Drafting Bills Clients Love to Pay
By David J. Bilinsky, Esq. and Steven J. Best, Esq.
Law Practice Today
The Monthly Webzine of the ABA Law Practice Management Section
Steven J. Best is the CEO and principal trainer of Best Law Firm Solutions, Inc., and is a certified trainer on time/billing/accounting, case management, document management and document assembly software packages. David J. Bilinsky is a Practice Management Consultant and the Practice Management Advisor for the Law Society of British Columbia. He is a Fellow of the College of Law Practice Management and served as Editor-in-Chief of ABA's Law Practice Magazine. Dave is the founder and current Chair of the Pacific Legal Technology Conference, a past Co-Chair of ABA TECHSHOW, and he has been active in an advisory role for other legal technology programs.
This "Best of ABA TECHSHOW" article was originally presented at ABA TECHSHOW 2008, the World's Premier Legal Technology Conference. It's just one example of the terrific content offered at TECHSHOW by more than 50 legal technology experts.
You have just finished looking through your aged accounts receivable printout and even through closed eyes you can see the total amount outstanding. Is it really that large? Don't your clients like you and like your work? Why are they not paying their bills? You start thinking about how to take some action. You groan when you think that most businesses would simply turn over the collection of their delinquent accounts to their lawyer. Write yourself out of this one, Joan Wilder….
One of the hardest things in business is constantly having to ask people for money – at the outset of a file, during the ongoing work on the case, at the end and worst of all, after everything is over but the payment of the outstanding bill. Let us examine some suggestions to try to avoid the problem in the first place realizing that sooner or later, someone is going to slip thru the best of systems….
II. Expectation Management is key - setting expectations and boundaries right from the start and then following through.
III. Communicate Well -Consider invoices as the last step in a communication process; communication starts the moment the client first makes contact with your firm. Payment is, therefore, the client's affirmation that expectations established at the beginning of the attorney-client relationship have been fulfilled. Along the way, there are many steps that reinforce the expectations...and their fulfillment by you and by the client.
a. Internal controls and policies – In order to adhere to billing policies established with your clients, you must also create and enforce internal client billing policies at your firm. Accordingly, you must inform your staff of the firm owner's expectations about keeping track of lawyer, paralegal and support staff time and expenses incurred.
i. How frequently should staff record his/her billable time?
ii. Will you track internal soft costs (photocopies, postage, faxes) individually or through a monthly administrative fee?
iii. How are client advances handled, recorded and ultimately billed?
iv. Are time tracking and billing policies different for different firm departments and/or types of law?
v. Will certain types of legal work done on a task basis (i.e. flat rate basis for a task certain)? And, if so, should your staff record the flat rate themselves, or continue to bill themselves per your standard (presumably hourly) billing polices? And, if so, is the billing staff responsible for managing task billing?
vi. Do certain clients require ABA Task Codes associated with legal work performed?
b. Sending appropriate information to your clients : Remember, first and foremost that billing is a communication tool; being paid is the result of proper communications right from the get-go. Report appropriate steps that you have taken to your client. In the past, you would have sent letters confirming what you have done. For example, today, with email, you can be easier on the environment and more efficient in the process, by confirming what you have done by sending an email to your client. Furthermore, it is easier to call up these emails and refer to them when drafting your bill than was possible in a paper-based world. Time and Billing and Case Management software allow a lawyer to draft time entries directly into their billing system concurrently with sending emails -which eases the billing communication process.
c. Billing is a step to avoiding bar complaints : Remember, if you fully report work done by all personnel internally to your clients, the bill becomes a wonderful communication tool. One of the biggest complaints that bar associations receive about attorneys from clients is a failure to communicate . Accordingly, after properly spelling out your firms billing and payment policies, you should not only adhere strictly to same. Do not shy away from billing, your client may shudder at the balance due, but will respect the fact that you have clearly communicated the work you've done on his/her behalf.
d. Ask your Client : Determine what and how your client wishes to hear from you. Chances are, unless you are dealing with a very unusual client, they will want to be regularly and constantly informed on the efforts that you are taking on their behalf.
e. Cycle Billing : Optionally, if your internal staff can keep up with same effectively, you may wish to ask your client for a preferred billing cycle. Some clients may desire preferred ways and times to be billed...for example, they may process and draw checks only once or twice a month...it is worth finding out the date by which an invoice must be received in order to qualify for payment that pay period...otherwise you can end up waiting a further two to four weeks for payment.
f. Internal Reporting : Have a management reports prepared monthly that monitors the money in trust and compares it with the WIP (Work in Process) on your files. This should prompt you to bill files and move funds from trust into your general/operating bank account in payment of invoices.
