As senior counsel for a large financial institution, I was tasked with reviewing outside counsel’s bills and approving them for payment. On occasion a legal bill would come across my desk that seemed out of line and I had to broach with the firm the sensitive topic of its fees. These discussions were often pivotal points in the relationship—pivotal in the sense that how the firm dealt with my concerns determined whether I would retain or recommend the firm or the lawyer in the future. Yet it was often surprising what seemingly little consideration and tact went into resolving my issues.
How you prepare and present your bills and how you proactively manage and respond to billing disputes will not only help you get your bills paid, but can also enhance your client relationships. Here are a few tips on doing both from an in-house counsel’s perspective.
Don’t Send Bills That Are a Challenge to Approve
You want to make it as easy as possible for the client to review and approve your bills. That does not mean sending an invoice with the one-line description “For legal services rendered in connection with x” followed by a five-digit number. It can be a challenge for an in-house counsel or any other person who retained you to approve a bill like that. And don’t assume that the person who retained you is the only person involved in reviewing your bills. Often legal bills are scrutinized by accounting departments or senior management that have little knowledge or appreciation of the work you’ve performed, leaving the person who retained you in the position of having to justify the amount incurred.
Find out who at the client organization will review and approve your bills and what type of information they would like to see. For instance, many clients want to know who worked on which parts of the file, a breakdown of the time spent, the respective hourly rates of the various lawyers involved and so forth. Overall, clients want a sense that the firm allocated time and resources cost-effectively and in line with the matter at hand. You can increase your clients’ confidence in this regard by increasing the transparency of your billing practices.
Prepare Bills That Reinforce the Lawyers’ Value
Avoid using abbreviations and acronyms that clients have to struggle to decipher. Spell out exactly what services were provided and who provided them. I commonly came across bills that listed lawyers’ initials next to time entries without any other clues as to the identity of the person who provided the service. For an industry that prides itself on individual expertise and relationships, it’s baffling that some law firms don’t use every opportunity to promote to their clients who is working on their files.
Many in-house counsel and other clients are keenly interested in the depth a firm has in its lawyer ranks—and not just in its senior ranks. They like to know that you are putting junior lawyers to good use and building up associates’ familiarity with the client’s organization, too. When senior lawyers are not encouraging younger associates to build relationships with their clients, it can lead to an impression that the firm has a territorial culture or lack of interest in developing its juniors, neither of which serves the client’s best interests.
Scrutinize Each Bill Before It Goes Out
I once questioned a bill with a time entry for a lawyer that to my knowledge did not work on the file. When I asked the lawyer responsible for our file to explain it, the response I received was, “My assistant prepared the bill. She must have made an error.” As you might guess, this left me feeling that I had to be all the more vigilant in reviewing this firm’s bills for accuracy and fairness.
On the other hand, when a statement includes time written off or a discount on a bill, this demonstrates that the lawyer not only reviewed the bill but also considered how all the entries in it might be received by the client. Such goodwill gestures go a long way in reducing billing disputes and deepening the client relationship.
Manage Clients’ Expectations
Most billing disputes arise because there was a difference in expectations about the work and costs that could be involved. Managing your clients’ expectations along the way can avoid many problems down the road. Clients appreciate being provided with accurate and meaningful quotes—and being informed as soon as it appears that a quote will be exceeded because of extenuating circumstances. Providing a grossly inaccurate quote, on the other hand, can diminish the client’s level of confidence and trust in you.
Don’t startle your clients with the amount of your final fees. Before submitting a bill that could surprise a client, think about calling the client first and say you are sending a draft of the bill for advance review. This gives you an opportunity to explain to clients the rationale for the work undertaken and discuss their concerns up front.
Be Timely in Sending Your Bills
On more than one occasion, I received bills that included time that was recorded more than 12 months previously—and in one case, the bill arrived more than a year after the matter had been resolved. Time can have a diminishing effect on clients’ perception of the significance of the matter and, therefore, their perceived value of the legal services provided. Plus, if a manager that was intimately involved in the details of the file moves on, getting a bill approved and paid can pose an even greater challenge (and annoyance) for his or her replacement.
More importantly, delays in billing can affect clients’ financial reporting and forecasting. Being sensitive to each client’s fiscal reporting and preferences increases the likelihood of your bills being paid in a timely manner.
Care About What Your Clients Care About
Are your billing practices serving and forwarding your clients’ business interests as well as their legal interests? For example, in many business transactions, such as financing and leasing, someone other than your client may be paying your bill. But that doesn’t mean your client isn’t affected by your bill. When the ultimate payer has little recourse to your firm, that party’s only avenue is to direct complaints to your client. It can be difficult for your clients to defend your bill, particularly when it is out of sync with what their customers are paying their own counsel on the same matter. When I once raised a concern about a “flow-through” bill, I was taken aback by the response, “Why do you care? Your customer pays the fees.” This type of attitude does not help with the perception that for flow-through bills, lawyers are more likely to overwork a file.
Excessive fees can taint the relationships your clients have with their customers and business associates. Appreciate that your clients, like you, operate in a highly competitive environment and your firm’s cost-effectiveness can make a difference in their business.
Probe for More Information
Some lawyers view clients’ questions about their bills as a personal attack on their expertise and professionalism. If you can set aside your ego, you might just find the key to keeping your clients for the long haul. I recall on one occasion when I asked for a meeting to discuss a bill that seemed unreasonably high, the lawyer simply responded, “I wouldn’t have signed the bill if I didn’t think it was appropriate.” In other words, “It doesn’t matter what you think.” It’s tough to imagine any client appreciating an attitude like that.
In any relationship, differences arise and you need to try to work out the issues. It is the willingness to engage in dialogue to understand each others’ perspectives that will serve to strengthen and sustain the relationship over time. By probing more deeply into clients’ concerns, you can gain useful insight into how they value your services, how you can better serve them and what would establish your firm as their legal service provider of choice in the future.
Thank Your Clients for Caring
Consider it good news that a client is willing to bring up a fee or service issue with you. It shows their commitment to the relationship. As uncomfortable as these conversations are for you, for some clients it can be just as unnerving to raise the subject. Clients that avoid having such frank conversations often move their business elsewhere without explanation and without you being given an opportunity to present your case for why they should retain you in the future.
The fact is that fee disputes are going to happen from time to time. So lawyers are well advised to prepare for them and come up with a few strategies to turn them into opportunities to strengthen the client relationship.