Start Your FREE Membership NOW
 Discover Proven Ways to Be a Better Law Office Manager
 Get Our Weekly eNewsletter, Law Office Manager Bulletin,
    and MUCH MORE
 Absolutely NO Risk or Obligation on Your Part -- It's FREE!



Upgrade to Premium Membership NOW for Just $27!
Get 3 Months of Full Premium Membership Access
Includes Our Monthly Newsletter, Office Toolbox, Policy Center, and Archives
And MUCH MORE!
BILLING AND COLLECTIONS
 

Traditional procedures bring in the most money

Getting paid or not getting paid to a great extent depends on the firm’s billing and collection guidelines – and whether they are enforced.

Without guides, the firm is asking for money loss. Billing is haphazard, collection work isn’t done regularly, personal clients aren’t always satisfied with their bills, and corporate clients may hold up payment or contest the bill.

Guidelines will vary from firm to firm, says law firm consultant Bret Baccus, senior director of the Huron Consulting Group in Houston. They have to reflect the firm’s culture along with its clients and the type of work it does.

But in general, best practice calls for traditional procedures. Here he outlines the basics.

First and last month up front

Start with a retainer.

With almost all clients, the firm takes “an understood risk” when it accepts work, Baccus says. The client may be a slow payer or a part payer or may have an uncertain financial future and become unable to pay.

A retainer is the only way to ensure that the firm doesn’t wind up holding an unpaid bill and possibly being forced to continue the work for free.

The amount depends on the nature of the representation, but on average, an appropriate amount is sufficient to cover the first 60 days of expected billing “so the firm isn’t doing work the client can’t pay for.”

“Think of it as the first and last month’s deposit” and bill for the work as it progresses.

Then after all the money is collected, return it to the client. If the client doesn’t pay, the firm has the first and last month’s bills covered.

The retainer “is a test of the client’s reliability,” he says, especially for clients who are experiencing financial difficulty. If someone can’t or won’t pay it, why should that person “suddenly be able to pay it later on during the legal process?”

A defined and enforced policy

Every firm needs a billing procedure, Baccus says. And that process has to be well defined and also enforceable.

It needs to cover when and how invoices are sent and when and how collections take place. But it also has to cover when the attorneys run in their time, and that’s where the enforcement comes in.

To get the attorneys to honor the billing rules, “there has to be a carrot and a stick.”

The carrot depends on firm preference. “What’s a reward in one firm will not be true in another.” But it doesn’t have to be elaborate. Food is generally an appreciated reward, and it can be something as simple as lunch for the practice group.

The penalty, on the other hand, “has to have a bite in it.” And the partners have to impose it on every violation.

Some firms fine the attorneys for lateness, and for partners, the fines run as high as $100 per day per matter.

Some firms withhold the attorney’s paycheck until the billing is completed.

Some make billing part of the associates’ performance reviews.

Or the firm might stop an automatic salary deposit and require the attorney to get the check personally from the managing partner.

The one penalty that doesn’t work, however, is “public embarrassment” where the firm publishes the names of the attorneys who are behind on billing. Far from doing what it’s meant to do, a delinquency list “becomes a merit badge for the offenders,” Baccus says. It’s a swagger. “They take pride in being on it.”

Billed by the 15th, paid by the 30th

Send all the invoices by 15th of the month. Don’t wait until the 30th as most firms do.

Bills generally get paid in the month they are received. Send them on the 30th, and the receivables are outstanding by another 30 days; send them mid month, and most clients will pay during that same month, which means receivables are outstanding only 15 days. The sooner the client gets the bill, the better the chance of getting paid fast and in full. In fact, billing by the 15th versus the 30th can increase collections by as much as 5%.

Bill the way the client wants

Another essential practice is to follow the billing guidelines for corporate clients precisely. Most corporates have standard guidelines for outside counsel. Yet many times the partner who receives the guides doesn’t send them to everybody working on the matter and the attorneys don’t even know about them. Missing the guidelines means missing the money. A corporate may hold up payment or not pay at all. For that reason, the firm needs a procedure for disseminating the guides and ensuring that the invoices follow them.

That requires that somebody in the firm review the invoices to make sure they meet the requirements, Baccus says. The attorneys can’t memorize everything. If there’s a requirement that new time keepers get approval before entering time, the attorney may well not be aware of that. In-house legal departments keep an eye on the cost of outside attorneys, and they pay close attention to untimely billing, vague billing descriptions, and questionable timekeepers and costs. They can be sticklers to the rules because the attorney market is wide open. If one firm doesn’t follow their guidelines, another firm will.

Why is it so expensive?

There needs to be a standard way to write the time narratives so the bills “display the value of the work that is done.” Along with that, the narratives need to be phrased clearly so the client can understand them. Few firms have a formal practice on how time should be entered on the bill, Baccus says. And few firms give the attorneys any training on how to enter time.

An entry of no more than “reviewed document” shows absolutely no value and may well be rejected by outside counsel as well as by an individual client. There needs to be clear detail so the client understands not only what was done but why and how it affects the outcome of the matter.

Don’t be the banker

Another good practice is to not to bill the client for the outside costs the firm incurs, particularly significant costs. Those are charges from other entities for things such as expert witnesses, e-discovery, or records management, The firm shouldn’t have to collect those payments from the clients; the third party should be billing the clients directly. There’s no need to carry that cost on the books, he says. Neither is there any need for the firm to take on the administrative work of billing for them. What’s more, the client needs to see an outside charge for what it is – a charge from an outsider, not an unexpected hike in the legal fee – and by the way, has the firm marked that up?

Push for payment all year long

Timing for the collection work counts too. Don’t do what many firms do and wait till the end of the year to start pushing for late payments. Any client knows that by the end of the year the firm is getting desperate for the money and is willing to cut a deal. Worse, if the matter is still in progress, there could be a real payment problem the firm should have discovered earlier – when it could have stopped the work before all those hours were lost. Or that client could be somebody who never intended to pay in the first place. To get paid, any firm needs a consistent and escalating procedure that’s consistent throughout the year, Baccus says. Every step should be laid out so there’s no variance in when the billing attorney gets involved or when the managing partner gets involved or when the matter is turned over to a collection agency.


Related reading:

How to Manage Billing & Collections


Make payment and collection policies work together to boost cash


6 proven strategies to make the most of revenues to build profits


Close

EMAIL ADDRESS


PASSWORD
EMAIL ADDRESS

FIRST NAME

LAST NAME

TITLE

COMPANY

CITY / STATE

Try Premium Membership

(-0)