Law firm billing is more complicated than most goods or services consumers are used to purchasing. Instead of a simple price list, those seeking legal assistance are often confronted with a variety of billing options that change depending on the area of law and matter type. What are the most common types of billing people may encounter, and what should law firms consider when choosing one for their practice?
Hourly or time-based billing
Hourly or time-based billing is exactly what it sounds like – clients are charged based on the amount of time the law firm spends on their case. It’s commonly used in areas of law where it may be difficult to anticipate how long a matter will take to resolve, and ensures that the firm is paid for the entirety of their efforts while the client is not overcharged if a case is completed quickly.
Family law is a great example of an area of law that commonly utilizes hourly billing. Emotionally charged matters such as divorce and child support can hit unexpected snags and drag on for longer than expected, or both sides may find themselves able to come to an agreement quickly. Other areas of law that frequently engage in hourly billing include probate law, civil litigation, and business law.
What’s important for time-based billers
Accurate time tracking is vital for hourly billers. Unaccounted for billable hours mean lost profits, loss of credit for unclaimed work, and frustration at the end of the week as attorneys try to reconcile their timesheets.
Using an automatic time tracking system like Smokeball’s AutoTime ensures that all time spent in a matter is tracked contemporaneously, with no need to maintain spreadsheets or start and stop timers. All billable hours are stored within the case management system to be reviewed as needed, and law firms can be positive that they’re billing what they’re worth.
Flat or fixed fee billing
Flat or fixed fee agreements are common in more transactional areas of law such as real estate, estate planning and even bankruptcy. The matters associated with these areas of law often have predictable procedures and standardized processes which make it easier for attorneys to anticipate the effort required for a case and bill accordingly.
Fixed fee billing is convenient for clients and simple for law firms, but requires that firms have a sophisticated understanding of how much time they spend on different tasks.
What’s important for fixed fee billers
Attorneys using a flat fee billing system need accurate data in order to properly set fees. Without an understanding of how much time different tasks and matters have taken to complete, firms are left setting their rates based on what feels right or how much the attorney across the street charges – not on what’s truly profitable for their business and fair for their clients.
Utilizing automatic time tracking means fixed fee billers can collect the data they need in order to set their rates appropriately. By accurately tracking how much time they spend on different tasks and matter types and using that information to calculate fixed fees, attorneys can be confident in the fees they charge.
In contingency billing, the law firm is paid a percentage of the amount ultimately paid to their client at the end of the case – meaning that the law firm may make a significant amount of money if a case is settled in their client’s favor, but also take the risk of not being paid if the case is not successful. This method of billing is frequently used in personal injury, workers compensation, and employment law cases.
This option is attractive to clients who may not want to invest heavily in a case that may or may not end in their favor, but can be tricky for law firms. These firms will need to choose what cases they take on carefully in order to protect their bottom line.
What’s important for contingency-based billers
Firms billing on contingency need access to historical reporting so that they can make educated decisions on what cases might be profitable for them in the future. Using a reporting tool like Smokeball’s Firm Insights allows firm owners to review their profitability by matter type, fee earner, and more, all powered by real-time data from our industry-leading legal software.
No matter what type of billing your law firm uses, Smokeball can help your firm to bill more without charging your clients more.
We do this through state-of-the-art case management software that allow you to get more work done in less time, cutting out hours of tedious administrative tasks. You’re able to spend more time on the work that furthers your cases and fit more billable hours into every day.
Smokeball’s legal tasks and workflows keep you and your staff on track, making it easy to assign and check off each step in a case. Our powerful document automation coupled with a form library containing over 17,000 forms makes drafting letters and forms a snap, and email management means you’ll never waste another minute searching through your inbox. Combined with automatic time tracking, built-in reporting, and much more, it’s no wonder that the most successful firms use Smokeball.
If you’re ready to find out how Smokeball can transform your law firm, contact us for a free customized demo.