IV. Embrace case management and billing/accounting software technology -Every law firm has the power to truly take control of its finances by embracing case management and billing/accounting software. By utilizing these firm wide databases, made for law firms, your firm can not only have better internal controls to ensure that appointments are met, tasks are assigned and properly completed, communications are memorialized and documents prepared, all in a timely and preferably contemporaneous fashion, but most of these software systems have one touch buttons that send completed appointments, tasks, communications and documents to billing.
a. The old way – What we like to call the OLD WAY of billing is what some of you may still be doing. You WRITE your time down and hand your handwritten chicken scratch to someone else at the firm who types your time into some computerized system (a word processor, generic accounting software, a spreadsheet, etc). You wait for pre-bills to be generated, you may or may not respond in a timely fashion, time gets away from you, pre-bills linger on your desk and may or may not make it back to the billing clerk before the end of the month. Further, because the system is manual, not every billable event is captured, paper slips can be lost or inadvertently discarded, and your firm (unbeknownst to you) is losing thousands if not tens of thousands or even hundreds of thousands of dollars per year in missed billing opportunities.
b. A better way – Some firms have moved into the twenty-first century by at least utilizing a law office proprietary billing system. Even though these firms may allow timekeepers to record their own billable time, many still revert back to hand writing their billable time on those pre-printed billing pages and handing same to a subordinate to type into the billing software. These firms still lose money without even knowing it. And, from the client's perspective, the client is not receiving complete communication of work done.
c. The Modern (Technology) way – Firms that expect timekeepers to utilize technology to record billable events seem to have the easiest time at keeping up with billing and capturing greater revenue. Consider investing in a properly configured (i.e. for your practice) case management system that not only provides internal controls for HOW time is recorded, but enforce use by your staff to ensure that ALL time is recorded contemporaneously with events that take place. In other words, your firm ought to require any and all timekeepers to utilize your computer software to capture billable time for every appointment, every completed task, every document generated, every phone call memorialized and every email sent and/or received. By doing so, not only will you effectively communicate with your client, but also, you have complete knowledge at your finger tips as to WHAT is happening on any matter at any moment. Leading case management packages that feature seamless integration to billing/accounting software include (but this list is not by any means exclusive): Amicus Attorney®, Lexis Front Office powered by Time Matters™, LexisNexis Total Practice Advantage™, Thompson-West's ProLaw®, Abacus Law, Practice Master, Legal Files and Perfect Practice.
d. The Great Irony – A great irony is that, specifically in the opinion of these writers, the larger the law firm, the more the tendency is to shy away from Case Management, while smaller firms are more likely to embrace same. It seems that the larger firms continue to rely on manual timekeeping so much more than smaller firms. Yet, firms of all sizes are responsible for reporting events that take place on matters that they are obligated to handle. Why shareholders in a large firm see the light on this topic less than their small firm counterparts remains ironic and puzzling.
e. Proper Reporting to your Client – Ultimately and, perhaps obviously, it is not only going to benefit the client to receive a bill which explains ALL events which have taken place on matters, but also, a wonderful by-product of embracing case management and time/billing/accounting software technology is to have internal controls to ensure that ALL events, communications and documents are scheduled, completed and properly created on matters to ensure that these matters are being handled with the level of care and expertise required.
f. Internal Reporting – Review productivity reports for all attorneys, paralegals and support staff to ensure that everyone is meeting expected billing thresholds monthly. Investigate and counsel those that are not meeting management expectations.
