Improve your year-end billing and collection
June 3, 2021
“A good word in court is better than a pound in the purse,” goes the Irish proverb. But, having put in that good word, and so much more hard work, how do you manage to get that pound from the client’s purse to yours?
Billing and collection of fees are among the most important and most difficult of the myriad of business tasks associated with the practice of law. As the end of 2020 rapidly approaches, we offer a few basics, reminders, and suggestions.
- Communicate with clients clearly from Day 1.
- Your engagement/retention letter must be clear and on your updated legal form (don’t forget costs, especially if they are to be deducted from any award).
- Explain the process, i.e., how you prepare a bill; show an example bill, using an easy to understand billing format.
- Utilize descriptors; billing a block of eight hours with the descriptor, “Memo preparation; client conf call; document review,” is not adequate for a professional invoice, and can generate more questions instead.
- Convey expectations on payment terms, and state that clearly in the engagement letter.
- Keep accurate track of all time and get write-offs approved afterwards; do not allow individuals to work six hours on a matter and enter four hours because it “took too long.” Otherwise, you don’t know how your fixed fee files are performing financially, how many hours lawyers and paralegals are really working, what your profitability is, and other key performance indicators.
- Track time contemporaneously. Reconstructed timesheets invariably miss time, take longer to prepare, lack sufficient detail when subject to review, and evidence a lack of organization. Eliminate the wasted and lost time spent looking at emails and document logs to determine what you did this week (or last!) with cloud-based remote legal software and a document management system.
- Identify a responsible party and give them the authority to bill, and to negotiate if necessary, and collect. Effective and clear delegation to an accounting role will help eliminate grumbling by the fee generators.
- When considering different types of billing models, e.g., contingency with a reduced hourly fee, contingency with a fixed fee, fixed fee with a bonus, etc. be sure that you have a proven method to keep track of the time, the costs, and the contingencies related to the fee. This is especially important in cases where attorney’s fees may be part of the award application.
- Bill regularly, and especially immediately after any resolution of the matter. The benefits of doing so are well-documented, and are illustrated by the “Foonberg curve of client gratitude,” which proposes that the client is most likely to pay immediately after a resolution, and less likely to pay the longer the delay. In addition, failure to regularly and promptly bill subtly sends the message, “We don’t need the money.”
- Make it easy and secure to pay your invoices; accept online payments, credit cards and LawPay, a payment platform with enhanced features that is integrated with Smokeball.
- Use the right tools. According to the 2019 ABA Legal Technology Survey Report, “Solo and small firm attorneys were the least likely to have time and billing software, which may result from the higher use of fixed-fee pricing in solo and small firm practice.” As noted above, however, just because a file is on a fixed fee does not mean its profitability and other key performance indicators should not be measured.
YourABA e-news reports that the top three reasons lawyers lose money, simply, are failure to keep time contemporaneously, inconsistent invoicing practices, and reluctance to take retainers due to fear of trust fund accounting rules. Cloud-based law firm management software is now available to all law firms, large and small, that addresses each of these focus points, including IOLTA trust account support. The continuously updated business management features of Smokeball are designed to enhance the productivity, organization and profitability of law firms of all sizes.
If you would like personalized assistance with getting more “pounds in your purse,” contact us today.
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