Law Firm Billing: Five Ways To Ensure Your Clients Pay On Time
Billing clients is foundational to success at any law firm, but oftentimes lawyers struggle to receive payments on time, if at all. For an essential business function like getting paid, one would think it would be as simple as preparing an invoice and waiting for the payment to roll in. While yes, these two tasks encompass the general framework of legal billing, your firm is missing out on opportunities between these endpoints to maximize your payment efficiency. There are many steps your law firm can take to ensure you get paid on time, and it all starts long before you even interact with your client. Here are five ways to ensure your clients pay on time.
Provide concise and public communication on your billing policy
The first step your law firm should take it to establish consistent rates. Whether this be hourly billing rates by attorney, or flat fee billing rates by projects, present your rates in a format that anyone will be able to understand. Whichever route your firm chooses to take, the important part is to have an open and transparent conversation with your clients during your initial consultations about these billing structures. You can then follow this up by reiterating your rates in the Letter of Engagement you send to your clients, making sure to include clear and consistent messaging throughout about your billing terms, when payment is due, and details about whether interest will be applied to overdue invoices. This step may sound simple, but this straightforward task sets you up for success in a few ways:
It proves to your client that you are transparent, and won’t haggle them on fees.
It sets expectations for the client so they know exactly what they are paying for.
It provides a clear roadmap for how much is due, and when.
Providing a thorough breakdown of what your billing policy looks like to your clients helps keep them comfortable and leaves them satisfied knowing that they will receive quality service from your firm. Remember, it’s all about setting up the foundation for trust.
Offer multiple payment options to clients
When it comes to paying for legal services, law firms can’t take a one size fits all approach. It’s no secret that legal services can be expensive, and just like purchasing a house or a car, if clients don’t have the option to pay the way they feel most comfortable, they may walk away and look somewhere else.
Find a payment structure that’s mutually beneficial
Of course, which payment options you provide will depend on the type of law you practice, but by laying out a few options for your clients other than the traditional billable hour, you will further your clients trust and confidence, and make them more comfortable when it comes to making that first timely payment. A few alternatives to standard hourly billing include:
Flat Fee Billing
Charging your clients a flat fee for your services allows you to get paid in full, either up front or at the end of the project (pro tip: request payment up front to your trust account to eliminate missed payments for services rendered). This option is best if there is a specific type of case or project that your firm handles regularly, the fewer surprises the better. This option is convenient for clients as they only have to pay once and you won’t need to chase checks on a regular basis. One downside of charging a flat fee is missing out on extra payment if the matter takes longer than anticipated, so use your best judgement when choosing to accept flat fees.
Subscription or Evergreen Trust Replenishment Model
More and more firms are moving to a subscription model for ongoing projects or clients that want to engage them on a regular basis. Under this model you establish a monthly rate and charge the client on an ongoing basis before the work is performed via an evergreen trust deposit replenishment. For instance, on the 1st of each month you charge the client a flat, consistent rate via a deposit to your trust account. At the end of the month when those trust funds are earned fees, you can compliantly move them over from your trust account to your operating account.
This model gives clients open access to their attorney without the restrictions that hourly billing may present, however most clients will still want at least a basic invoice for services rendered at the end of each month for their records. Similar to flat fee billing, use your best judgement in establishing a monthly rate with your client: some months you may work more than you anticipated while others you need to perform less work for that particular client.
Unbundled services, or limited scope, simply means that you are offering your clients a choice of services rather than a full package. If your clients can easily pay you for smaller tasks like legal research or document drafting without having to pay for unnecessary services included in a full-scope fee, they are more likely to agree to your terms expeditiously. If you decide to offer unbundled services to your clients, you can do so via a flat fee to trust (up front) or operating (after services are rendered) or charge them on a more standard hourly basis.
