Introduction
Everyone knows you can dramatically increase your annual earnings by capturing just 15 more minutes per day. So, why aren't we all doing it? Capturing all of your time is just not as easy as it sounds. And how to you make sure clients understand the value of your services and pay for them, too?
Of all the elements everyone has to work with, none is more precious than time. For the lawyer who bills by the hour, meticulous timekeeping achieves multiple crucial goals. Your ability to accurately capture the quantity of your billable time directly affects the total amount of time you must spend working in order to meeting your billable time goals; the greater your “capture” rate, the more time you can spend with your loved ones, on rest and relaxation, and pursuing your outside interests. Your ability to accurately describe the quality of your billable time will allow you (or your firm) to craft timely, persuasive bills that stand the best chance of achieving every lawyer’s ultimate goal in every billable matter: a satisfied client who pays the bill promptly and in full.
Here are some ideas to help you accurately capture both the quantity and quality of your billable time and get paid; adopt and adapt those that you think will work for you.
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Good Reasons to Track All of Your Time
The key word here is ALL your time. Many people think about tracking just billable time, and some even only track billable time associated with a file that is billed hourly and skip all the contingency based time. Here are some reasons you should consider tracking all your time – billable or not.
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Once time tracking is discretionary, time will be missed. If you have to think about whether you should track the time you are about to spend, or if you have to decide whether to record the time that you just spent, that makes it too hard. Tracking everything takes that all away. You just simply track the time you spend each day – and you track all of it.
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Where does the time go… How many times have you looked at your time at the end of a long day and thought…"5 hours?... I have been here for 11 hours… what did I do all day?" Often, the gap is our non billable time – be it administrative time or even firm marketing time. Instead of wondering if you got it all, if you track everything you will not be wondering if you missed something billable.
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All that non-billable time adds up! Track the time you spend on Firm Administration, Firm Marketing, Bar Association related activities, CLE, community related activities, etc. It is very important to know how much of your time you spend on these types of things and it will help determine when it is time to bring in an assistant.
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Tracking all your time will help you to set realistic billable hour goals. Experience shows that in a small firm, for every billable hour logged, there is 20-30 minutes of non billable time spent. So, is it realistic to have a goal of 10 billable hours a day? Not unless you are willing to work between 13 and 15 hours a day.
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In the absence of good data, you cannot make good business decisions. How will you know whether your contingent or flat fee matters are billable unless you measure the investment of time against the amount earned?
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Maybe the most convincing reason…a little translates into a lot. Using conservative estimates, if you bill at $150 an hour, and you neglect to track a quarter hour a day (just 15 minutes…), you lose $37.50 a day, $187.50 a week, $787.50 a month, and $9,450.00 a year – PER TIMEKEEPER! If you lose more time per day, or you bill more per hour, those numbers all go up. I don’t know about you, but I would love an additional $10,000 a year in my bank account.
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So… How Do You Capture More Time?
A difference in timekeeping habits makes a big difference in the bottom line. In today's competitive legal market and deflated economy, there is tremendous pressure preventing anything other than infrequent and modest hourly rate increases. Therefore, increased productivity is one of the few ways to improve the bottom line. If that increase can be obtained by better timekeeping habits, and no one has to work longer hours to earn the increase, what better incentive is there to take corrective action now?
Develop Good Habits
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Start your new attorneys off right. From new grads to lateral hires, an attorney at the firm should be educated regarding the firm's time recording policies. It is a proven fact that time which is recorded several days after the work takes place will invariably "shrink". As much as 30 - 40% can be lost in a matter of days. In order to be accurate, time should be recorded each day without fail, and the time sheet should be handed in each day for the day before, or immediately recorded in the computer on systems where attorneys can input their own time.
