The One That Got Away

Volume 37 Number 6

By

Laura A. Calloway (laura.calloway@alabar.org) is Director of the Alabama State Bar’s Practice Management Assistance Program, a Past Chair of ABA TECHSHOW and a member of the ABA LPM Section Council.

Boy, was it a whopper!
 If you’ve spent any time around fishermen, you’ve undoubtedly heard tall tales about the ones that got away. And, as often as not, the great escape takes place just as the excited but hapless fisherman thinks he’s about to reel in the prize.

Just like fishermen, lawyers have tales of the ones that got away, although they’re not nearly so eager to share them. These fish tales involve solid cases that were going to feed the firm for the winter. But instead of helping the firm to stay flush and maybe even set aside a little for a rainy day, these matters managed to slip the hook after they were well under way, usually with the client heading off to another law firm and often without pausing to pay a sizeable bill on the way. So how do lawyers get caught in this trap? It’s through failure to understand and manage the billing process.

Most lawyers think that once the client has signed a fee contract, the issue of reasonableness of the fee is settled. Unfortunately, that’s not the way it works in real life. Throughout the course of representation, you must constantly be attentive to what you’re telling the client about the case and how this information may be changing the client’s perception—and his or her consequent willingness to continue to remain with your firm and to pay you.

The billing process has two purposes. The first, and most obvious, is it keeps your practice financially afloat. The second, and less obvious, is that it communicates with and conveys value to your client.  Many lawyers are unaware of this and take advantage of it only by accident. The way bills are prepared has a direct impact on how the client views you and the value of your services. Execution of good billing practices is one of the most important things you can do to exhibit professionalism to the client and ensure that the client stays with your firm, continues to pay and returns in the future.

Draft Bills Clients Want to Pay
Your bill is not only a request for payment, but it’s another chance to provide a status report to the client—one which informs the client on how the matter is progressing and how hard you have been working on it. So think of the time spent on preparing bills as a part of a continual client marketing effort. The more you can say in a bill about the effort involved and the benefit achieved on the client’s behalf, the smaller the fee will appear in relation to the work described.

Because your bills are also an opportunity to convey the value of your services, it goes without saying that they should always be perfectly accurate. You should exercise the same degree of care in review of client bills as that in drawing a contract or preparation of a brief. In an age of great distrust for lawyers (and several years ago we rated second only to used-car salesmen as untrustworthy), nothing puts a strain on the relationship more than a billing error. At best, the client will think that you are sloppy and unprofessional and at worst, the client will wonder if you are trying to cheat him. Unaddressed billing errors will forever cement that view.

Bill like Clockwork
Make sure you bill your clients on a regular basis, although that basis may, of necessity, vary from client to client or case to case. If your firm has the capability to accommodate individual cash flow needs, determine up front when during the month the client would like to receive the bill. If you are not able to tailor a billing schedule for each client, it is still essential that bills be sent regularly. This way, the client knows when to expect the bill, and you know how soon after the bill goes out you can expect to be paid.

If you are not billing regularly, you can’t expect payment regularly. If you don’t really know when to expect payment, you won’t know when payment is past due. If bills are sent regularly and a client is unhappy with the bill or the quality of work, he or she will have an opportunity to stop you before you’ve done work that he or she is unwilling to pay for. Likewise, if you don’t receive payment when expected, this will be an early clue that there may be a problem.

The amount of a bill should never come as a surprise to the client. If you bill regularly, your client will not be surprised in this way; however, if you find that a bill is substantially more than you have led the client to expect, call the client immediately to explain the problems. Detail all of the things you did to keep the bill as low as possible under the circumstances. Only after you’ve taken time to do this should the bill be sent.

Manage Accounts Receivable With a Careful Eye
Effective client screening and good billing practices will go a long way to prevent collection problems and client defections. Even with implementation of these procedures, and full documentation of fee arrangements, however, you can’t expect collections to operate on autopilot. Review of accounts receivable information on a regular basis is critical. Whether once a week or once a month, regular review of your A/R will alert you to unhappy clients before problems become insurmountable.

When the aging information provided by your accounting system lets you know that a client is failing to live up to the terms of your fee agreement, you must act quickly to let the client know this is not acceptable. Early intervention is just another step in making sure that client concerns are met—keeping costs in line with value to the client—and protecting both yourself and the client in the event that withdrawal becomes necessary.

Sharpen Your Hooks and Tie Your Flies
It’s difficult to keep every client happy and to hold on to every good case that you initially hook. Sometimes the client just won’t be a good fit for your practice, personality or legal strategy. Nevertheless, if you remember to continue to “market” your services to existing clients by effectively communicating about the value of your services, and if you utilize a billing and collection process, which does so, you won’t have to moan and cry about the one that got away.

Advertisement

  • LAW PRACTICE MAGAZINE

  • LP on the Web

  • 2013-2014 Editorial Board