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May 01, 2022

Finance: Time Is in the Mixing Bowl—Now Add Billing!

Frederick J. Esposito Jr.
Clients judge law firms by the quality of their legal work and the billing for such services.

Clients judge law firms by the quality of their legal work and the billing for such services.

iStock / fcafotodigital

The last two columns have discussed the importance of contemporaneous time entry and identified categories of timekeeping behaviors. We discussed solutions to assist law firms with improving these behaviors in capturing all the essential ingredients for the next critical step: billing.

Law firms provide exceptional services to their clients, and while the gratification of a successful case outcome and/or of a top-notch work product is a great feeling, all the time spent must be captured and billed quickly. Attorney time is the inventory that translates into fees, and it is critical that law firms make billing a priority to ensure strong collections and profitability.

"Sometimes the questions are complicated and the answers are simple.”  —Dr. Seuss

Like contemporaneous time entry, billing can also be perceived as an administrative headache to attorneys. It requires taking time from billable work to thoroughly review a prebill and prepare to send the final bill to the client. There are times billing attorneys will need to be prompted to get their bills out, but the key is to help them see the big picture and the critical importance of billing to the firm. Simply stated, “If we don’t bill, we don’t get paid!”

It is no secret that billing has a significant role on the financial front, but if done correctly, billing is both an art and a science.

It can be a very mechanical process depending on the type of services provided, but it can also be a very good client development and relationship building opportunity for law firms. Many of the “ingredients” to be discussed are not as complicated as one might think and bring a great deal of value and quality to your billing process.

Accordingly, consider the following suggested billing ingredients when working to achieve timely billing success.

The process begins with the review of the prebill (draft, etc.). It is a given that all time entries are to be captured and accurate. It is also helpful to make sure the billing and accounts receivable history, as well as write-off and billing realization information, are on the prebill. This will assist the billing attorney with their review and, where applicable, open the door for some client relationship building—stay tuned.

Create a process for billing attorneys, or maybe a legal assistant or billing department designee, to review time on prebills before the month’s end. This will assist and save considerable editing time when trying to get all the firm’s billing out the door. One of the biggest obstacles to timely billing is having multiple timekeepers on a matter recording their time in several different styles—for example, abbreviations that read like code, with mixed tenses and typos. Firms should develop a process to perform such reviews throughout the month. Also, when new attorneys join the firm, ask them to print out their time entries before posting and ask the supervising partner to review for narrative style. While the partner may have an issue with this initial review step in the beginning, it will save them hours in reviewing prebills each month, especially on larger matters. It is time well-spent and will facilitate a much faster review in getting the bills out and paid quickly.

Point one suggested the review of accounts receivable, billing history and write-off/realization information. This can be very helpful when determining how a matter is progressing and whether an accommodation to the client might be necessary due to issues arising in the case or as just a good “relationship” gesture. Most write-offs happen behind the scenes because of poor time management or a variety of other circumstances, and the client is not always aware of those write-offs. Sometimes an occasional “no charge” entry can go a long way with a client. 

The client sees the accommodation on the bill, but the art is in how it is presented. Timekeeping entries should be kept on the bill with a “(no charge)” placed at the end of the entry. The most common mistake made is that billing attorneys will remove the amount of time worked to zero out the time entry. Instead, leave the recorded time in place and zero out the dollar amount. The key is to format the bill to show at the bottom a summary of each timekeeper’s time and dollars billed. This will also illustrate the amount of time worked by a timekeeper with zero dollars. This is where the client sees the value of the gesture. They see the time worked but see it was never billed. While not to advocate a no-charge frenzy, a few of these entries can go a long way. 

These gestures are most effective when attorneys are billing for internal discussions among multiple attorneys billing for the same task or reading an email or performing a task that could be considered clerical or paralegal in nature. The key is to identify and be proactive because sometimes clients will take notice and could take issue.

Another variation of the no charge is the “professional courtesy discount” provided at the end of the bill. This is where review of the billing history and realization can be very helpful. If the matter has been ongoing and billing at a realization of 95 percent or better, why not offer a small discretionary professional courtesy discount to the client? This would not be recommended on a regular basis, but on a larger matter where a client has invested a substantial amount in fees and the matter is profitable to the firm, it makes some sense to consider periodically. Not only will it be appreciated by the client, but it could manifest into new matters coming to the firm. A small discount invested in the client could turn into a new six-figure matter for the firm. Again, it is a discretionary ingredient, but worthy of consideration as a law firm contemplates business development opportunities.

Promote collaboration among all the attorneys on a significant matter to look at the prebill after the billing attorney has reviewed it and before going final. This becomes less of a tedious task now that many time and billing programs are offering electronic prebill review to reduce time and paper and make the process more efficient. This trend has been out there for some time, but considering the pandemic, it is picking up more traction. Law firms need to get ahead of that curve and become more innovative and proactive with process improvement, especially with billing. Moving billing out the door much faster can have a very significant and positive impact on cash flow, so law firms are encouraged to explore those opportunities. 

Back to the metrics side, remember to monitor the history information on the prebills. While client building and relationship management are key, and write-offs have a proper place in that endeavor, profitability is key, too. Accordingly, make sure that billing practices adopted by the firm support profitability. Billing and supervising attorneys should be mindful of the metrics and monitor regularly.

Clients judge law firms by the quality of their legal work and the billing for such services. Billing must not only be accurate and prompt, but the presentation must also be formatted to make the best impression and cultivate client trust. If billings go out with some of the style issues noted above, clients could perceive their legal work is being handled in a similar manner, and in most instances, this will manifest in a resistance to paying the law firm’s fees billed. While clearly understanding that this is not the case, law firms still need to be mindful of the client perception and make sure billing receives the priority it requires.

Frederick J. Esposito Jr.

COO, Rivkin Radler LLP

Frederick J. Esposito Jr. is the chief operating officer of the regional law firm Rivkin Radler LLP and has more than 25 years of law and accounting firm experience. He is an author and sought-after speaker specializing in financial and organizational management, process improvement and project management, and has managed and worked in a consulting capacity with several domestic and international law firms. He is also a senior consultant with the Legal Lean Sigma Institute, LLC, and a Certified Green Belt in Legal Lean Sigma as a project leader working toward his Black Belt Certification. [email protected]

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