V. Regular Processes - Every client has a payment process from the individual up to the largest of corporations. At the outset, establish how you can best accommodate the needs of your client so that your bills are processed quickly and efficiently. They may wish for you to send the accounts directly to the accounting department, to in-house counsel for review first or to the President's desk. Either way, finding out what processes they have and how to best meet them may save you valuable time and ensure that your invoices are submitted and processed promptly and correctly.
a. Electronic Billing – About a dozen or so years ago, the American Bar Association, in conjunction with the American Corporate Counsel Association and a group of representatives from large corporations and law firms, coordinated by consultants from Price Waterhouse, published the first set of uniform task based billing codes for litigation matters with the idea that utilizing these codes will beget easier, streamlined, paperless and fully electronic billing and payment processes. If your client requests that you bill them electronically, be sure and establish the ground rules from the outset by asking:
i. Which ELECTRONIC BILLING TEMPLATE is required (e.g. Ledes, Tymetrix, Examin, Unitrin, etc.);
ii. Which task codes are acceptable and which are not?
iii. Who at the client billing department is responsible to troubleshoot and assist you with the billing process?
iv. Is the billing acceptance website secure (since bills are communication methods and communication is privileged, what guarantees are in place to ensure that the attorney-client privilege will be maintained)?
v. Is there a test period or method to test your bill submissions to pass muster once uploaded?
vi. Will your bills be audited electronically or manually before submission for payment and how long will that take each period?
vii. What is the average time period between acceptance of an invoice for payment and payment remittance?
viii. Will payments be made by electronic means to your firm's bank account?
ix. And, if payment is not rendered electronically, respectfully suggest to the client that they consider doing so since they've required you to submit bills electronically. Electronic payment is usually faster and more accurate.
b. Use Different Words : don't use the same phrases over and over in your invoices. The clients are left with the impression that either you are double-billing or it took several tries to do something right. Alternatively, use different phrases that may describe the same thing, but indicate that “different” things took place at different times. Of course, if you are task billing, your task descriptions may be the same from invoice to invoice, but embellish each entry with different words to properly explain what's taken place.
c. Show when you Worked : Rather than only showing the amount of time that you worked, show the dates that you worked as well. This indicates to the client the occasions that you were active on their matter. And, make all attempts to show them the work completed in chronological order. Most billing systems permit you to re-order your time entries so that you can show “preparation for” prior to “attendance at” entries.
d. Show actual time : Especially if you are using a case management system, do not concatenate your time entries for a particular day together, rather show the client what you did and how long each task took to complete. Since, in most hourly billing firms, our only commodity is our time, and the more time we spend on a file, the higher our revenue and since most firms have minimum time entries (i.e. 6 minutes or one tenth of an hour), most clients are under the impression that you will pad your bill. By tracking your time contemporaneously with work performed in your case management system and utilizing built in timers, you should show the client exactly what you did, even if a day's worth of time entries actually presents itself as several lines for a particular day. A client is less likely to complain about bill padding when he or she can review precisely what you did and precisely how much time it took. And, by running the timer, you have the justification to show a client how long tasks took by running audit trails and reports in your software should a client complain.
f. Include Results : Make sure your time entries not only explain what you did, but also exemplify the results achieved in the file. Mention specifically the motions that were successful, the documents drafted, the agreements reached and so on. Make the services real.
VIII. Conclusion - Establish your billing and payment terms up front with a clearly written retainer agreement. Keep track of your time on all matters contemporaneously with events. Use both case management and time/billing/accounting software made for the law office and charge each person in your firm with the responsibility to record his/her time; set forth policies and charge clients for expenses, even in contingency matters; keep trust retainers on file and make sure your clients maintain a certain amount of trust funds on file at all times; review management reports to ensure that WIP isn't getting lost in your monthly billing cycle and review productivity reports to be sure your timekeepers are keeping up with management's billing expectations for each person. Produce clearly written bills that delineate the exact time you've spent on each task if you bill by the hour. Consider billing at a flat rate for certain tasks to shift the risk from the client to the firm, but have appropriate technology in place to ensure that you don't lose in the risk shift. Finally, bill consistently, timely and don't let payments linger. Don't be afraid to call a delinquent client and meet the payment problem head on!
IX. Thanks: The writers would like to thank Jay Foonberg, Milt Zwicker, Bill Cobb, Bob Arndt, Laura Calloway and others in the ABA's Law Practice Management Section whose work in this area has strongly influenced their thinking in this area and on whose shoulders they now gratefully stand.
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Price, Richard C., Why and How to Keep Track of Time, University of Texas School of Law, 2007, http://www.utcle.org/eLibrary/preview.php?asset_file_id=9829
Schlein, Carol L., Electronic Billing: Really Better or Easier?, New Jersey Lawyer, © 2000-2008. http://www.losinc.com/2004/electronic_billing.html
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