The Official BQE Software Blog

9 Ethical Billing Tips for Law Firms to Get Paid On Time

9 Ethical Billing Tips for Law Firms to Get Paid On Time

Sep 17, 2020 | By Rosemary Kupfert | 0 Comments

Topics: Legal, Billing and Invoicing, Featured

 

As a law firm or attorney diligently working to represent clients and win their cases with the highest ethical standards, nothing is more frustrating than to learn that your trusted client stopped paying your invoices.  

As the originating attorney on the case, you discuss the steps accounting has taken to collect payment. Only to find that the client, without any explanation or discussion, has ghosted your law firm. You then try to contact the client — but they've ghosted you too.

After all the late nights, weekends, and hours of dedicated hard work you and your law firm put into litigating and winning their case, the client appeared very satisfied with the outcome. So why now are they not paying the invoices?  What did your law firm or attorneys do wrong? No one complained as work was diligently being done, which leaves you baffled and confused.

As you relive the entire case backward and forward, you question what went wrong. You lay awake nights trying to determine WHY?  WHY has my trusted client ghosted me and turned into a deadbeat? 

Sometimes, clients get an unrealistic mentality and think, “Wow, rich attorney; they can wait for payment. I will pay my legal bills last.”  Clients don’t consider that handling their case is WORK FOR THE ATTORNEY.  Sadly enough, after settlement, clients are well aware they owe legal fees and costs advanced to your law firm, but still, they may try to turn the tables and circumstances around to blame the quality of work or outcome of the case on your work, and thus avoid the bill.

So, what can a law firm do to avoid problems in the future and collect the legal services fees and costs advanced when the money is owed?  The following are guidelines your law firm can implement to establish procedures to define retention terms, ethically bill, and provide detailed and accurate invoices to get paid.  

1. Define Terms of Attorney-Client Fee Agreement at Initial Consultation

By providing terms of retention up front, your firm is in control of the financial agreement. You’ll also be touted for ethical billing and avoid spending hours on cases for deadbeat clients! 

Keeping your client paying their legal services invoices timely starts at the initial consultation. At the first meeting, you must describe, in detail, how your law firm bills for the work they will perform, and the costs associated with representation.  

The Attorney-Client Fee Agreement must accurately define all the financial terms of representation to ensure your firm gets paid for all legal services and associated costs. These financial terms must be clear, concise, and set in stone. This puts the law firm in control of getting paid on time.

Hourly rates must also be defined based on the level of staff that will perform work, and there should be line items for both initial and anticipated costs.  Depending on the complexity of the lawsuit, any unforeseen charges must be discussed up front to cover all the bases.

2. Delegate Financial Discussions

In larger law firms with accounting resources, it is best practice to delegate all financial discussions to the accounting manager.  By having the accounting manager handle the initial financial discussion, they become the main point of contact for any future financial discussions. When law firms handle finances in this fashion, it eliminates tension on the attorney-client relationship. 

In addition, when the client misses paying an invoice or falls behind on payments, your accounting manager will help you determine if your law firm needs to substitute out.  

3. Require Clients To Have Funds in an IOLTA Trust Account

Managing partners and law firm administrators agree that the key to successfully collecting receivables is to not have any! Thus, it’s a good idea to require all clients—upon retention and executing the Attorney-Client Fee Agreement—to deposit and keep funds in a client trust account with a replenishment requirement.

By requiring client trust funds on retention, your monthly legal services invoices are automatically paid in full at the time of invoicing.  Just be sure that the invoice details all fee charges and costs advanced, along with detailed client trust account transaction activity.  In addition, the invoice should calculate a trust account replenishment due based on the amount required for the case or when the balance is low or exhausted. 

4. Hourly Billing Rate or Flat Fee Amount Based on Practice Area

The factors determining appropriate hourly billing rates or flat fee charges should be based on the level of experience and practice area knowledge, which is pretty standardized in the legal industry.  Most law firms in the same geographical area, in order to earn business, will stay competitive and charge market value.

However, law firms or attorneys that are touted as “boutique” or specialize in certain practice areas can often demand and bill at a higher hourly rate—well above industry standards.  To justify these higher billing rates, you require a very specific skill set or practice area knowledge. 

