Until the post-World War II era, legal bills detailed not only time spent, but also the nature of the service, the result achieved and the amount at stake. Charging an appropriate legal fee was a matter of professional judgment.
That changed in the 1960s when clients began demanding precise billing statements and lawyers used time records as a management tool to seek greater efficiencies. Today, most lawyers are paid by the hour and their billings are "features" lists: this is what I did, this is the time I worked and this is what you owe me.
This approach breeds dissatisfaction among clients because it doesn't address value and benefits— the worth, as opposed to the cost, of the service.
What's the Problem?
If clients pay their bills without complaint, lawyers assume that a laundry-list billing approach works. The doubt should begin to creep in, however, if several weeks have passed without payment. An unpaid bill generally indicates that clients have one of four problems:
- They didn't understand either the specifics or the value of what you did for them.
- They didn't think the bill was fair because you charged for things that weren't requested.
- They didn't feel an urgency to pay, preferring to focus on bills with more personal meaning.
- They no longer have money, though their intentions are good.
Be Reasonable and Clear
Note that none of the above-mentioned problems implies a professional lapse by the lawyer in preparing the bill. In fact, the primary billing obligation imposed by Chapter XI of the Canadian Bar Association's Code of Professional Conduct is only that "the lawyer shall not stipulate for, charge or accept any fee that is not fully disclosed, fair and reasonable."
Of course, "reasonable" is often in the eye of the beholder, and the CBA adds in its commentary on the rule that "the lawyer should try to avoid controversy with the client over fees and should be ready to explain the basis for charges, especially if the client is unsophisticated or uninformed about the proper basis and measurements for fees."
The point about controversy is especially important because, although the main purpose of your bill is to make sure you get paid, there is a secondary purpose that lawyers often miss—to leave the client with a favorable impression of the services received. In other words, your bill is another tool for client communication. The perfect bill is one that speaks clearly and directly to clients about how you as a lawyer have improved their lives.
Demonstrate Value
Good communication begins at the start of every client engagement by putting into writing as much information as possible about your billing practices. Once you establish your benchmarks, bill in a regular and timely way, using statements that contain a full narrative of the work done and the goal accomplished by that work. This allows you to provide status updates easily and to reinforce that every action you took on behalf of the client had a purpose.
Also, because legal services are often intangible, the more information you can provide about how hard you worked and what your work accomplished, the more likely the client will be to perceive the bill as fair and to pay it promptly.
"Good service," "value" and "solutions" shouldn't be vague buzzwords. All lawyers, in any size practice, can describe what they do to consistently encourage a high client perception of value. Basic elements of that may include:
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Return client phone calls, by yourself or an assistant, within two to four hours.
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Visit clients at no charge to learn about their concerns and understand their business.
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Prepare your clients for interactive events such as negotiation sessions, depositions, and testimony so they know what to expect and are prepared for what might happen. Don't scrimp on the time—incorporate various possibilities so that clients are not shocked if the outcome, over which you have no control, differs from what they had hoped.
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Describe promises made and kept, complete with examples of value and service as defined by both parties in the engagement agreement.
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Ask clients for feedback (without charge) about whether they were pleased with your services.
Such value-added elements will let you generate billing statements that are easy to understand and that clearly list actions taken on the client's behalf while relating them to the time it took to realize that value. These billing statements will be more meaningful to the client and will go beyond a mere laundry list of tasks performed.
A number of these suggestions involve actions and items that should be noted on the bill as time increments with "no charge." That's a vivid way of letting the client know that, although your time is valuable, you value your working relationship together even more.
Be Detailed
Of course, you want to be just as detailed when setting forth what you do charge for. Too many lawyers make the mistake of brevity when billing (i.e. "work on motion for summary judgment, 20 hours.") Break any such charge into its basic elements, with the amount of time needed for each: review key documents and deposition testimony, draft statement of uncontested facts as required by court procedure, research precedents in four similar cases, and so on.
Such itemization does not try clients' patience; it helps them understand just how much you did on their behalf. Use action verbs to describe your services. Clearly indicate the specifics of what was accomplished. This gives clients an appreciation of the effort required for success.
Be Convenient
If the perfect bill is understandable and detailed, it should also be easy to receive and pay by taking advantage of all that technology affords.
One simple way to do this is to email bills as PDF files (which cannot be modified by the recipient) rather than sending them through the mail; such speed and convenience often result in quicker payment.
For corporate clients, consider using an electronic invoicing service. This requires substantial initial setup and coordination, and is mainly justified for larger clients; but once this is done, the billing service performs much of the routine work of certifying compliance with the client's billing rules and assigning fees and costs by matter handled and by requesting lawyer.
Convenience is in the eye of the client. Ask your client how they want to receive their billings!
Be Timely
Finally, the perfect bill is timely. If you bill when clients are happy because you've just won a motion or negotiated a favorable deal (even if somewhat before or beyond the normal billing date)
they're more likely to pay quickly. Such billing places the client on the peak of the "satisfaction curve," the time of least resistance for payment of fees. Later, the client will invariably forget how important you were in the process of the result and wonder why the bill is so high. Once in that state of mind, the statement for services will sit unpaid until some future date.
One study shows that a bill that is over 60 days past due can still be collected about 89 per cent of the time. However, that drops to a 67 per cent likelihood of collection after six months and to a 45 per cent likelihood after one year. Why take the risk? Send bills promptly.
Above All, Communicate
The importance of an effective bill goes far beyond the document itself and the payment you receive from it. As a lawyer, you don't practice law, you serve clients. Without clients there is no reason to be a lawyer. You must provide a quality service and work product that clients find useful and beneficial. If clients don't recognize the benefits of what you do, they will become dissatisfied with you and no amount of marketing effort will retain them.
Lawyers have a consistent tendency to focus on the task at hand, without having communicated what they have accomplished to the client. You may well have done a great job with documents, the court, or the opposing party, but no matter how successful the end result, the client needs to understand what you accomplished.
A bill that only says, "For legal services rendered" or that is inaccurate or confusing, does nothing to enhance such understanding. Show your clients how highly you value them by communicating to them fully about the benefits you provide as their lawyer.
Edward Poll (edpoll@lawbiz.com) is a certified management consultant and coach in Los Angeles who coaches attorneys and law firms on how to deliver their services more profitably. He is the author of Attorney and Law Firm Guide to the Business of Law: Planning and Operating for Survival and Growth, 2nd ed. (ABA, 2002), Collecting Your Fee: Getting Paid from Intake to Invoice (ABA, 2003) and, most recently, Selling Your Law Practice: The Profitable Exit Strategy (LawBiz, 2005).