Looking at Fees and Billing with a Fresh Eye

What if collection problems prevail across your entire clientele – not just a few accounts?  It may be time to turn a critical eye toward your current fee structure and billing practices:legal_document_istock_0

Switch to AFAs – Alternative Fee Arrangements

Combining flat and hourly or hourly and contingent fees may solve at least some of your cashflow problems. In litigation it’s easy to dismiss flat fees as unworkable: “I just can’t do it because the nature of the case is too unpredictable.”

Is this really true or is it an excuse not to change?

Let’s take dissolution.  I would expect nine out of ten lawyers to reject flat fees outright, but wait a minute.  Fees aren’t “all or nothing.”  More accurately, they’re anything you want them to be (almost). Therefore, it is perfectly doable in dissolution to flat fee at least the first stage of the case:  initial client interview, client follow-up, preparing and serving the petition, initial mandatory discovery.  Go hourly thereafter, but look for other opportunities (stages/discrete tasks) where you can propose flat fees.  In short, be more flexible.  Done right, an AFA could mean collecting a flat fee up front for the initial stage of the case with a requirement for an evergreen retainer once hourly billing kicks in.

Do a Better Job of Educating Clients

As I’ve noted before, many a collection problem can be traced back to the initial client interview when the lawyer failed to adequately discuss billing practices. If you don’t have an honest, open discussion about fees, costs, and billing practices, reform now!

  • Reinforce what you tell the client by using billing brochures enclosed with your fee agreement.
  • Or if you don’t like the brochure idea, attach a one page bullet list of your billing procedures.
  • Prefer to be paperless?  Send clients to a private web page that serves the same purpose. Consider requiring clients to read and accept your web-based billing procedures before eSigning your fee agreement.

Why am I suggesting brochures, lists, and web pages?  The brutal truth is that even the shortest fee agreement is probably too long for the average client to digest.  But we can make billing more understandable!

When you separate and reformat billing details using brochures or bulleted lists you improve readability.  [Much like what I did in the preceding paragraphs.]  Improving readability increases comprehension and understanding.  If you go the Web page route, use the same or similar formatting techniques.

Change How You’re Paid

It’s hard to imagine a law firm that doesn’t accept credit cards, but I know you’re out there.  If you’re part of this group, and you’re also experiencing collection problems, start taking credit cards.  Yes, there are a few things you need to know – for example – how to pick a merchant to process payments and what to do about merchant fees (aka credit card surcharges or transaction fees).  But I’ve got your back.  Read the hyperlinked posts included above and you’ll get the answers you need.

Not convinced? Statistics reveal that 43% of consumers prefer to pay by debit card, 35% with a credit card.  Granted, legal fees are not a typical consumer purchase, but still: why would you disregard what many consider a preferable payment method?

Credit cards can be an ideal solution for collecting flat fees earned upon receipt or the cost of an initial consultation.  Many a family law lawyer has shared that clients would not be able to afford their services without the ability to put their bill on a credit card…

Be More Like Bugs Bunny

Yes, this is the carrot/stick metaphor.  It’s this simple: discounts are a client motivator.  If you want to collect a retainer, up-front fee, or take care of an outstanding balance give the client a financial incentive to pay you.

Here are some examples:

  • Your rate is $250 per hour if the client is invoiced, but if the client establishes a retainer, your rate is reduced to $200 per hour.  [Establishing a retainer triggers the lower hourly rate.]
  • You offer preparation of a complete estate plan at $2,500, due and payable upon completion.  If the client is willing to pay up front before work begins, your flat fee is reduced to $2,000.  [The earned upon receipt fee triggers a $500 savings to the client in return for being paid now.  Remember to comply with earned upon receipt payment rules and get your fee agreement in writing.]
  • You offer 10% off your bill if the client remits payment within 10 days (instead of the usual 30 or more).  [Your early payment discount saves the client money and allows you to collect the outstanding receivable in one-third the usual time.]

There is no magic wand in collections, but a willingness to start over and shake things up can make a difference.

All Rights Reserved – Beverly Michaelis – 2017.

The Best Legal Blog Posts of 2016

2016-word-cloudIf you’ve followed my blog for a year or more, you know I generally publish a “Year in Review” post.  This December I thought I’d take a slightly different approach. Instead of a comprehensive list, I’m filtering it down to my personal favorites. And while it may be controversial, I’m calling this compilation The Best Legal Blog Posts of 2016.  There is plenty of good stuff out there, but this is the best that has appeared here.  Mostly my content, but also sourced from other great writers.

