In Reviewing Client Billing You Have Discovered Many Entries for Work Which You Know Was Not Done

Billing is critical to the success of your law firm. And yet law house billing, including billing clients and chasing down payments, tin exist one of the about fourth dimension-consuming, repetitive, and dreaded parts of whatsoever lawyer's twenty-four hour period.

According to the 2020 Legal Trends Report , lawyers record only two.five billable hours per twenty-four hours on boilerplate, with the residual of their day going towards various non-billable tasks. These tasks often include billing-related activities like preparing and sending invoices, processing payments, and updating trust ledgers.

The constabulary firm billing process

In many cases, the law firm billing process looks something similar this:

The business firm brings on a new client and opens its case.
Billable time and disbursement fees/expenses are logged throughout the instance.
At the end of each month (or at the terminate of the case, if it's a shorter case), bills and expenses for each customer and case are put into a draft bill.
Attorneys add notes and adjust costs as needed and approve the neb.
A final version of the bill is created and sent to clients for payment.
Clients pay via whatever payment methods are accepted at the house.
The accounting team sends follow-up reminders regarding late payments.

While information technology seems fairly straightforward, there's enough of room for bottlenecks and wasted costs. For case, attorneys taking too long to approve bills or adding besides many edits tin cause a filibuster in bills getting sent out.

Your constabulary house's billing policy

To salvage your law firm valuable fourth dimension and money, having a straightforward, standardized constabulary firm billing policy in place is essential. It gives lawyers and staff something to refer to and keeps everyone in sync.

If you lot're writing a policy for the first time, you'll want to consider:

How your firm bills clients.
Where you meet the almost errors.
Which stages of the procedure are causing the biggest bottlenecks.

With that in mind, follow these steps to write an effective billing policy:

one. Provide a template and guidelines

Your standardized template and process should include:

When to send invoices.
How long descriptions should be.
What expenses must exist included on bills versus what should be written off.
Whatsoever standard introductory communications on bills, if needed.

Investing early in a transparent and accessible billing and expense process will save you time afterward.

Managing expenses is a claiming in its own right. Acquire more nearly law firm expenses.

2. Write out the flow of your constabulary firm'southward billing process

Go an expert in the lifecycle of your bills. You should exist able to quickly reply the following questions about your firm's billing procedure:

Which attorneys on a case need to review a bill?
In which lodge?
Are bills mailed or sent electronically?
Who should one inform when sending a nib out?

Write out your entire procedure from outset to terminate, so at that place's no confusion—fifty-fifty if y'all're a solo attorney. This agreement helps support your bottom line, and helps you lot better sympathise your clients. Giving yous momentum to invest in the client-centred experience.

3. Set requirements for invoice review

Information technology's helpful to ask lawyers to utilize a specific organisation, such as your legal practice direction software, to conduct reviews electronically. This helps speed upwardly the process and leaves less room for error—you can even apply automation software.

iv. Integrate the finance team with your billing process

Ensure your accountant or finance team knows when your business firm is sending bills to clients, what still needs to be nerveless, and what'due south being written off. Gaps in communication tin can cause defoliation and delay the payment process.

5. Include a standard process for disputes and collections

Don't go out unpaid bills languishing for months. The longer yous wait, the less likely your clients volition pay, so have a straightforward collections process. Place who needs to follow upward on unpaid bills and when. Have a standard but personalized reminder email or letter you can easily send to clients. It's okay to repeat the same phrasing, but the tone and message should feel friendly, at-home, and kind. Paying for legal services is stressful plenty; it's important to understand with and reassure your clients.

If a client disputes a nib, know who will review the dispute and provide frameworks for resolving the issue.

6. Have a public billing policy for clients

Your clients should be well-acquainted with your billing policy, and so they're clear on:

When and how oft bills will arrive.
The different payment methods bachelor.
How much fourth dimension clients have to pay.
The consequences for late payments.

Write this out clearly and provide it to all new clients, preferably right after their initial consultation. New clients might experience overwhelmed by new information and potential strife and uncertainty about their case. Having your billing policy in writing will ensure clients can go back and review it at their convenience.

Invoice requirements

If yous're working with a larger company, there may exist strict invoice requirements regarding everything from you demand to send bills to how you lot must format bills. However, fifty-fifty if you're not working with big businesses, yous should still stick to a standard gear up of invoice requirements. This will ensure consistency for your clients and continue the billing process running smoothly.

Billing descriptions

Legal business firm billing descriptions should neither be also long or too short. They should provide the right amount of context and information to leave the client satisfied that they've received the value they're paying for. Clear billing descriptions lead to fewer disputes afterward on in a instance.

