AI and the billable hour

How should we define an hour of billable time when a task that once took five hours can now be done in twenty minutes?

And if the task took five hours before, was it ever five hours of billable time? If a client knows the work now takes twenty minutes, what is that time worth to them?

People in law and accounting firms have taken to AI quickly, and many have taught themselves while carrying a full load of client work. Drafting, summarising and checking that used to take hours can now move much faster, which is good news for clients and for the people doing the work. It also raises questions about how professional firms value what they do.

1The billable hour

For more than fifty years, the hour has been the unit professional firms sell. A fee earner records the time, the time is multiplied by a rate, and the rate becomes the invoice. It is simple to explain, easy to check, and the client can see what they are paying for.

In 1958 the American Bar Association published a report called The 1958 Lawyer and His 1938 Dollar, which urged lawyers to record the hours they spent on each case so their fees kept pace with inflation. Those records were at first an internal accounting check, and by the early 1970s hourly billing had become widespread.

Five hours down to twenty minutes is at the far end of what the research shows so far. In a randomised trial published in April 2026, law students at two US universities completed six realistic legal tasks with or without AI tools. With AI they cut the time on most tasks by roughly 20 to 28%, and the quality of their work went up as well. Counting quality and time together, the researchers measured productivity gains of 50 to 130% on five of the six tasks. In accounting, a 2026 study in the Journal of Accounting Research, drawing on the records of 79 small and medium businesses, found AI adoption was associated with their monthly books closing about 7.5 days faster.

For now, most firms are billing much as they did before. A survey of 211 Australian law firms by Best Law Firms, published in June 2026, found 72% said generative AI had not affected their billing practices, and 15% said AI had reduced their billable hours.

An hourly rate has always carried more than the fee earner's own time. It pays for the support staff who format the documents, chase the signatures and keep the files in order, along with the systems and the office. As AI takes on more of that support work, the assumptions built into the rate start to shift.

2Rules and expectations

In December 2024, the Law Society of NSW, the Legal Practice Board of Western Australia and the Victorian Legal Services Board and Commissioner issued a joint statement on AI in legal practice. It says lawyers should "ensure that the time and work items they bill clients for accurately represent the legal work done by law practice staff", and that AI should not "unnecessarily increase costs for their client above traditional methods". It also asks lawyers to be open about how their use of AI is reflected in costs, if a client asks.

In the United States, the American Bar Association's ethics opinion on generative AI, Formal Opinion 512, says lawyers who bill hourly must bill for their actual time, including time spent prompting and reviewing AI output.

Accountants have less to go on. The Tax Practitioners Board's guidance on AI, issued in July 2026, says tax practitioners remain "ultimately responsible" for the services they provide and must exercise their own professional judgement. It sets no rules on fees.

A client who has already put a question into a chatbot may feel they have seen the answer, and a firm keen to win the work may meet them on price. We are already seeing this in website development and report writing, where AI arrived early and some business owners no longer see the value in work that looks quick to produce. Once prices fall to win work, they can be hard to bring back up.

In the Best Law Firms survey, 91% of large firms said they actively communicate their AI use to clients, compared with 50% of mid-sized firms and 41% of small firms.

This is general information, not legal, tax or professional advice. Costs, disclosure and professional obligations differ by jurisdiction and by matter.

3Six minutes at a time

Six-minute units, a tenth of an hour, are common in legal billing. The NSW Crown Solicitor's Office standard terms, for example, say fees "will be calculated on minimum units of 6 minutes". The unit suits a phone call, a short email or a quick read of a letter.

A file note summary that took three units to write may now take forty seconds to generate and four minutes to check. Is that one unit? If an AI tool drafts a letter while the fee earner is on a call about another matter, whose time is on the clock? And if the checking is where the judgement sits, is six minutes of checking worth the same as six minutes of typing?

We do not have an answer yet, and we suspect much of the profession is still working it out too. Is recording time in six-minute units how professional firms should keep moving forward, or a habit from a time when the work moved at the speed of a person?

4The other side of the ledger

Australian legal work is growing. The Thomson Reuters Institute and the University of Melbourne tracked 27 Australian law firms and found demand rose 5.4% in the 2026 financial year, while fees worked grew 10.2%, the second-fastest pace in at least 12 years. These are larger firms, and the figures cannot show what AI did or did not cause, but they sit uneasily with the idea that AI is wiping out billable time.

In the accounting study, higher AI use was associated with more clients each week, more billable hours and less time on routine data entry.

In its midyear update in February 2026, the Thomson Reuters Institute noted junior and mid-level associates were recording slightly fewer hours, while senior associates and equity partners were logging more. The authors said it was too early to draw solid conclusions. They offered AI as one possible explanation, if firms are using it most on the research, drafting and document review that has traditionally filled junior hours.

Much of the work AI does fastest is the work through which juniors have learned their judgement. If that work shrinks, the learning has to come from somewhere else.

So the saved time can go to more clients, deeper work or senior review, and the hour on its own cannot tell a firm which of those the client valued.

5Knowing where to tap

A story has been doing the rounds for well over a century. A machine in a factory breaks down and the staff cannot get it going. An old hand is called in, looks it over, taps it once with a hammer, and it starts. His bill reads: "To tapping machine with hammer, 10s. To knowing where to tap it, £10."

The earliest version Quote Investigator has found appeared in a Yorkshire newspaper in 1907. The best-known one swaps in the electrical engineer Charles Steinmetz, a chalk mark on one of Henry Ford's generators, and a bill for $10,000: $1 for the chalk mark and $9,999 for knowing where to put it. Almost every version is probably made up.

AI is making the tapping faster. Knowing where to tap is where education and experience come in, and it may become more valuable as AI takes on more of the rest. A client paying for a lease review is paying for the lawyer who knows which clause will cause trouble in five years. A client paying for tax advice is paying for the accountant who knows which question to ask.

A firm can then ask how valuable the work is to the client, and so what it feels it can charge for it. Fixed fees, value pricing and other arrangements have been around for decades. Which of them suits a firm is a decision for the firm and its clients.

Project management has a saying: fast, good, cheap, pick two. A firm that uses AI well could deliver work that is faster and better, at a price that still pays for the knowing.

The 2025 Victorian Lawyer Census found 53% of Victorian lawyers at risk of burnout, and CA ANZ has put fill rates for six key accounting and finance roles below 67%. If AI takes on more of the mechanics, some of the time it frees could go back to the people doing the work. We look at burnout in more detail in law and accounting.

6Starting points

Pricing is usually a decision for the partners, but much of what informs it passes through the practice manager: the timesheets, the billing system and the write-offs. Five places a firm can start, before making any decision about pricing:

AI can also be pointed at the firm's own practice, to understand the value of its work:

• reviewing past matters to see where the effort went into judgement and where it went into mechanics

• looking for patterns in write-offs, which can show where the time recorded and the value delivered have come apart

• drafting clearer scope letters and costs disclosures that describe what the client will get

• reading client feedback for what clients say they value most

The usual confidentiality rules apply to client information inside an AI tool, and the TPB notes that tax practitioners may need a client's permission before entering their information into one.

7Where we come in

Our investigation follows your firm's work through each of its steps, so you can see where AI is already changing it and where your people's judgement matters most. The findings belong to your firm whether or not we go any further together.

If you would like to work out what AI means for the value of your firm's work, reach out to our team. The first conversation works out whether your firm is the right fit for the AI Uplift Program, and whether we are the right people to help.

Five places to start