5. Detail Costs Advanced for the Representation of the Case

During the initial consultation, it is important to provide the detail of the initial costs to file and serve the lawsuit. Then, collect those initial costs up front. 

If an expert witness is required to testify or provide factual investigations, it is important to discuss these unforeseen costs immediately. As much as you can, advise the client that their defense may require knowledge or expertise above and beyond the expertise of the law firm, and explain all associated costs. 

Lastly, if a third-party must be retained, which is outside the scope of the Attorney-Client Fee Agreement, ask the client to pay the fees directly.  If the client does not feel comfortable paying the fee, get their approval in writing to retain the expert and get the funds in the client trust account immediately. 

6. Provide Detailed Accurate Invoices and Include Perks 

Not only do attorneys dread capturing time and managing expenses, but they also despise the entire month-end billing process. And, to top it off, clients do not like getting legal services invoices, even in the most positive of cases.  

Learning to bill your clients as an attorney is an art form all its own. Writing fee descriptions for casework performed takes practice, accuracy, and an easy-to-read invoice format. 

When a client receives an inaccurate invoice, a huge red flag goes off in their mind that they have been ripped off or miss-billed during the entire case.  It will cloud the client’s mind and they will question the fairness and accuracy of all prior invoices.   

Consistency amongst all timekeepers working on a case is imperative, and writing fee descriptions with the same language are key to billing success!  Using abbreviations for standard legal terminology is a must to cut down time spent on the pre-bill revision process.

Clients must be able to understand what work was performed and receive an accurate, clear, and concise invoice providing detail that is easy to read.  Accurate invoicing leaves no room for client questions to stall the payment. And by providing a link for payments on invoices, your law firm will get paid faster

It is also important to include a No Charge or a Professional Courtesy Discount on invoices instead of simply deleting time.  This will inform your client that work performed on their case was not billed and they received a perk. Who does not like to get work for free!?  

7. Invoice Clients Consistently 

Law firms must bill their clients consistently. And best practice is to invoice at the same time each month for consistent cash flow on both sides.  This seems obvious, right, but that’s not always the case in small law firms. In particular, solo attorneys can easily fall behind and forget to send out bills because of staff resources, which leads to collection problems and client billing disputes in the future.

8. To Sue for Legal Fees or Not To Sue

As an attorney, your first thought is to sue the client when bills go unpaid. However, if your law firm moves forward and sues, the case hardly ever provides a positive outcome and sucks up hours that could be used for billable work.  

In addition, if you move forward and file a case against your client, the client will most likely file a counterclaim alleging that the legal services rendered and costs advanced, were unreasonable or cannot be justified. The client’s counterclaim may be a simple tactic to leverage and negotiate a lower outstanding balance due.  

This situation is not good for the law firm because any suit filed by or against a law firm or solo attorney must be reported to their malpractice carrier. This creates added stress to get the invoices paid for the ethical legal services provided. 

9. Economic Issues Out Of Your Control

Complicating this situation, even more, are the current economic times and financial struggles the entire nation is facing.  Unpaid legal invoices are spiraling out of control, and law firms are not the only ones rendering services and not getting paid.  

Not only are national statics reporting that receivables are aging longer, but some reports show invoices are just not getting paid—at all.  This has forced many professional services firms to either close their doors, halt hiring, lay-off staff, cut budgets, or devise creative strategies to reduce overhead costs and frivolous spending.

Now, more than ever, it is important to have procedures in place to seamlessly track outstanding receivables and collection efforts.  It is mandatory for accounting to document all collection efforts and communication in case your law firm has to sue the client and back-up collection efforts.

Attorneys Can Get Paid on Time

To sum up our nine steps for billing ethically to get paid on time, your firm must have a rock-solid Attorney-Client Fee Agreement, communicate case status regularly, and discuss any unforeseen circumstances immediately.  And, keep your clients happy by ethically billing with the terms defined in the Attorney-Client Fee Agreement.

The Author

Rosemary Kupfert

Rosemary Kupfert is Product Expert - Core Legal at BQE Software. She has more than 30 years experience as a firm administrator and then a consultant to over 1,000 law firms nationwide, helping to improve their workflow and administrative efficiency through business and technology.

More From This Author

Comments