BILLING: A CRITICAL MANAGEMENT ISSUE
Nothing strikes a nerve with clients more than having to pay legal fees. I am not sure why but some clients think it is acceptable to expect their lawyers to work for free. No one else does – but lawyers should. In today’s economy, clients are looking for reduced legal fees and results. Value billing, flat fee, contingency and a hybrid of hourly and contingency are becoming the norm these days.
The Realities of Client Billing:
· Most clients pay their bills begrudgingly. It doesn’t matter if the result was outstanding, superb, satisfactory or excellent – whatever you are charging it’s too much.
· If you do not bill your client every 30 days, it is a lot harder to get 2 months of legal fees paid than to get one. Even if there is a retainer and the retainer pays that month's billables, send the statement to the client stating "There is no money owed at this time". Otherwise, 3 or 4 months down the road you will have the client asking "what happened to my money".
· Billing regular cycles every 30 days, on or very close to the same date each month will help the client to expect your statement. It doesn’t mean they will pay any faster, but at least they know to expect it.
· Be sure everyone’s time is in for the period ending that you are going to bill for. Nothing sends up a red flag for a client like getting a bill in May, with time on it from March that was not captured on the billing statement sent in April. Sometimes it is just easier to charge off that stray billing.
· Clients always want to know “what happened to my money”. It does not matter if all fee or cost trust monies that are disbursed are on the billing statement, they will still call asking what happened to the $5,000 they paid 3 months ago.
· Sometimes the only money you will see from a client is the fee retainer paid at the beginning of a case so be sure to accurately estimate based on other cases you have handled how much of a retainer you will need. Do not forget to get a cost retainer, unless you plan to pay your vendors – i.e., process server, etc. out of your operating account and hope that the client will reimburse you later.
· Be sure to ask for a replenishment retainer. Whoever handles your billing should see that the current retainer fees are exhausted or near exhausted. This will give you enough time to get an additional retainer, or withdraw from the case if that is possible.
· Clients are not impressed by the number of billable hours that you worked on their case. The number of hours will always be too many, and the results, no matter how successful you were, will never be justified by the number of hours they were charged.
How to Reduce Client Complaints about Billing:
Clients will never be totally satisfied with their legal bills regardless of the satisfactory result and whether they won or lost.
· Establish a regular billing cycle of every 30 days.
· Outline the billing arrangements with specificity in your retainer agreement. If the case is being billed on an hourly rate, be sure that the hourly rate for partners, associates, paralegals, legal assistant and any administrative fees are specifically delineated in the retainer agreement.
· Clearly set forth the hourly rates for attorneys or paralegals working on the file.
· Your billing statement needs to reflect trust monies, unapplied funds and costs held in trust. Clients are less likely to question how their funds were disbursed or what is remaining if it is right there on the statement.
When you encounter difficulties collecting fees from clients, it is like having to work twice as hard for payment – first when you do the work, and then when you are trying to collect what is owed. This is not an efficient use of anyone’s time in the office, and you will end up thinking you should have gone to the beach instead.
Need help implementing billing practices that will help you collect your fees? Call me - Liz Miller, Law Practice Management Consultant at 813-340-9569. Let's talk about what you are and are not doing and how you can collect the monies that are owed. Consultations are free.