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Un-Billable Hour: Law Firms, Invoicing and Collections

Un-Billable Hour

Earlier this month the Legal Talk Network unveiled a newly revived podcast called the Un-Billable Hour. Podcasts are a great way to make effective use of time to soak up additional information, for example during a daily commute, or while exercising.

The Legal Talk Network makes this especially easy by offering the ability to listen to a variety of legal industry podcasts on its website, on SoundCloud, or as the screenshot nearby demonstrates, by subscribing on iTunes (search for “Legal Talk Network Un-Billable Hour).

The podcast’s debut features Christopher T. Anderson, Loretta Ruppert and Jeffrey S. Krause and all three come at the business of law from slightly different, albeit useful, perspectives. This show focuses specifically on how a law firm can dig itself out of a collections hole.

Alternatively, given the work experience of the Chris, Jeff and Loretta have, I might venture to suggest an alternative title:  What two techie-attorneys and a CFO can teach law firms about effective billing practices.

We’ve summarized (paraphrased) a few questions explored on this program – but you’ll have to listen to get the rest of the goodness. The program runs just about 25 minutes, or about just enough time to squeeze in a three mile run!

How has obtaining new business changed in law firms?

Clients are increasingly more sophisticated when it comes to technology, and in part perhaps because of technology, clients *think* they are most sophisticated in terms of law. The web has made finding information easy – from firm ratings to legal topics – this has created a generation of clients more inclined to question a legal bill.  We can see the applicability in the medical field:  patients can now log into secure client portals to see appointments and test results for example.  In law, we can observe that clients are starting to expect this sort of service – to see bills, the status of work performed and an electronic means to pay a bill.

If clients are more sophisticated, is anyone paying with a check anymore?

It’s less and less likely because there is a higher expectation to be able to pay bills through a means like a mobile app.  Starbucks and taxi drivers for example, are using mobile devices and tablet computers to take payments…why aren’t attorneys?

Often firms balk at accepting credit card payments over concerns for a two- or three-percent transaction fee.  However, it’s useful to think of that relatively small fee in the context of having upwards of 20% on an accounts receivable ledger with a payment that’s 30, 60 or even 90 days past due. Part of the solution to this is for firms to make it easy for clients to do business with them.  This also means we need to offer secure online payment portals to make it easy for clients to pay their legal fees.

With 20 percent of bills past due, what’s contributing to this ongoing collection challenge at law firms?

When firms get into bind on collections, it’s often the result of a gap in law firm process, policies or procedures.  By policy, we mean for example, it is a firm’s policy to bill a case at the end of the month, or at the end of the case, whichever comes first.  Procedures means documenting a process for how something gets done:

  • Who opens the mail
  • Who records the receipt
  • Who enters the receipt
  • Who makes the deposit
  • Who reconciles the books

It’s important to hold staff accountable to the procedures in place for consistencies sake and because it leaves less room or error. Part of that means, the attorneys need to follow the policies and procedures too.  Often at small law firms, say one with five attorneys, in essence run like five different law firms because everyone follows their own process for doing things. This makes it very difficult to keep billing straight, especially where there’s centralized billing.

Having well-documented processes enables a firm to set the tone and expectations with a client at the outset. This is especially important when it comes to fee agreements – and defining the scope of work and expectation of payment.

Sometime when it comes to clients who fall behind, it’s easy to give a client a discount in the hopes they’ll get back on track. However consider the impact of such a gesture – it rewards our toughest clients, when we’d be better off rewarding our best clients – and it encourages the tough clients to ask for a discount on the next bill too.

More than likely, if the bill does wind up in collections, the law firm will end up ceding even more in paying for the collections fee. There’s an old saying that the best way to handle a client that is behind on legal fees is to double the retainer.

* * *

The entire program is well-worth a listen – especially for solo- or small-law firms. We are also actively considering topics for future programs so if there’s a topic you’d like to hear in a future podcast, do let us know in the comments.

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About Frank Strong

Frank Strong
Frank Strong is the communications director with the LexisNexis software division located on NC State’s Centennial Campus in Raleigh. In this capacity he leads communications efforts in support of software products for law practice and law department management and also litigation tools – across large law, small law and corporate counsel segments. With more than 15 years of experience in the high-tech sector, Strong previously served as director of public relations for Vocus, which developed marketing, PR and media monitoring software. He has held multiple roles both in-house with corporations, ranging from startups to global organizations, and has also endured the rigors of billable hours, having completed gigs at PR firms including the top 10 global firm Hill & Knowlton. A veteran of two year-long deployments, Strong has concurrently served in uniform in reserve components of the military for more than 20 years, initially as an enlisted Marine and currently as an infantry officer in the Army National Guard. Strong holds a BA in Film and TV production from Worcester State University, an M.A. in Public Communication from American University, and an M.B.A. from Marymount University.