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Immediately act on attorneys who exhibit poor timekeeping habits. If new attorneys exhibit poor timekeeping habits, take immediate corrective action, because the habits will only get worse over time, not better. The firm's administrator or office manager can communicate much of this information. However, it often will have greater impact coming from an attorney at the firm, such as the attorney’s mentor or the managing partner. And it will have more clout if it is made clear that it is a factor which is directly tied to compensation.
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Monitor attorneys with unusually low billable hours compared to total hours. Additional guidance is needed for all timekeepers regarding recording all time without editing. Take a close look at any attorneys whose billable hours are unusually low compared to the hours put in at the office. Are they self-editing? Poor recorders? Perhaps they need time management training, or a quieter workspace. For some, more hours at the office, or an adjustment to compensation may be the right solution.
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Train attorneys on ethical questions about time recording. The firm should educate young lawyers regarding ethical questions about time recording, such as what to do when traveling to one client while doing work for another, or making one visit to court on behalf of multiple clients. It’s not a bad idea to cover these areas with laterals as well, to make sure they are on the same “page” as your firm. Although one would think all firms handle these situations the same, that is often not the case.
Provide the Tools for Tracking Time
Take a look at the tools you’ve provided for timekeeping. Do you have a variety of timesheets available to accommodate the different recording styles of your attorneys, or is it a “one–size–fits–all” environment? Have you provided software like case management which has pop–up timers and text macros to facilitate easy and accurate time recording? Even Outlook’s Journal function can be a real benefit to someone who otherwise has no tools to assist in accurate timekeeping. Remember, it’s not the slow days that are problematic for time recording. It’s the really hectic days, where lots of dollars are at stake, that tend to produce the least time recorded in the absence of appropriate tools.
Time Tracking Tools
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Use manual time logs. A bit old fashioned because with all of the software on the market it is sometimes difficult to remember that computers are not always accessible and maybe automation just isn't for everyone. Try different time log formats using stop/start times or time incurred in tenths of an hour. If manual logs are used, consider formatting them to be imported into an electronic billing system. Make it easy to use the time log by keeping it in specific place on the desk with a pen or pencil close by. Develop abbreviations to record descriptions of the work performed throughout the day. Manual systems have some advantages. They tend to be fairly simplistic, and therefore are easily understood, taught, and followed. They tend to be very inexpensive, which puts them within reach of all practitioners. And they have been around “forever”, making them universally acceptable. On the other hand, manual systems are somewhat inflexible in terms of ones ability to extract or rearrange the information contained in them.
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Time & Billing Software. These products provide a multitude of methods for billing clients while the timekeeper only has to worry about entering their time. Various bill methods are setup in the client or matter record which controls how the bill will look in the end. When time is entered abbreviations can be used which are automatically expanded to full descriptions. Timers are available in most products along with hundreds of reports to assist in tracking productivity, profitability and Accounts Receivable. Benefits of using time & billing software are to eliminate redundant time entry, easily manage client receivables and trust activities, reduce the cost of your malpractice insurance and avoid related lawsuits, standardize the billing process and capture all billable time. If money is a factor and calendaring is not an issue for your firm, a time and billing product might be just the ticket.
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Case Management Software. Case Management Software has been around for quite some time and in the past decade it has really matured and become highly reliable. It is now “ready for prime time.” And lest your firm get caught in the dust as your competitors improve their operations, you should now take a serious look at this software. Basically, most CMS packages today handle docket/calendaring, conflict checking, (some much better than others), contact/rolodex management, tasks/todo lists, and document management. Many now handle PDA interface/synchronization, and email management. Most integrate to word processing to provide the ability to quickly produce mailing labels and lists, form letters, and so forth. CMS enables everyone to share all the information, so that things like changes of name or address are made once, and are thereafter correct for everyone. Most CMS have pop-up timers for recording your time as you take telephone calls, dictate documents and so forth. At the end of the day you add activity codes and/or narrative and close them out, and the time is transported to your billing system, ready for billing.