Billing time descriptions could look similar:

"Met with client to review wills and answer questions"
"Legal enquiry to strengthen arguments for side by side month's hearing"
"Spoke about and recorded the facts of the case with the client"

Law house billing codes

Separate from descriptions, billing codes convey—at a loftier level—which activities or expenses a client is being billed for.

Case codes might look like:

Meeting
Typhoon/revisions
Research

These codes should, at the very least, exist consistent inside your firm. Another way of doing this is to use standard billing codes equally outlined beneath.

LEDES billing

If your law firm works with larger clients, your billing procedure may include an extra step: Formatting your bills to use LEDES billing codes for time and expense entries.

LEDES stands for Legal Electronic Data Substitution Standard. LEDES billing is a standard format for electronic legal billing that uses specific format guidelines. Information technology makes it easier for large organizations to handle large amounts of files and data, and assess invoices, as they volition all be coded in the same format.

Unless your client specifically asks for it, you probably won't need to provide LEDES-formatted bills. However, it's worth checking if you're working with a business organisation or a larger client.

You can also use UTBMS codes (Uniform Task-Based Management Arrangement Codes) to give further item on a LEDES beak.

Creating a billing template

If you're not sure where to start with standard invoice requirements, plenty of billing templates are available. Software suites like FreshBooks provide an fantabulous police force firm billing template. Yous tin can also create customized bill templates past using pecker themes in Clio.

Acme tips to improve billing productivity

1. Set expectations with clients up-front almost your firm'due south billing process and policies

Good billing comes downwards to clear communication with clients . A pecker isn't just an invoice: It'south a tool for communicating the value you provide to your legal clients.

Depending on your practise area, hiring a lawyer may be 1 of the most expensive things your client ever does. Spare them from unexpected bills: Set clear expectations equally to what clients can wait to see on invoices, when they'll receive them, and how they'll be able to pay.

2. Runway your time every bit you lot work for more authentic billing

If you've ever saturday downwards at the end of a workday and tried to remember exactly where your time went, you know just how difficult information technology is to get everything recorded on a bill. Apply a timekeeper to rail your fourth dimension as yous piece of work, and accept notes to ensure the client is crystal clear on the value you've provided. This is the best way to ensure zip gets missed and that every time entry is accurate.

Legal timekeeping and expense tracking software can help you meet your billable targets, neb clients in real time, and increase cash flow. Learn more about timekeeping and expense tracking.

3. Use articulate descriptions

Your invoices to clients should exist easy to sympathise, but that doesn't hateful they should lack item. Conspicuously articulate everything you lot've washed for your customer: An item for a 15-minute phone call to review the case with no context might leave a client feeling confused or anxious about the accuse.

Consider: Katy Young of Advertizement Astra Police force Group prioritizes adding clarity and detail to bills considering she believes it creates trust—which makes her clients more than willing to pay.

4. Pecker frequently, and consistently

With the right system, you can send out bills and reminders quickly, so there's no reason to put off billing your clients. Sending out smaller bills consistently can lower the daze of a large unexpected pecker. Plus, there'southward the added benefit of encouraging a smoother cash flow for your firm.

5. Automate, automate, automate

There are plenty of solutions available to assist automate routine tasks, then you tin spend your time and free energy on things that tin can't be automated, like answering hard questions or giving your clients peace of listen.

Earlier implementing any software, know that process should come earlier technology. Understand the kinks in your billing processes, so look for tools that tin aid amend them.

Some examples include:

Using software like Clio Manage to generate draft bills in minutes.
Using Automatic Beak Reminders in Clio Manage to automatically send Outstanding Balances to your clients and bill recipients based on a schedule you lot can customize.
Accepting credit card payments to become paid faster. Learn how to pick the best credit card processor for your firm hither .
Setting the right rates for your firm

Setting the right rates for your firm

To start computing your firm's billing rates, read this article on how to calculate your hourly rate based on your cost of doing concern. Information technology volition likewise help you cistron in the number of billable hours you look to record in a year (if your house bills hourly instead of via flat fee or contingency). And so, cheque how closely your called rate tracks against market rates.

Hither'southward a wait at benchmark lawyer hourly rates from the 2019 Legal Trends Study , including actual rates and rates adjusted for price of living in each land:

Some interesting statistics:

The highest boilerplate hourly billing rate by state was $346 per hour in New York.
The everyman boilerplate hourly billing rate by country was $158 per hr in West Virginia.
The highest average hourly billing rate by practice expanse was a tie between bankruptcy constabulary and intellectual holding lawyers at $340 per hour.
The lowest boilerplate hourly billing rate by exercise surface area was for juvenile law at $87 per hour .

