It is vital to the sustainability of your law practice that you are paid, and paid timely, for your legal services. Yet invoicing clients and collecting legal fees are constant challenges to many lawyers. Handling cases without being paid is simply bad business: you incur unnecessary malpractice and ethical complaint exposure and suffer the loss of money and staff time spent on the case. Worse, you lose valuable time your could have spent on other, fee paying cases. Working on a case without being paid is what I call “involuntary pro bono.”
Here are three simple tips that will improve your legal fee collection:
1. Set expectations and establish boundaries.
It is important to do this in your initial conference. Often we want the business and are concerned that too much discussion about payment will result in the client going elsewhere. You must have a detailed discussion about fees. In an hour long consultation you should spend at least 5-10 minutes discussing payment. Go over the scope of the legal work, the increments involved (for example the phases of a litigation case), the method of billing (fixed fee or hourly) and your hourly rate, if applicable. It has been shown repeatedly that clients do not respond unfavorably the the hourly rate unless it appears exorbitant. They are more concerned with the total cost for handling their case. So, the best of your ability, give the client a good faith estimate of the range of expense likely involved. Explain what will happen if your fees are not paid. It is very important to get the client to agree and commit to the fee arrangement during this initial conference. Don't just state what the charges will be, engage the client. Ask questions whose answers will reflect the client's agreement with and commitment to your fee structure and paying your legal fees timely.
2. Keep great time records.
This, in itself, is a challenge to many attorneys. However, it is important not only for the collection of your legal feess but also as a defense against potential malpractice or ethical complaints. You must be accurate. A client will focus on any perceived inaccuracy, for example the length of a meeting you both attended, and your and the invoice's credibility could be undermined. Use current technology, paper time slips don't cut it anymore. There are many practice management and billing/time recording systems, both software and online, available. Choose one and use it consistently. Be sure that at the end of each day your time is fully accounted for. The consequences for not doing this can be costly. Waiting until the end of the billing period to organize your time records usually results in some time not being billed or the temptation to write off time. If, in fairness to the client, you need to reduce the billable portion of some of your legal work, do it when you record the time initially. Another cost is your billable time. I had a coaching client once who waited till the end of the month to go over her scattered time records and produce invoices. It took her two days to do this. As a result, she lost valuable time she could have spent on billable work or enjoying personal time. This problem was corrected.
3. Write a beautiful invoice.
The goal is to have the client feel appreciative for the work you have done and happy to pay your legal fees. Communication is the key. The invoice needs to detail the work you (and your staff, if applicable) have performed in the client's behalf. The date each service was performed as well as the time spent and a clear description of the action is vital. Detail each action taken. Rather than just stating what was done such as ” Telephone conference .2o hours” make it read more like this: “Telephone conference with engineer Ted Smith regarding preparation of expert witness testimony for trial .20 hours.” Additional effort spent here can have a real effect on payment. The billing process also provides a great opportunity to give the client an update on his case. Take the time to draft a letter to go along with the statement explaining the progress made to date on the client's legal matter. If you have told the client in the initial conference that you will give him regular status updates (an excellent idea), this is a perfect opportunity to do that and build goodwill at the very time he receives the bill for your services.
If you implement these three tips, your receivables will decrease and your collections will increase.
Have a Great Practice!