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Tracking time while on the road. If you use a Palm based handheld, a Windows based handheld, or a Blackberry, there are several time tracking software packages available to help you to track your time, and some of them can even track your expenses and import them directly into your billing system either as you enter them or when you return to the office. In some cases, the case management or billing software you use will have an add-on module (most of the time it costs additional money) that will download your case list into your phone and allow you to track time and expenses. Most phones now have the ability to create voice recordings, so even if you have just a basic phone, you can leave yourself reminder messages about time you spend on the road.
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How Software Can Help You Track Your Time
There are many fine software products on the market today to allow you to easily track your time. If you are technologically inclined even a little bit, this is a very efficient way to track your time – and track it contemporaneously. Time tracking directly into your billing system has some great advantages. Some of those are:
- Work in progress is updated automatically, and if all users are tracking their time in the software, you can always see the WIP totals.
- If you can imagine this – billing can be simple! Your time is already in the billing software.
- When time is updated as you go, you have a way to tell if you are on target with billable goals for the day, week or month, and for any timekeepers who are tracking time the same.
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Industry Leading Legal Software Products
At the end of this paper you will find an extensive listing of the majority of time and billing software packages available today. Some are highly sophisticated, and some are very simple. What will be right for your firm will be more determined by your needs and the requirements of your clients, rather than by the size of your firm. Some of these packages include automated timekeeping tools, e.g. pop-up timers.
Most of these software companies have either a web-based demonstration, or a demonstration CD they will send you. It is always important to do your homework before you buy software, so look around and make sure you ask lots of questions!
There is also the option to enter time directly into a Case/Practice Management software package. Many such software packages have time & billing integrated within, others will more than likely be able to link with your firm billing system. At the end of this paper you will find an extensive list containing most of the available packages today. Those which have integrated time & billing and/or general ledger are marked.
Again, most of these software companies have either a web–based demonstration, or a demonstration CD they will send you. It is always important to do your homework before you buy software, so look around and make sure you ask lots of questions! After you have made your selections and narrowed your focus of software to just a few possibilities, you should contact a qualified consultant to assist your firm with an in-house demonstration which answers any remaining questions, and then work with the consultant of the selected product to install, customize and train everyone on its proper use. Training is essential.
Contact your local Practice Management Advisor for recommendations of quality consultants you can contact.
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Managing Billing and Collections
Managing your billing cycle is one of the most important aspects of your business. You can be the best attorney in the world but if bills don't go out in a timely manner and make sense to the client, you'll never get paid. Clients will look for reasons not to pay or to pay it next month. Consistently billing and following up will increase your cash flow.
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Your Engagement Letter Communicates Payment Expectation
Effective communication to a client at the beginning of an engagement will assist with collecting your money at the end. More frequently that most attorney's care to admit, the engagement letter gets forgotten. This puts your firm in a very vulnerable position when it comes time to collect on services rendered. To ensure clear communication be sure that your engagement letter is:
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Required. No work should be done on a client until the signed engagement letter is received. End of story.
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Spell out rates and terms. Be clear about your hourly rate and if there are different rates for court appearances or other special events. If there is a flat fee, specifically identify what the flat fee includes. If you accept credit cards, specify which ones.
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Disengagement for non-payment. Not paying for services rendered should not be tolerated. Take a hard–nosed approach on this and stick by your rules. If you give them an inch they will take a mile and next thing you know payment will be 120 days or more past due. Or worse, you will have completed the work which was urgent for the client, and have lost your leverage in urging prompt payment.
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Interest charges. Send notification on the bill when the client first becomes past due. Most billing software has different dunning messages that can be included when a client is 30, 60 or 90+ days past due. Sending an interest statement two years after the bill is due will not affect payment but it might make you feel better. On the other hand, charging interest on the first month the bill becomes past due will likely have a desirable effect on payment behavior.
