The ABCs of best billing practices
When it comes to best billing practices, know your ABCs, says Bruce Policky, the host of a free webinar sponsored by the ABA Legal Technology Resource Center and Tabs3, a billing software producer. “The first of those is accountability, second is billing and third is collections,” he says.
The accountability part of billing includes three things: tracking time, reviewing prebills and ensuring attorney productivity, Policky says.
Tracking time. Whether you track your time hourly, use flat-fee billing or do contingent billing, it’s vital to your firm’s financial health that you track your time daily, he says. “Even for nonbillable work, most successful firms can account for every hour so they know how they’re spending each day,” Policky says. “But regardless of your billing method, tracking your time will help you know which matters and clients and areas of practice are the most lucrative.”
Regardless of your billing method, tracking your time will help you know which matters and clients and areas of practice are the most lucrative.
The key to becoming a better billing time keeper is to make time tracking less time consuming, Policky says. Some of the tools for doing so include timers, which are “a great tool to help you track your time as you go and allow you to easily turn billable hours into fees,” he says. Toolbar plug-ins can also be helpful. “A plug-in basically helps facilitate the exchange of information easily between applications” such as Outlook, Word or Excel, Policky says.
Use technology that makes sense for your firm, Policky says. “Take the time to analyze how you work, then figure out a better way to accomplish whatever it is you’re doing in a less time-consuming way by leveraging that technology,” he says. Consider time- and activity-tracking software like Proximity and others to “create what I call an all-activity log. Basically what’s happening is that your computer can tell you how much time you spend working on … email or a Word document or a website. The activity log gives you a list of what you have done so you know exactly how you’ve spent your time.”
Get time and billing software that makes tasks easy for everyone, Policky says. This is crucial because “using time and billing software is really the most reliable way to make sure that attorneys and paralegals bill on time, and it also helps reduce unreported billable time,” he says. “It allows firms to minimize manual and clerical effort in the billing process and helps partners understand how the law firm is actually performing.
“Billing software usually tracks both your hours worked and hours to bill as well as nonbillable time, ensuring all your hours are booked,” he adds. “It also allows you to capture your expenses and provides useful reports to stay on top of your billing and then analyze what’s happening daily, weekly and monthly when you’re looking at your billable and nonbillable time.”
Prebilling. When you’re doing time entry, enter the hours as if you had to pay the bill, Policky says. “Now when you’re reviewing your prebills, sit back and ask yourself, ‘Would I pay this bill?’
“In addition to verifying the accuracy in billing, prebill review is vital to ensuring that you are communicating the value that you provide to your client,” he adds. “Draft your bills so they communicate your efforts and are presented in a way that makes your clients grateful for your services that you’re providing. Clients are more likely to pay if the bill is clear and precise and they know exactly what they’re paying for.”
Timing is important when reviewing your prebills, Policky says. “The faster attorneys can turn them back to accounting, the faster invoices will go out to the client, which will help shorten the receivables cycle,” he says.
Establish policies regarding the submission of time sheets and the timely review of prebills, he adds. When you’re implementing the policy, find out the suitable requirements for your billing cycle, whether that’s monthly, bimonthly or some other frequency. “You have to make sure that whatever policy you’re implementing, the odds are high for everybody to comply,” Policky says. “Once that policy is in place, make sure you keep up on it and that things don’t extend beyond your weekly, biweekly or monthly due date, because if you don’t enforce that, it just invites sloppy time-keeping behaviors.”
Finally, plan for and make time for billing. “The billing process really happens in one day,” Policky says. “It’s common to have stacks of client statements in your inbox waiting to be approved. But if you take the time to keep on top of your billing, you’ll soon find out that you will get paid fast.”
Attorney productivity and collections. Keep an eye on your firm’s productivity by reviewing your billing system’s reporting, which can be done by client, Policky says. “Hundreds of hours can be spent on a case, but your bottom line will not improve if that time is never billed or if the firm is absorbing costs that are associated with that case,” he says. “You really need to know the difference between hours worked and hours billed and to make sure that you are not unnecessarily writing off fees and costs.”
Watch cash flow carefully, Policky says. “In order to maintain a streamlined cash flow, you need to do two things: You need to bill promptly and you need to bill regularly.
“Imagine receiving a bill yourself from a vendor for services that were performed six months ago,” he continues. “Chances are you feel that if receiving payment was terribly important, they would have billed you long before now, and probably paying this vendor is not your top priority, and your clients feel the same way. Be prompt in your billing and your clients will in turn return the favor.”
Send invoices to clients at the same time each month so they know when to expect them, Policky says. One way you can expedite the process is by emailing statements. “Emailed statements get to a client faster, and it makes it easier for them to quickly reply if they have any questions about the bill itself,” he says. “Everything’s fresh in their mind at that point.”
Unfortunately, sending an invoice doesn’t always result in getting paid. If a client’s account becomes overdue, how long do you wait before sending it to collections? “The longer they go without paying, the less they remember the details and extent of your services, the less likely they are to pay,” Policky says.
The results of a recent survey from the Commercial Law League of America show that at three months, 27 percent of accounts receivable will not be collected; at six months, 43 percent of accounts receivable will never be recovered; and at 12 months, 75 percent of your delinquent accounts will have to be written off.
“If you don’t have one, you need to develop a consistent accounts receivable policy,” Policky says. “Review what your firm is doing right now and document it and take that and write your policy out.”
If you already have a policy, let the client know by including it in the terms of payment in your engagement letters, he says. “And then on your part you really do need to run accounts receivable reports monthly and act immediately on collecting those past-due balances,” Policky says.
Listen to the full webinar by clicking here.
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