This article is brought to you by Attorney Kristen Wolf and Attorney Shari-Lynn Cuomo Shore.
If I had known that I was going to own my own business, I probably would have gotten an M.B.A. That’s a thought I have a few times per week. When you own your own law firm, you wear a number of different hats and are no longer just a lawyer. You are now a CEO, an accountant, a marketing manager, an office administrator, and sometimes, a collector. While it’s obviously ideal to “outsource” these different roles to employees, you, as the owner, ultimately are still responsible for everything. One way to lessen the burden on yourself is to keep thorough billing records so that you can easily generate invoices, you can invoice regularly, and hopefully, limit any collections.
Billing may seem tedious, but the vast importance of it is really two-fold. First, you cannot get paid if you are not billing. Even if you are working on a contingency fee case, your time keeping should be accurate so that you can produce your billing records if there is ever an issue. Second, keeping contemporaneous and detailed billing will largely protect you if you are ever grieved, audited, or dealing with an unhappy client in any manner.
Long gone are the days of analog billing, such as handwriting in a notebook, scribbling on receipts, etc. Unless you are a very small practice with only a handful of clients, you should be using some type of billing software. There are many software options available now for reasonable rates that can keep track of your billing, your calendar, due dates, client management, and even run a conflict checker. Once you have the correct tool to keep your billing on track, you need to get into the habit of tracking your billing regularly. A tried and true way is to bill immediately after you complete each task. That’s the only way to ensure that: a) you don’t miss something, and b) you bill the correct client for the correct task.
It’s also important to have a retainer agreement that specifies how you bill, how frequently you bill, and what your rates are. Again, this is a maneuver meant to protect you. If you have a detailed retainer, you can easily show that the client was informed as to your billing policies and procedures prior to retaining you.
If you are billing consistently, but do not actually run the invoices and send them to clients, it’s likely that you will not get paid. You should set a specific timeframe in which to run invoices. For example, every month by the fifteenth day. This way, your clients will get used to receiving a regular invoice from you and they won’t be surprised. Also, by doing this you can alert them if they need to replenish a retainer, make an evergreen payment, or in some cases, if they should expect money to be returned to them once their case is over. No client wants to see a large bill every few months, or at the end of their matter, and then be told they owe you a lot of money. If you aren’t billing regularly, the client may not feel like you are working on their file, even if you are.
Sending a monthly invoice is also a great way to check in with your client. You can either send the invoice as an attachment in an e-mail, or you can mail it with a cover letter, but either way, you should address the client personally. Use this recurring e-mail as an opportunity to check in with your client, see how satisfied they are with your representation thus far, and ask if there is anything not being handled to their satisfaction. Be sure to personalize this mailing so that it does not look like you are sending a mass mailing, but rather something that is crafted to their specific case. “Why would I do that,” you ask. What if it’s something I don’t want to hear? Well, isn’t it better to know up front if there is a problem rather than have a client be frustrated with you and not address it until it’s too late (i.e. they fire you or grieve you).
It is preferable to send invoices to clients, especially those that owe money, by e-mail rather than mail. Sending via e-mail also makes it easy for your clients to pay any outstanding balances owed, by including a “Pay Now” link which can be back linked to your website. Clients will be much more willing to pay you if you make it easier for them to do so. Sending invoices by e-mail is the easiest way to accomplish this.
Check with your law practice management software to see if you can easily run batch billing and send batch e-mails. Batch billing will allow you to simply and easily run your invoices in just minutes and save yourself the hassle of an unsatisfied client in the future.
If you bill smart (contemporaneously, regularly, and thoroughly), then your accounts receivable should be fairly low. If your firm operates on a retainer basis, get your entire retainer up front. Do not begin work on the file until the entire retainer balance is paid in full. Be clear of the terms of your retainer agreement which provide for the client to deposit more money if their retainer starts running low. Also, make sure to give the client plenty of notice if his or her retainer will need to be replenished. By billing smartly and consistently, your clients will not be surprised when a retainer replenishment email or mail comes to them.
If at all possible, have someone else in your office handle money matters with clients. Money and billing can be sensitive subjects for clients, especially when legal bills become higher than what they originally anticipated. By having someone else in your office handle the billing and collections calls, you remove yourself from the situation, allowing you to maintain your personal relationship with the client and not discuss money matters unless absolutely necessary.
Do not sue clients for money owed. If you are billing smartly and regularly, you likely will not be in a position where this is a problem. However, if you are, it is a better practice to write off the remaining balance than to sue the client for the money owed. Suing clients for money owed often opens the door for clients to be unsatisfied with your representation, which in turn allows for them to either file a grievance or a lawsuit against you. Additionally, it opens the door for an unsatisfied client to leave poor reviews for you on the internet and social media which you will likely never be able to remove. This could affect your future marketing and income of your firm. Instead of suing a client for funds owed, speak with your accountant and see if you can take a loss of money as a tax write off rather than creating an opportunity for a potential law suit or grievance from a past client.
Always consider your billing as your top priority. It is after all, how you get paid. If you follow these few easy steps, you will be able to stay on top of your billing, maximize your income, and most importantly, keep a satisfied client base.