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Early pay discounts. Some firms offer discounts for early payment. Most clients will pay the bill on the last day they think they can get away with it. By offering an incentive to save 1% or 2% if payment is received in 10 days, clients can see a benefit to them paying quickly. Some firms even offer as much as 5% “early bird” payment discounts. Be sure to specify the last date on which the discount can be taken, lest you wind up having clients extend the date and take the discount anyway.
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Identify who should receive the bill. Many times something as seemingly inconsequential as failing to direct the bill to the proper person for first review can delay payment slightly, or even permanently. Be sure to ask at your initial meeting to whom the bills should be sent.
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Reimbursement of collection costs. Your engagement letter should include the ability for you to be reimbursed for collection costs, including attorney fees and any related costs. Hopefully you will never have to go that route, but wisdom dictates that there will always be a small percentage of clients who will not pay willingly, despite having no dispute with the charges.
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Get back SIGNED copy for your files!!! In the event of a dispute, you will need to turn to your engagement letter for support. For example, if you have to seek permission of the court to withdraw from a case, you will need to show that your engagement letter shows the client agreed you may withdraw for non–payment. Judges honor that, unless your withdrawal will prove to have extreme prejudice to the client’s matter. Remember that in the event of a dispute, your client may experience “revisionist memory” and either claim to not recall, or to recall differently, the terms of your engagement. Having the signed letter eliminates that possibility.
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Timing
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Top of "bell curve". There is something called the “curve of appreciation” in a matter. Simply put, there is often one or more points during the course of representation when the client will be particularly impressed or appreciative of your efforts. If you can manage to present your bill for payment at one of those points, you will be paid quickly, and with appreciation. For that reason, the optimum time to bill is always when you are at the top of the bell curve of appreciation.
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The client's payment cycle. Most clients have a pay cycle of some sort. They may pay on the 1st, 15th and 30th, or the 10th and 25th, or by some other predictable basis. If you know your client's pay cycle and get you bill in before the cut-off, it will be paid much quicker than if it arrives right after the cut-off. It is easy to find out when your client’s pay cycle is; just ask at the beginning of the representation, along with “to whom should the bill be sent?”
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The 10th of the month. Let’s assume you cannot manage to bill at the top of the bell curve of appreciation, or maybe the type of matter doesn’t clearly have one. Let’s assume also that you just can’t manage to send out bills individually during the month based on client payment cycle. If that’s the case, then you need to make sure that your bills go out each month in order to arrive at their destination by no later than the 10th of the month. Why? Psychological impact. By sending your bills early each month you demonstrate that it is a priority at your firm, and thereby also communicate that getting paid is important to you. In addition, if you examine your own receipt of bills at the office and home, you will notice that most of the “important” bills arrive at the very beginning of each month. You want yours to be included in that group at the other end.
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Billing Methods
- Hourly
- Alternate or flat fee
- Contingent
- Kickers
Billing methods vary. Discuss alternatives with clients. Explore the ability to bill on a flat fee basis, or to demonstrate you are willing to assume some of the risk with your client by taking a lower stated fee and working in a “kicker” or bonus for exceptional outcome or performance. One thing clients are clear about is that they want predictability regarding their legal expenses whenever possible. Although hourly work is comforting to both client and the firm in terms of both relating fees to work performed and in predicting firm revenues based on workable hours in a given year, it does nothing toward ensuring that the value of the services matches the size of the bill in the client’s eyes.
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Clarity of the Bill
The bill serves two purposes. First is to be sure you get paid. And second is to leave the client with a favorable impression of the services rendered. The bill is another tool for client communication. Make sure it reflects the same level of professionalism as your services.
The "Top Five" characteristics of your bill format:
- Use your logo on the bill and format the header in essentially the same layout as your business stationery. This helps you to maintain a consistent professional business image. It is not necessary to print your bill on expensive letterhead.
- Include the invoice number, date and payment terms at the top of the first page of the bill.
- Present the information in a logical sequence (Fees, Cost, Previous Balance, Interest, Payments and Current Balance Due).