If you're depression compared to your state's boilerplate firm billing rates, consider raising your rates. If your rates are higher, remember carefully about how you're providing extra value to your clients to brand that rate make sense.

Remember that the rate you charge is, to some extent, up to you. If you'd like to accuse a petty less to continue legal services affordable for others in your community, that'south completely fine.

Determine if your rates are competitive by viewing industry averages from others in your practice expanse. Compare your rates at present.

Adieu billable hours: alternative billing arrangements

What are billable hours? This has long been subject area to argue amongst law firms. The practice is alive and well, just plenty of lawyers abet that this isn't the best way to charge for legal services—at least not for every practice expanse.

Here are some alternative billing arrangements:

Subscription-based police force firm

With a subscription-based firm, you lot provide clients with legal services on an equally-needed basis for a set up monthly subscription fee. This setup works well for modest business clients who may need regular help with trademark applications, proactive IP protection measures, transactions, and more than.

This leads to a more than anticipated income for your firm and smoother working relationships. It tin be a challenge to get clients to buy into the idea if they're used to the billable 60 minutes, but it's worth it. Larn more about running a subscription-based law firm hither.

Sliding scale fees

If you work with clients with lower incomes, sliding scale fees may be appropriate. Clients pay fees based on their household income rather than a standard charge per unit. This approach tin can assistance your house admission more clients by making your services more affordable.

Unbundled services

The idea of "unbundled" legal services refers to limited scope representation. The limited scope attorney and the customer agree to define the chaser's involvement in their instance. Unbundled legal services can vary greatly , depending upon the agreed-upon chore(due south), in both litigation and transactional matters. Examples might include:

Evaluating a case or transaction
Providing limited litigation or transactional guidance
Suggesting court documents or transactional documents to set

Flat fees

If you lot're able to accurately scope the amount of piece of work required for certain types of cases, flat fees tin can be an excellent approach to billing. They create clarity on costs upwardly forepart, and are a form of value-based billing —pregnant that you lot bill based on the value you provide to your client, rather than commodifying your time.

Of course, there's some adventure of underestimating the work required for a example and setting fees too low. Just with diligent instance scoping, flat fees can provide an excellent alternative to the billable hour.

Contingency fees

In that location's potential to assistance clients who can't afford a lawyer with contingency fees. These allow you to receive payment based on a percentage of the coin paid out to the client if the instance is successful. Depending on the instance, this corporeality can be pretty substantial.

Of course, at that place'south also the risk that you won't get paid for your piece of work. But, if you can stomach the risk, billing on a contingency footing is a not bad way to build a profitable practice and serve those who otherwise might not exist able to afford your services. Read these v tips for determining your contingency fees.

Notation: Contingency fees are prohibited for sure types of cases, so double-check your country's ethics rules before deciding to bill on contingency.

Evergreen retainers

Evergreen retainers simplify the process of getting paid on fourth dimension. Here's how information technology works: Your client provides an original retainer held in trust against which legal services are billed—and when their trust account hits a predetermined minimum residue, they furnish the funds.

The key to success is notifying clients when trust funds are at or below the minimum residual required. In this case, applied science can assistance past automating notifications when a client'due south trust drops below the minimum rest. Learn more by reading our guide to evergreen retainers .

Payment plans

According to the 2017 Legal Trends Study , 44% of legal firms say clients don't pay their bills considering they lack the funds to pay at one time. Offering payment plans tin exist a large assist for ensuring your firm gets paid.

Before yous starting time, create clear guidelines for when to offer payment plans, typhoon an agreement template to determine how you will collect payments, what payment methods you'll accept, and what happens when a payment is late.

Then, set up a organisation for billing clients and collecting funds to aid automate the repetitive work.

Reasonable fees and price transparency

When information technology comes to ideals and billing, clarity is key. Rule one.5 of the ABA Model Rules of Professional Conduct states that a lawyer may not collect an "unreasonable fee" or an "unreasonable amount for expenses." The ABA provides eight factors to consider when determining whether a fee is reasonable, including fees charged for similar legal services, the reputation of the lawyer, and any fourth dimension constraints.

As a all-time practice, make your bills as clear and authentic as possible. If y'all're billing by the hour, provide clear, detailed notes on work performed. But if you lot're billing via fixed fee or contingency, ensure you lot've got fair rationale to prove your fees are reasonable.

Besides, if yous're in the United kingdom, you'll need to be mindful of the SRA's price transparency rules , which country that price information must be provided in a clear and easy-to-sympathise format. Other requirements include providing a full cost, explaining the footing of your charges, and communicating what is and isn't included in your services.

