Pledge to Get Paid in 2016

How many times have you heard, “If you want to avoid collection problems, get your fee up front?”  Good advice, but how exactly do you make it happen?  Here are four sure-fire techniques:

Use Evergreen Retainers

In this type of arrangement, the client agrees to maintain a specified retainer balance at all times.  Your bill should reflect the initial retainer deposit, fees and costs incurred during the month, total funds disbursed from the client’s retainer, any balance remaining, and the amount needed to replenish the retainer.

Keep a careful eye on the client’s balance at all times.  If the client fails to replenish the retainer as required, be prepared to enforce the terms of your agreement (including withdrawal).

Offer Discounts

Discounts can be a great motivator for clients to give you a retainer, pay your fee up front, or promptly take care of an outstanding balance.  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.]
  • 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.]

Tinker with the math to make discounts work for you.

Practice Tip: If you intend to charge a “fixed fee earned upon receipt” read and understand Oregon Rules of Professional Conduct 1.5 and 1.15-1  and OSB Formal Opinion 2005-151These arrangements must be in writing and must contain specified disclosures.

Collect Last Month’s Rent

Inspired by a common practice in landlord-tenant agreements, the “last month’s rent” approach requires the client to pay a security deposit into the lawyer trust account. Each month the client is invoiced and expected to pay.  At the conclusion of the matter, the security deposit is used to pay the client’s final bill. Alternatively, the deposit can also be used if the client fails to pay a monthly invoice.

As with all fee agreements, put your “last month’s rent” arrangement in writing. Keep in mind that if the client’s funds can earn net interest, you are required to establish a separate interest-bearing account for the client or obtain a waiver of the client’s right to interest. See OSB Formal Opinion 2005-117 for additional details.

Accept Credit Cards

Avoid bookkeeping hassles by using a private credit card processor who will take merchant fees only from your business account, not your lawyer trust account. Be sure to read and comply with OSB Formal Opinion 2005-172.  Credit cards are a great way to collect retainers when clients can’t otherwise come up with the funds.

[All Rights Reserved 2016 Beverly Michaelis]

Making Money: Maximizing the Business Side of Practicing Law

Law is both a profession and a business. So what pearls of wisdom did the experts at the 2014 ABA TECHSHOW have to say about the business side of law practice? Read on…

How Are We Doing?

  • According to Lexis’s Chris Anderson, over 50% of solos have no accounting software at all. @MrsMacLawyer RT @lawyerist (My 2 cents: true and sadly ineffective – the return on investment in purchasing quality billing and accounting software can’t be overstated.)
  • Law firms used to raise rates 10% a year; now just about 3% says @gnawledge – @Business_of_Law
  • Key Business Challenges for Lawyers [INFOGRAPHIC] – MyCase Blog @nikiblack

Talking to Clients about Fees

  • Calling a client that’s behind on payment is a hard thing to do; manage expectations — says Steve Best of @affinitytech @Business_of_Law
  • Lawyers are not comfortable having conversations about fees (both sides) – feels “salesy” and “confrontational” says @gnawledge – @Business_of_Law

Setting Rates and Crafting Agreements: The Rule of 3

  • Law firm billing discounts are a 1-way street; once you give them, you’ll continue to give them; protect the price – @gnawledge – @Business_of_Law  (My thought: I don’t believe in continually marking down bills.  I do believe in offering early payment discounts.  The client saves money.  The lawyer is paid more quickly.  Win-win.)
  • Rule of 3 in law firm pricing: 1% cut in price = 3% cut in profit – @gnawledge – @Business_of_Law
  • Rule of 3 defined: Attorney bills at $300/hr; 1st 100 is salary; 2nd 100 is law firm cost; 3rd 100 is profit – @gnawledge – @Business_of_Law
  • Bills Out – Money In – #ABATECHSHOW session @PeggyGruenke makes this case for flat fees – @Business_of_Law
  • New meaning for AFA: “appropriate” fee arrangement – @gnawledge – @Business_of_Law
  • The better law firms are at pricing, the better it is for the market – @gnawledge – @Business_of_Law
  • Resources for law firm pricing: LMA Group (Legal Marketing Association) | ILTA. (International Legal Technology Association) @gnawledge – @Business_of_Law

Billing

  • Some firms have 300 billing codes…but just 20 are used. Need to think through codes – @gnawledge – @Business_of_Law
  • Billing codes are gamed; got a cap on one code, the hours get logged in another. @gnawledge – @Business_of_Law
  • Where’d those billable hours go? Right here in the matter management system – @Business_of_Law (Link to LexisNexis FirmManager “Money Finder.”)

Trends and Where to go from Here

  • Litigation finance is a growing trend — several financing companies have raised lots of capital @gnawledge – @Business_of_Law  (My input – this can be a slippery slope.)
  • The Essential Survival Guide for the Independent Attorney: summary here. @Business_of_Law
  • Session Summary: 5 Effective Law Firm Billing Techniques – @Business_of_Law

All Rights Reserved – Beverly Michaelis [2014]

Expert Tech Training – Quick!

Last week I had the privilege of attending the 2010 Annual ABA Meeting in San Francisco.  The speakers were excellent and I look forward to sharing that content with you.

The meeting reminded me of the many benefits of belonging to the ABA.  One of the most valuable (and probably underutilized) is ABA TechEZ.

Through ABA TechEZ ABA members can purchase software, hardware, and related technology services at a discount.  Even better, ABA TechEZ offers FREE training events every week.  Dubbed “Training Tuesdays,” these sessions offer ABA members expert technology training in 15 minutes or less.  The sessions are quick, to-the-point, and focus on specific features or products.  The training calendar is posted here.  Subscribe to the RSS Feed to automatically receive notices of future training sessions.

Almost everyone can make room in their calendar once a week for 15 minutes of tech training, but if you miss a session, check the ABA TechEZ Training Library for a free recording.  Here are some of the more recent programs:

  • Redacting Documents with Adobe Acrobat
  • Archiving Outlook E-mail Folders with Acrobat 9
  • Removing Metadata with Word and Acrobat
  • E-mail Management Tools in MS Outlook
  • Mac Users: Boost Productivity with Spaces
  • A “QuickJump” Around: Finding Files Fast
  • Electronic Signatures with RightSignature
  • Three Ways to Capture More Billable Time with Chrometa

Additional technology services are available through the ABA’s Legal Technology Resource Center.

All in all, the ABA gives lawyers great value for their money.  If you’re a solo, joining now is easier than ever with reduced dues.  So if you’ve been wondering whether it’s worth the investment: the answer is yes!

Copyright 2010 Beverly Michaelis