- Include a remittance copy to be returned with the check. Summarize previous balance, new charges, payments and credits posted and the new balance.
- Provide contact information in the bill footer. If the client has questions, tell them who to call and provide telephone and email information.
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Establish Regular Billing Habits
If you want to make sure you get your bills done each month in a timely fashion, you should develop a routine which involves teamwork between you and your support staff. This routine should include:
- A consistent cut off date for printing pre-bills.
- A deadline for returning the pre-bills with edits.
- A prohibition against self editing. Time should always be recorded in full, and only discounted upon review of the pre-bill by the billing attorney.
- A “billing czar” who oversees and appropriately challenges billing discounts in excess of a designated percentage of the total fees or costs. Some attorneys routinely feel uncomfortable billing for their time in full. The role of the billing czar is to suppress their natural tendency to devalue their work. Over time, as clients pay higher value, most attorneys start to feel more confident billing for the full value of their work.
- Avoid “unseen” discounts. Unless time is recorded in error, no time should be written down without the client seeing and being able to appreciate that a discount has already been applied. Discounting in an “unseen” fashion often results in clients calling and asking for a discount, and as a result getting what is commonly referred to as a “double dip” discount.
- Send the bill to the right person at the right address. Always make sure any change of address or contact information is immediately shared with the person who does the billing.
- Resolve problems immediately. If clients call with questions, they should be responded to and resolved within 24 – 48 hours. This is at its most basic level just simple customer service which clients expect.
- Negotiate a payment schedule when necessary. It is up to you to determine if the client is experiencing cash flow difficulties, and offering payment alternatives.
- Let the client know which credit cards you accept.
- Send bills at the same time of the month each month, unless you are billing at the top of the bell curve of gratitude.
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Selecting a Billing System for Your Firm's Needs
Attorneys seeking a new automated time & billing system usually will talk with a software consultant or law practice manager and say something like “Please tell me the RIGHT billing system to purchase. We have xx attorneys.” If only it were that simple. There is never one right answer for a law firm. Each firm has its own unique personality. I use the term personality in a sense which goes beyond firm culture, to include firm logic. Different firms “think”, or process information, in different ways. The work “flows” differently from firm to firm, and what seems like the logical way to process information and perform procedures at one firm can be very different at another firm. So too can the requirements to meet client needs vary. Some clients —institutional clients like banks and insurance companies—can have very rigid or specific requirements regarding formatting, task–based codes, special summaries, and so forth. You need to be sure whatever you buy can meet those needs.
For these reasons, when a firm is seeking new time & billing (or case management) software, the first advice is NOT to pick something because a trusted colleague at another firm uses and likes it. No matter how much respect you have for that attorney, a perfectly well-written software package which works well at that attorney’s firm may not work well at yours. It may not fit your particular needs, nor “think” the way you do at your office. If there are two similarly priced and featured packages, it is highly likely that one will make more “sense” given the way you do things at YOUR office, and the other will not. That is no reflection of the quality of either package. So by all means, check out the package your colleague recommends, but do not buy based on his/her recommendation without making sure it is the right package for you. The trick is to figure out what your needs are, so you can indeed pick the right package.
Here are some of the things to take into consideration when looking for software:
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Examining the new software. The first step is to look over various software packages on the internet. Read as much as possible about the company and their products. You will be married to that software for a long time, so take your time to get it right; it will be well worth the extra effort. After you’ve explored the web sites and narrowed your choices, download a free demo of the packages you’re still interested in and walk through each. So far, you have not made any official contact and will not be “bugged” by sales people as you quietly and anonymously explore the software. You are trying to find software which flows logically for you. The idea is not to have to change your procedures to accommodate the software, but rather to find software which will work well with your existing procedures.
