Best Billing Practices for Law Firms
- Get to know your clients well so you can provide them with the best possible legal consulting service. Knowing your client means knowing their financial situation, what they want, and if they’ll be satisfied with the billing arrangement you propose. It’s important to get this right because once a client is angry at you, it will be difficult to win back trust even if the billing arrangement was reasonable or the client was uncooperative during proceedings. It also helps to know what your client expects billable hours to look like for them (e.g., flat rate). This way, when entering into negotiations with opposing counsel, you can make sure both parties are on the same page about how many legal consulting billable hours will be allowable before either party reevaluates the agreement. Doing this helps avoid a situation from occurring where opposing counsel believes they have been billed for too many hours and subsequently sets a new hourly limit that is lower than what your law firm needs.
- Be clear about what you expect out of your client so there are no misunderstandings that lead to disagreements about legal consulting billing. This applies equally to flat fees as it does billable hours. For example, if you’re going to charge by the hour for services, be explicit with your clients (especially those clients who aren’t used to paying by the hour). If you tell them that their matter will cost $X per hour and they haven’t agreed to extend beyond Y number of hours, stop working on their case after Y number of hours to avoid billing them for more hours.
- It’s a common misconception that you can’t bill for time spent thinking about how to prepare a case. The idea is that since you’re not doing anything tangible, it isn’t worthy of being billed as a legitimate expense. However, this line of thought fails to take into account the fact that any legal consulting expert who has been in practice long enough knows that good legal reasoning and strategizing takes time and mental energy. In addition, these activities are crucial to having your client receive the best possible service from your law firm. Because of this, try to include some rate-based estimate of how much time you’ll spend on each phone conference or email exchange with opposing counsel so you have an accurate idea of what to charge your client when you bill for work
- When legal consulting billing, make sure you know what is included in the time being billed. For example, if it takes two hours to draft a document that will only take one hour of court time if filed with the court, don’t include both hours in your journals. If you do file it early without consultation with opposing counsel about any potential changes to the document that they want to be made, you can expect them to call you up asking why they were charged for two hours even though the job only took one hour of lawyer’s time. This situation is very easy to avoid by talking to opposing counsel before filing anything so there are no surprises about how much is being billed.
- Know the rate you want to bill at and make sure it’s agreeable with your client. If they’re adamant about paying more than what you’ve proposed, consider negotiating. However, don’t automatically assume that because the client wants to pay more it must be reasonable.
- Know what is included in your hourly rate and how this varies depending on the type of work that needs to be done for a case. For example, if one of the legal consulting experts from your firm is going to have to spend some time out of their normal schedule training a summer associate who has never been through deposition before, discount the number of hours accordingly so you know what you’ll return as an invoice. In addition, depending on the circumstances, never forget that it might be appropriate to charge a higher rate than usual if they’ve given you more work than is typically assigned to associate attorneys.
- Don’t be afraid to ask for feedback after presenting opposing counsel with an invoice so you know what went wrong. If they call you up and say something like, “I can’t believe you expect me to pay $X per hour!” don’t just accept the fact that there’s nothing you can do about it because they’re not willing to agree on a price with your firm. Instead, ask why they feel that way and then try negotiating with them again by lowering your hourly fee or extending their billable hours limit if possible. You might be surprised at how receptive they are now that both parties are speaking openly about their opinions.
- Don’t assume that you’ll get more clients if the price of your legal consulting services is less expensive than other law firms. Surveys have shown that clients are willing to spend a little extra for lawyers they trust and who will do a good job for them instead of going with a cheaper but less reputable solution.
- A practice area that’s been found to be especially problematic from an ethical standpoint is when attorneys charge by the number of hours worked regardless of whether or not their client wants to accept the terms. In these cases, their client might try negotiating with them to lower the hourly rate in exchange for extended hours, but they won’t budge on it because they don’t care about what works best for their client as long as they get paid.
- Charging by the hour is tricky in general because you’re not getting paid if your client doesn’t win their case, but it’s also very unethical when you end up with clients like this anyway. Even if they don’t lose their case, they may not pay you what you believe to be a reasonable fee for the work you put into building the case toward their success if they don’t want to keep paying an hourly fee. A majority of legal consulting pros will refuse to lower their hourly rate even though they might have gone through more than eight hours of work on something that was resolved within four or five instead of taking the time to think about how this would affect both them and their client agreeing to continue billing by the hour instead of taking one lump sum.
These are some of the top billing practices for law firms that should help you avoid any serious problems with the way your firm is handling its money. If you’re not sure about how to handle something, always feel free to contact a reputable accountant who specializes in serving professionals like lawyers or talk things over with someone on your legal team!