Let’s face it. Law school simply does not prepare attorneys to take on the challenges of business ownership. You can be truly a talented attorney with great analytic skills when it comes to the rules of evidence, but that doesn’t mean you know where to start when it comes to tracking down your outstanding client invoices or understand how to get more traffic to your website. Business processes aren’t the focus of a legal education and this is to the detriment of practice owners everywhere. Not taking the time to really understand these areas can lead to you missing out on potential clients, not being paid, and in extreme cases even being disbarred for violating a state bar trust accounting rule. Be intentional at the beginning of this new year and build new habits in billing, marketing, and compliance.
This brief article will share some tips to help you get a better handle on your business practices.
Tips for Law Firm Billing and Payments
You and your team are busy and no one enjoys chasing after clients for payment of outstanding invoices. Make time to develop a collections strategy. You can make your bill collecting process easier by making a few basic adjustments to your client intake procedures, payment processes, and client communication.
- Vet your clients. We know that there is no one-size-fits-all approach to finding the best clients but interviewing potential clients carefully and thoroughly can help you avoid major pitfalls later on. During your consultation process:
- Determine whether the client’s needs and expectations can be realistically met by your team.
- Give the client a road map of what steps come next. Framing out the correct expectations of both parties from day one will be integral to a productive attorney-client relationship. Engaging an attorney can be an intimidating process. When your client has a clear understanding of what happens next, they are going to be more comfortable with you, your team, and what needs to happen to help move their case along.
- Make sure your client understands the cost of their case and the timeline at which they will be expected to pay in relation to their case. Finding out someone’s ability to pay must be done at beginning of the relationship. Clearly layout all fees. This should be explicitly addressed in your fee agreement. Be sure to explain to the client that a retainer is not the total cost of their case.
- Use your gut. If a warning bell is going off, there’s probably a reason for that. You’ve seen good and bad clients over the years and it’s possible you’re picking up on some similar traits between a prospective client and a past client you wouldn’t take on again.
When the consultation ends and the client decides to retain you, both attorney and client should be on the same page and confident in the integrity of the other party.
- Communicate, Communicate, Communicate. Don’t let your clients be the ones to complain, “my lawyer won’t return my call.” A good way to protect yourself and your firm from potential liability is to have consistent and transparent communication. Set a goal to touch base with each client once a week. Never let your clients feel forgotten. A simple, “Hi, I wanted to check in with you and let you know that we’re still waiting for XZY” will go a long ways to helping you keep a confident and calm relationship with your client who is likely going through one of the most stressful periods of their life. Keep in mind, clients will get nervous if they do not hear from their attorney for a prolonged period of time. In addition to that, poor client communication can get you in trouble with your state bar and may also impact a client’s willingness to pay their bill.
- Bill Regularly and Timely – Don’t wait until months after service is rendered to bill a client. People have relatively short attention spans. After too much time has passed, the client’s willingness to pay will decrease. Billing as work concludes or as work is progressing is recommended. If you are billing on a payment schedule, be consistent the the frequency and timing of when you bill clients. Regularity helps clients to know what to expect and allows them to plan their finances accordingly. Using an online payment platform can help with this and make the process easier for your office as well. Allowing clients to pay online via a provider, like LawPay, means that your clients can pay you anytime from anywhere. The fewer barriers between clients and payment, the less likely it is that you will go unpaid.
- Don’t Let Unpaid Invoices Sit– Your billing process should include scheduled follow up for any late or unpaid invoices. Remember, the longer a bill sits unpaid, the less likely it becomes that it will ever get paid. About a week after invoices are sent out, schedule time on your calendar for a follow-up contact to confirm that they received their bill and check if they have any questions. Keep a running list of the clients who have not paid their invoice and how much each one owes. Each follow up should include a reminder of convenient ways to pay you by credit card, debit card, or eCheck to increase your chances of being paid.
- Keep It Simple– Be clear and concise in your communications with your clients, especially with your invoices. Your clients need to understand what they’re paying for. This doesn’t mean that you need to give them a minute-by-minute accounting, but you should create separate line items for the larger tasks. Consider including a brief summary of each but do not use legal jargon to do so. The ultimate goal of your invoice is to give the client insight into what you are doing for them and prompt payment. As lawyers, using technical terms and legal jargon is second nature, but for your client, it can be confusing and distract them from the original point of your communication. Billing.
- Know When to Hold’em, Know When to Fold’em– This one is hard. People seek out attorneys because they need help with a problem. It can be very difficult to fire clients because of this. That being said, if a client is more than a month behind on paying anything towards their invoice, you should consider firing them as a client. Small and repeated non-payment can easily snowball to a large deficit for your firm if you are not careful. Client termination for non-payment should be outlined in your fee agreements and should be discussed during your consultation process.
Tips for Trust Compliance
- Trust Accounting– As we mentioned at the beginning of this article, law school does not adequately prepare you for the day-to-day business of running a firm. One of the key things you must pay close attention to is the handling of your trust account (aka IOLTA). With these accounts, you’re accepting advance payments from your clients or receiving money on their behalf. How you handle your client’s funds cannot be compromised. State bars are not shy about enforcing their rules concerning trust account violations nor should they be. Trust account violations are the #1 cause of lawyer disbarment in the U.S. It is your responsibility to understand your trust accounts and treat them appropriately. To get started, check out the e-book Peggy wrote for MyCase, Trust Accounting Basics. It provides you with a complete step-by-step outline of what you need to do to open and operate your own trust account, from choosing a bank to developing proper trust account management procedures.
Making updates to your law firm’s operations is always a process. Take a step back and recognize the sheer number of moving parts. If you try to tackle too many initiatives at once, you will not achieve the results you were hoping for. Prioritize. Rather than making broad sweeping changes, focus on opportunities for optimizations in your billing and payments processes, security and compliance safeguards, and marketing before re-inventing the wheel. Don’t forget to take advantage of technology designed specifically to make running a law practice easier — like LawPay, Clio, and others.