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Arrange a personal demo. The website of each product should list consultants in your area. Narrow your choices to 2 or 3 products and arrange a personal demonstration through a local dealer. Do not allow the vendor to do a “canned” demo. Instead, be prepared to ask your questions and have the answers demonstrated. For example, “Show me how we set up a client from start to finish, including special rates for that client and a special bill format.” Also note that Time & Billing systems are highly sophisticated databases. You will be much better served having it professionally installed, and receiving some training, than doing it yourself. Correct installation is critical to the on-going integrity of your data, particularly if you have data to import from another system.
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Reporting requirements. Does your firm or its clients have any special requirements for producing reports? Never assume that any of your reports, other than an accounts receivable and work-in process, will be available on a new system. Show any of your “mission critical” reports to the dealer and have the dealer in turn show you how you can produce them, or confirm in writing it can be done.
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Billing requirements. Does your firm have special requirements for clients? For example, do you have any clients which require task-based billing (TBB)? Typically this is a requirement for insurance companies, for example. It is also a handy function to use in bankruptcy matters to produce the fee petitions automatically. If you need TBB and the broker says their system does TBB, you must explore further to ascertain what they mean by that. One highly regarded software package, for example, only offers one set of predefined TBB codes. The software company “assumed” that everyone would use the Uniform Task-Based Billing Codes. Unfortunately, clients seem to excel in inventing their own code schemes. And you must be able to accommodate. Another typical billing requirement is to be able to produce the bill in a particular format, or electronically. Make sure that the software isn’t just “capable” but will produce what you need.
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Client billing rates. Many firms have multiple billing rates in effect. There may be rate schedules which apply to an entire “class” of clients, or rates which apply only to a particular client or matter. Or you may have matters which use rates by status, like all shareholders/partners at one rate, all associates at another, and so forth. It’s shocking how many firms purchase a time & billing system only to find afterwards it can only handle, say, seven combinations of rates, and that they have upwards of a dozen at their firm. Try telling your client you have to change billing rates because your new billing system can’t accommodate their existing rate schedule! Unless the change is downward, you can bet this will not fly. And, do you ever do flat rate or contingency billing? Make sure the software can do it, and do it the particular way you need.
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How often will you be changing rates? How difficult will the software be in maintaining and making rate changes? Do you need the ability to make changes retroactively? For example, you negotiate for a while with the client each year, and when you finally agree to a new rate schedule, you’re allowed to make it retroactive to the first of the month in which the new budget year with them began. You’ve got to be able to make changes to the rate and fees retroactively. The alternative is to hold up entry of all timesheets until new rates are entered. Some packages also allow prospective rate changes. So, for example, if you know that your rates will change on the first of the following month for a client, you can put in the new rates the month before, with a future effective date. That way, you do not have to hold off entering timesheets at month end while you first enter the new rates.
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What other packages will you be using and “talking” to? You may want an integrated general ledger and trust accounting package. You may be happy using QuickBooks, and therefore need to make sure your new time & billing package will “talk” to it. How about case management? Do you want to connect billing and case management? If you already have case management you must determine if the targeted time & billing package can “talk” with it. If you have not yet selected case management, you should simultaneously look at those to find the few you like the best, and then see if they “talk to” the time & billing packages you are interested in. This additional consideration might just serve to eliminate one or more of the time & billing packages you’re considering. Of course, the best solution is to purchase an “all–in–one” package which includes all the various components you seek. Then you have no linking to set up and maintain, and no possible double entry work —everything is in one database.
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What are the hardware requirements of the software? Sometimes firms specifically do NOT want certain operating systems. For example, smaller firms prefer windows-based software. Larger firms are not afraid to tackle Unix-based systems, as they have sufficient in-house technical support to manage it, and can afford the increased hardware and IT-support costs.
This is certainly not an all-encompassing list of areas to consider when exploring time and billing software, but it should assist you in covering the most critical, and hopefully help you think strategically on your own about others. The important thing is to think about these things before you buy.