Billing, reporting, and monitoring

To keep your billing process on rail, you should keep a shut eye on outstanding balances, payments, and revenues. The following reports can help you monitor your law firm's financial health and continue your billing process running smoothly:

Accounts receivable report

The Accounts Receivable Report helps firms determine amounts outstanding on all open up and past due invoices on a per-user, per-client, and per-matter footing. The report details amounts due on approved unpaid invoices, partial payments made towards those amounts, and credit notes applied to invoices.

Accounts receivable aging written report

The Accounts Receivable Aging Report helps firms rails unpaid bills. It divides overdue accounts receivable into aging categories (e.g., unpaid bills 1-30 days old, 31-60 days old, and 61-90 days old). This enables you to go paid faster by efficiently following upwardly with clients whose bills are overdue.

Billing history report

The Billing History Report provides a detailed view of open receivables, by-due receivables, and paid invoices. This provides a consummate history of your clients' invoicing.

Affair rest summary written report

The Affair Rest Summary Report gives your law firm a snapshot of outstanding receivables, equally well equally how much is work in progress, and expenses in progress, on a per-thing or per-customer basis. It allows your business firm to look at what future revenue remains to be collected for each matter.

Invoice payments study

The Invoice Payments Report gives firms a detailed view of payments on invoices for individual matters made towards individual service and expense items. It also details the users responsible for those line items.

Revenue written report

The Acquirement Report helps your house visualize and quantify key performance metrics on a per-user, per-client, and per-matter basis. The study details hours, expenses, and taxes in terms of unbilled, billed and collected amounts.

How to get paid faster

Police force firms oft find that it takes too long to go paid. The 2019 Legal Trends Written report found that of all hours invoiced to clients, 14% are never paid.

Here are four tips to improve collections at your law firm.

one. Better your timekeeping

Ane of the nigh of import means to better cash period is to implement diligent timekeeping and recordkeeping habits. How can you lot collect on time billed if you haven't tracked it? Take notes on what you're doing, review approachable calls and emails, and, as mentioned above, track time equally you become.

two. Nib consistently

Think for a minute about the way y'all handle bills in your personal life. When these bills come at a anticipated time, you can budget appropriately and pay them on time. When bills are unpredictable and inconsistent, it's harder to stay on top of things.

Getting bills out on time, at the same time each month, will aid your house collect faster.

three. Send regular reminders

Don't let forgotten law business firm bills slide under the radar. Brand information technology a habit to send regular reminders to clients who oasis't paid. Automating this process volition help relieve time and money.

4. Have credit card payments

If you lot're still asking your clients to pay by check, you may be asking them to use a payment method they haven't used in years (or one they've never used). In the digital era, clients expect convenient online payment options. As a lawyer, y'all can give them this option with online credit card payments.

All information technology takes is a flake of due diligence to ensure you're accepting credit card payments following ideals rules.

Legal firms need a credit card processor that does non allow chargebacks on trust accounts and that does not take fees from trust accounts. So, if a client disputes a charge that results in a chargeback, and the credit bill of fare company withdraws money from a pooled trust business relationship, this may cause an ideals violation.

Usually, this means using a credit bill of fare processor tailored specifically towards lawyers, such equally Clio Payments.

Bend Law has found that using the Clio Payments software had significantly improved its billing and collection process:

Law firm billing software

Investing in billing software for police force firms makes a meaning departure in how you spend your time—and mitigates the take chances of fault.

Clio Manage lets you lot easily create branded invoices and customized billing plans, and have payment by credit bill of fare. It manages trust accounting features and likewise integrates with your favorite accounting programs including QuickBooks Online, Xero, and Klyant—and so you can go on all of your financial information in sync.

Investing in legal billing software to help your process run more smoothly can exist invaluable for your firm: Chris Trebatoski of Treblaw LLC gets all his bills out each month in most 15 minutes with Clio—a task that used to take him much longer at a larger house.

"I spend less time doing my time entries and sending out my bills using Clio than I spent being the Chair of Billing and Collection at a large constabulary house calling other lawyers proverb, 'Could you lot get your neb out?'" he says.

Again, it's crucial to think about your process earlier technology. Don't be agape of a learning bend. Software like Clio Manage is intuitive, and a modest investment in learning how it works tin yield a lifetime of simplified billing practices for your law firm.

Notation: The information in this article applies merely to US practices. This post is provided for advisory purposes but. It does not constitute legal, business organization, or bookkeeping advice.

Nosotros published this web log mail service in March 2019. Last updated: December 8, 2021.

Categorized in: Accounting

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