billed amount is independent of time spent. In such situation, how should one distribute collected income? Here are few examples about how CosmoLex performs these calculations:


Lets say your setting has 10% fee distribution for Timekeeper's efforts.

Example-1 (An example where actual time spent is less than the fixed fee charged to the client):

Fixed Fee Case of $1500.
Client Paid $1500.
Timekeeper A recorded Unbillable Time values to: $600.
Timekeeper B recorded Unbillable Time values to: $300.

Program will compute Compensation as following:
Timekeeper A: ($600/$900)*$1500*0.1 = $100
Timekeeper B: ($300/$900)*$1500*0.1 = $50

So, basically 10% of the collected fee got distributed.

Example-2 (An example where actual time spent is more than the fixed fee charged to the client):
Fixed Fee Case of $1500.
Client Paid $1500.
Timekeeper A recorded Unbillable Time values to: $1200.
Timekeeper B recorded Unbillable Time values to: $300.

Program will compute fee allocation as following:
Timekeeper A: ($1200/$1500)*$1500*0.1 = $120
Timekeeper B: ($300/$1500)*$1500*0.1 = $30

So, again 10% of the collected fee got distributed.

This is a very simple example. CosmoLex is able to handle partial fee payments, discounts etc in these reports.