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Getting Paid
Probably the best news we will deliver during this seminar is that the attorney isn’t the right one to make the routine calls to follow up on receivables. First, it doesn’t make sense to invest otherwise billable hours pursuing past due billings if someone else can perform the same function just as, or more, effectively. Second, it is almost impossible for an attorney to contact clients seeking additional work while they are simultaneously trying to collect on past work. And finally, most calls are more of a customer service function than a “collection” function, and therefore should be handled by the most customer–service–friendly person at the firm.
Finding the most customer–service–friendly person means, for most firms, that the bookkeeper is NOT the right person to make the calls. Think about it. Most bookkeepers are “rule followers”, and have little tolerance for those who do not follow rules themselves. Everything in their world has to be neat, tidy, and organized, in order to proceed on a schedule which is consistent from month to month. Their idea of making a call about a past due bill is to say, “Our terms are net thirty days — what part of that do you not understand?” Hardly the kind of rapport you want to establish! In small firms where options are limited, the most customer–friendly person is often the receptionist. In larger firms there are more options available. If the firm has an administrator, that person should have the requisite people skills to make the calls. Don’t assume that an office manager, especially without sufficient legal background and good people skills is suitable. I had one firm referred to me for counseling by the Disciplinary Board because their new–to–legal office manager was yelling at and threatening all their clients with law suits! That method may work in other industries, but is certainly not suitable in the legal profession.
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Collection Procedures that Work
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Calls should be made on each receivable as soon as it reaches the due date. Different types of clients may have different due dates, depending on their payment terms and arrangements with the firm. If you have varying payment terms, tracking the date to start the calling process can be a little more complex.
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Your billing system must produce an aged receivable report on demand. In order to make calls when required, you need a billing system which can produce an aged receivable report on demand, or you need to make a tickler entry for follow-up on each bill as it goes out, especially when the terms are other than Net 30.
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Place the call to the client’s bookkeeper or accounts payable clerk. When the initial call is made, you just want to ensure the bill has arrived, and determine whether there are any issues concerning the bill which might hold up payment.
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A frequent “stalling” technique is to claim the bill has not arrived. If that is the response you receive, you should immediately — that day unless your call is made right before 5:00 p.m., in which case the next morning — fax and Federal Express a copy of the bill. It isn't normally recommended to hit a fly with a brick, but in this case you want to make sure that this excuse will never be offered to you again by this client. You will also convey a sense of urgency, indicating that your firm cares about whether you get paid on time.
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Follow up on the telephone the very next day to confirm receipt of the fax and hard copy. Again, ask whether there are any problems with the bill.
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If a problem or question exists about a bill. You must determine the nature of the problem. Try to get the client to specifically identify what charges are problematic. Ask the client to temporarily hold back that portion of the bill until you can respond, and to pay the balance in the meantime. Remember, it is always better to get a slice of bread even if you can’t get the whole loaf.
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Problems on bills should be researched and resolved as quickly as possible. This is definitely a customer service issue, and the client has every right to have their questions answered in a prompt and courteous manner.
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Empower the person making these calls to write off charges up to a certain percentage, if they feel the situation warrants it. For example, if the client expresses unhappiness with the efficiency with which a young lawyer has handled a matter, and the fees in question equal less than 10% of the overall fees on the bill, your employee should authorize the client to take a courtesy reduction, provided they send in their payment for the balance right away. When the costs or fees questioned are in excess of the percentage you set, this is when the attorney must get involved. You must contact the client to resolve the issues without delay.
Some attorneys balk at the idea of empowering an employee to offer courtesy reductions. According to the Commercial Law League, receivables aged one month are 93.2% collectible; at 3 or more months they are only 72.3% collectible; at 1 year or more a bill’s collectability drops to just 28.4%; if your bill ages 2 years or more you can expect to recover only 12.5%! Would you take on a matter knowing you were going to provide a discount of over 87% on your normal rate? Keeping these numbers in mind, you want to do everything you can to keep your receivables from reaching that 90 day mark. Offering a maximum adjustment of 10%, which is what I usually recommend, is small compared to the write-offs you will ultimately incur if you allow the disputed bill to remain open and unpaid for too long.
