“Having good billing procedures in place is important for cash flow,” says Suzette Welling, CLM, President at Law Practice Edge. “If everyone knows the drill and follows it, you will see your cash flow be predictable.”
Additionally, client billing helps to maintain a positive attorney-client relationship. “Law firm billing is a communication tool — it tells our clients everything we have been doing on their behalf,” says Welling. “Proper client billing creates trust between the firm and its clients and is imperative for a good client relationship as well as a good reputation for repeat and referral business.”
If your law firm is struggling with cash flow, or you simply want to rework your client billing process, here are some helpful strategies you can put into practice right away.
1. Clearly Communicate with Clients. Prior to starting on a case with a client, make sure they are aware of your billing practices — set clear expectations up front. Welling suggests giving them an anticipated budget and communicating with them if things change. “For instance, [you could tell them] opposing counsel is creating issues that are increasing the amount of time you have to spend on their representation and taking it beyond budget.”
2. Get Your Write-Offs Approved. If your case involves any write-offs, someone needs to approve them before coming up with the final bill. “[It’s important to] set up a process whereby attorneys have all write-offs reviewed by a practice group leader or the firm administrator or even the bookkeeper,” says Anna Cates Williams, Executive Director at Walker Lambe, PLLC. “Some write-offs are more for convenience of the attorney than [a] necessity for the client. By having a write-off review/approval process, the attorney becomes more likely to sort out an issue or simply bill the client than move the bill to a write-off status.”
3. Keep Accurate Time. Your firm needs to have a system in place where it’s easy for attorneys to track their time. As Welling points out — if you lose one hour per day at $350 per hour, you’ll lose $91,000 annually per attorney. “Firms lose a tremendous amount of revenue due to unlogged/forgotten time,” she says.
4. Hire a Dedicated Billing Person. Cates Williams also suggests that someone who understands cash flow, trust accounting and accounts receivable should be in charge of managing the billing efforts. However, attorneys should be involved in the billing process by talking about billing with the client at the beginning and the end of the transaction. “Client bills are often the first and last ‘touch’ an attorney or firm makes when engaging a client. These bookends are vital opportunities for the attorney to develop (or undermine) the client relationship.”
5. Consider Different Types of Billing Models. You’ll still need to use billable hours for some transactions like litigation, because you aren’t sure how much time the case will take. But for transactions that are simple to duplicate, Welling suggest using a flat-fee model. “If you work out your processes and become really efficient in what you are doing, a flat fee can result in better profits than the billable hour,” Welling says. “A mixed fee, such as [a] reduced hourly rate combined with contingency, can be a good option for many matters.”
6. Use the Right Tools. Client billing is much easier if you have the best tools on your side. “You want to keep your accounting records as directly linked to your client quotes as you can,” says Scott Royal Smith, Founder and Chief Executive Officer of Royal Legal Solutions. “For example, with certain solutions, clients can send their payments directly from a quote. This cuts down dramatically on your administration.”Welling recommended Tabs3 and PCLaw. This software not only saves on postage, as firms can email bills, but it also gets bills into clients’ hands quicker and allows them to easily pay by credit card.
7. Bill Immediately. After you complete a case, immediately bill the clients. Otherwise, you may not get the amount you ask for. “Bill at the point of highest impact,” says Cates Williams. “The client values legal work most at the exact moment the case is settled, or the transactional documents are in hand. Have bills ready before a client leaves the conference room. The longer clients wait for a bill, the more often they question the time spent on the matter.”
KEEPING BILLING ON THE BRAIN
Whatever model you’re using now or processes you have in place, you can always improve how you’re managing client billing and ensure the overall long-term growth of your firm.
“Proper client billing is vital to law firm operations because when attorneys focus on cash flow and revenue, they feel more in control of their performance, the welfare of the firm and their own success,” says Cates Williams. “I have found that when partners have their ‘finger on the pulse’ of their own billing, they spend less mental resources micromanaging other firm operations.”