Many attorneys prefer to bill clients on a more traditional hourly basis. However, one of the main reasons hourly clients don’t pay their bills on time is because they can’t afford to pay the full cost of your bill in one payment. Luckily many firms have started allowing their clients to pay over time to help ease the burden of the cost of legal services. With payment plans, the firm decides the payment intervals (weekly, monthly, etc.) and the amount of each payment, and the client pays down their balance over time. It’s a great way to help reduce the burden to your clients while also ensuring that you’ll get paid in full on your bill eventually.
Level up by offering compliant online payment options
Allowing clients to pay by credit card or eCheck is no longer a nice to have, it’s standard operating procedure — especially in an increasingly digital world. Paying digitally is not only expected by today’s clients, but it makes your firm more efficient by accepting those payments faster. However, firms should use caution in selecting an online payment provider to ensure that the processor they choose is compliant with local, state and ABA rules for payment processing. We get into simplifying the digital payment process more below, but first you need to make sure your invoices are accurate.
Track time as you work
Now that your clients have read through your billing process, selected the payment option that works best for them, and entered into an agreement for your services — it’s now your responsibility to be as transparent with them as possible about the time you spend on their behalf. Not only will accurate time tracking provide peace-of-mind to your clients, it will actually yield you more money. According to the American Bar Association, attorneys that wait to capture their time at the end of each week can lose as much as 50% of their billable hours. Being diligent about your timekeeping can be challenging, but the easiest way to stay on top of it is to record your time as it happens using a practice management tool like PracticePanther.
Having a clear picture into how much time was spent where, with detailed notes about relevant tasks, will help settle any disputes your client may have around the overall price. Remember — they’ve already agreed to your set rate from your detailed pricing, so the better time tracking you have in place, the harder it will be for them to decline payment or request a discount.
Keep clients up to date
Sending your clients regular status updates about upcoming payment deadlines, missed or late payments, or any late fees that are accruing for overdue invoices is crucial to getting paid timely and collecting in full on your invoice. With practice management software, these tasks can even be automated with workflows, meaning you’re providing real value without having to manually send messages.
Regular and transparent communication with your clients keeps your firm top-of-mind, and ensures that a request for payment doesn’t slip into the junk inbox or is deleted entirely.
Make payments convenient (and make your clients happier)
Your firm was transparent and locked in billing terms from day one, your clients understand when to expect your bill, and your communication with them has been consistent and ongoing. You provided a tremendous service to your client, you captured time contemporaneously, and your invoice has been prepared with meticulous detail. You’ve got one last hurdle to overcome before your money is in the bank — actually getting paid. The easier you make this process, the more likely you are to get paid quickly and collect 100% on your billed time.
With PracticePanther, this crucial step is now as easy as providing your law firm’s universal OneLink directly on your website or embedded in your email signature line. By placing your OneLink where it can be easily found online or in your emails, you can now begin to receive payment with just the click of a link.
OneLink is your firm’s secret weapon when it comes to getting paid, a link that is unique to your firm, yet can be given to all of your clients to make a quick and compliant payment. Let’s look at how OneLink can be used with a few of those payment options described above:
Hourly Billing: Embed your OneLink in an email when you send your clients an invoice with the breakdown and explanation of your hours. Try embedding it in your personal email signature, or those of your billing or accounting staff as well.
Flat Fee: Include your OneLink early on in your conversation along with your Letter of Engagement and retainer request to allow your client to make a compliant one-time payment to your trust account. OneLink will then automatically create or update any existing contacts you have within PracticePanther — reducing data entry steps for you and streamlining the overall collection process for both parties.
Subscription or Trust Replenishment: Easily send your OneLink on an ongoing cadence to your client whenever fees are due.
In each instance, your clients will be at ease using OneLink — it’s just like checking out at any other online retailer. All they have to do is click OneLink wherever you’ve placed it and enter their payment information, the rest is taken care of. Clients don’t need to create an account and they don’t need to fill out any extra paperwork — it’s the fastest way to compliantly receive payments to date.
Making your legal payments process as convenient and comfortable as checking out at an online retailer will ensure that your clients pay on time, every time.