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Don't be defensive, and certainly don’t make the client feel that way. Concentrate on being open in your communications, and patient with the client’s lack of understanding as to what goes into managing their matter. You never want the client to regret that they raised issues. Their discomfort level might motivate them to seek another attorney to handle their subsequent matters.
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Before the call ends, you must secure a specific date on which the payment will be made. Often clients will not want to commit to a date, replying “I don’t know, I can’t say right now when I’ll be able to pay this bill.” There are two concerns here. First, is the client having cash flow problems? If this is an otherwise good client, and your instincts tell you they are just short on cash, it is up to you to offer them progress payment terms. Most clients do not think that they can send their attorney a partial payment. So they don’t pay the bill at all, rather than send a check on account. You must let them know that a partial payment is ok. Try to get a commitment for a partial payment right away. You do this by asking something like, “If you can’t pay the entire bill right now, can you send $2,500 on account at this time? Then we can work out a schedule to pay off the balance that works better with your cash flow.” If the client says no, ask again, lowering the payment to $1,000. Again, you want to get a piece of it as quickly as possible, and work out a payment schedule you can monitor, so that the amount which begins to age is increasingly smaller.
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It’s not acceptable to end with “I don’t know when” from the client. Keep asking specific questions like “Well, can you get the check out in another week?” If the client says no you should then ask “Can you get the check out in two weeks?” And so forth. Keep asking about increasing time frames, until the client finally says yes or probably. Then repeat the date promised, and let the client know you will check back with them on that date to confirm payment has been made.
The first time you have this conversation with the client, you may find that the client gives you an untruthful answer in desperation just to get you off the phone. Many clients know that most people who call for money do so erratically. So any excuse to get them off the phone usually buys another two to six months of silence before they call back. Under those circumstances, anything which ends the call, even a lie, is a good trade for the extra time.
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It’s essential for you to immediately diary your calendar for the date promised, and follow up on that date without fail. When a client finds out that you will always follow up, rather than disappear for an extended period, they will stop making empty promises, and deal with you in a more forthright manner. And gain, your persistence will indicate how important it is to you that your firm get paid.
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Follow-up is key. Always diary the client’s payment commitment. Always call when the check is supposed to go out to see if they are keeping the commitment. If not, negotiate a new date, and try to get a first or another progress payment.
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Diary the calendar again for the next promised payment date. Keep in mind that the client’s bookkeeper is a rule player. That person would pay every bill the day it is received, leaving the client’s company devoid of cash, if permitted. (Think about your own bookkeeper or payables clerk, and you’ll know I’m speaking the truth.) They really hate receiving your calls, no matter how friendly the context of the call. When they come to know that you will always make calls when the bill is due, they will do everything within their power to ensure YOUR bill gets paid before someone else’s who does not call, or calls only sporadically.
Yes, when it comes to payables, it is true that the “squeaky wheel gets the oil.” Remember that SOMEONE is getting to be paid, and your job is to make sure it’s your firm, rather than someone else. Consistent and persistent follow-up, always with a warm friendly tone, will not only make significant inroads into shifting your receivables back toward the current column, it will also provide each client with the ability to voice concerns about bills, and work out payment terms when needed. It’s a win–win situation.
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Conclusion
There is no doubt that a world of difference can be made to the bottom line of any law firm when consistent and solid practices are employed from input through conclusion of a matter. They start with a clear understanding of expectations on both sides, and memorializing them in an engagement letter, a copy of which is signed by the client and retained by the attorney. Accurate and contemporaneous recording of all time worked is the next essential step. Self editing must be scrupulously avoided. A variety of tools, including automated time tracking and entry, should be employed by the firm. Prompt billing and consistent “no exception” follow-up until payment in full is received completes the picture.
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TIME & BILLING SOFTWARE
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