Client Relations

eCourt and court procedures

Finances

Marketing

Security

Staffing

Technology

Time Management

All Rights Reserved 2016 Beverly Michaelis

Improve Your Collection Rate Through Better Billing Practices

Billing clients for services is not practicing law and it does not take a ton of thought to create a procedure. However, it is important to design a system that works — and to continue to revise and improve it based on experience. If you have little or no procedures in place, here is a […]

via Billing: Developing a Winning Procedure — NWSidebar –

Picking Practice Management Software: A Guide for Lawyers — NWSidebar

With all the different time and billing, practice management, and customer management programs these days, it can be difficult to choose the right one for your practice. Here are some red flags I’ve learned to recognize, as well as answers that give me confidence that lawyers are making the right decision for their practice.

via Picking Practice Management Software: A Guide for Lawyers — NWSidebar

The 7 Golden Rules of Collections Revisited

This classic post bears repeating.th (1)

In the annals of professional liability, there is one statistical truth: sue a client to collect fees and odds are the client will sue you for malpractice.

How can you avoid this dilemma?  Be proactive!  Develop policies and procedures designed to preserve client relations and avoid collection problems before they start.  In short, follow the seven golden rules of billing and collections:

  1. Always take the time to discuss fees, costs, and billing practices.  Most nonpaying clients who file retaliation suits or malpractice counterclaims do so because they never understood what the lawyer’s services would cost.
  2. Never leave home without a written fee agreement.  Be specific and complete.  Your agreement should: (a) specify the scope and timing of services; (b) describe what the client is expected to pay for and when; (c) explain billing practices; (d) identify what will occur if payment is not timely made.  Losing a potential client who refuses to negotiate and agree to a comprehensive fee and engagement agreement is a small price to pay compared to defending yourself in a malpractice claim or disciplinary proceeding.
  3. Consider alternative fee arrangements – flat fees, fixed fees, unbundled fees, evergreen retainers, or “last month’s rent.”  Clients cooperate more fully when they are financially invested in their case.  If the client is unwilling to commit financially, the matter quickly becomes your problem rather than the client’s.
  4. Keep detailed records documenting time spent and submit itemized bills
    to clients on a regular basis.  Inconsistent billing practices disrupt firm cash flow, infuriate clients, and make collection more difficult.
  5. Be a smart biller:  (a) review “pre-bills” and statements carefully; (b) if  you make a mistake, correct it quickly and accurately the first time; (c) send statements before clients receive their paychecks – usually just before the 15th and again at month end.  If you serve corporate clients, send bills in a manner and format that works for the accounts payable department; (d) always include a due date on all statements (most clients prioritize bills based on due date); (e) offer a carrot instead of a stick.  In lieu of late fees or interest, offer clients a discount if payment is received within 10 days of the billing date.
  6. Do not allow outstanding fees to accumulate during the course of representation.  As soon as a payment is missed, call the client.  Get to the root of the nonpayment.  Is the client dissatisfied?  If a client becomes seriously delinquent, terminate the attorney-client relationship and withdraw from representation if possible.  Re-read last week’s post and comply with all provisions of Oregon RPC 1.16 as well as applicable court rules.  Read more here about the do’s and don’ts when ending representation.
  7. Offer to arbitrate fee disputes through the Oregon State Bar’s Fee Arbitration and Mediation Program or consider other alternative dispute resolution methods.

If you decide to sue a client for fees, consider the following:

  • Will a judgment be collectible if obtained?
  • Do you stand to gain or lose a substantial amount of money?
  • Are there any grounds upon which the client can credibly dispute the debt or any part of it?
  • Have you really listened to your client’s side of the dispute?
  • Was a good result obtained in the underlying case?
  • Has an uninvolved, experienced lawyer reviewed the file for possible malpractice?
  • Will a law suit result in bad publicity reflecting negatively on you or your law firm?
  • Have you offered to arbitrate, compromise or meet the client part way on the amount due?

Most collection problems can be averted at the outset of representation.  A frank discussion of fees, finances, and billing procedures will greatly reduce the possibility of disputes.

[All Rights Reserved 2016 Beverly Michaelis]