May/June 2020

Practice Management Advice

Billing Policy: The Humdrum Profitability Conundrum

John D. Bowers

From a purely objective view, financial whizzes must be able to gauge the next couple of months of performance with a few simple reports: work in process, fees billed and accounts receivable. At their simplest state, these metrics reveal what has been entered for billing, what clients have been asked to pay and outstanding balances due to the practice, respectively. Law practice leaders can then spend a few minutes analyzing these results and draw basic conclusions about both productivity and financial projections. It is all very simple, since numbers don’t lie … right?

The truth is that you must maintain a consistent billing policy since financial figures can become anything but objective in practice. Frequently when life happens, the balance rightfully shifts from work. Occasionally, nonbillable effort that genuinely benefits the firm crowds out time spent on client work. And often, massive projects roll in and timekeepers steeped in the appearance of busyness can’t be bothered to bill for the “genius” work they’re churning out.

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