You didn’t go to law school and become a lawyer to pursue the thrilling pleasure of legal billing, right? No. It is, however, a reality of managing a small law firm—one that is taking a lot of time away from billable hours and can introduce risk if done inaccurately. But following some road tested guidelines will help you keep your clients and your revenue stream happy.
Legal billing is time consuming and complicated
A Thomson Reuters survey (2016 State of US Small Law Firms Study) found that 69% of respondents noted administrative tasks as a key challenge in managing their small law firms. Invoice management definitely counts as admin duty. And while invoicing takes time away from billable hours, it’s also crucial in sustaining cash flow, which is a particular challenge for small law firms. A Lexus Nexus survey found that nearly half of small law firms reported that up to 39% of their client base was past due.
Having to make a collections call not only takes time away from practicing law, it can be potentially straining to a client relationship. Lawyers must also navigate compliance rules that can make invoicing much more complicated. Despite the challenges of invoice management, it is also a key component in enabling a functional law firm.
Billing is a reflection on your business
Lawyers are, after all, providing a high-end professional service, one that includes high billable hours. Accurate, timely, professional billing makes you look more legitimate as a professional service provider, thereby justifying the high value of your time. You can get paid faster and more consistently, and it just makes your firm look better. It’s worth your time to evaluate your invoicing processes and take a disciplined approach to implementing legal billing best practices for small law firms.
Best practices for better billing
Legal billing is much more than just sending out a list of services rendered each month. Many ancillary activities lead up to sending that bill, like calculating hours and expenses and following up to ensure payment. You can streamline your overall billing process by integrating those ancillary activities into your day-to-day practice management, rather than treating them as a separate task that follows work completed. Codify legal billing best practices into company policies, even if it’s just a policy for yourself as a solo practitioner. Here are some guidelines to get you started:
- Record time as it happens
Don’t try to estimate your hours on a weekly or even daily basis. You’re likely to underestimate yourself. Use a time tracking device that you can start when you initiate a task, and stop when you’re done. Phone down, timer off. Or do essentially the same thing by hand with a notebook always nearby.
- Generate timely invoices
The longer it takes you to bill, the longer it takes you to get paid. And clients are likely more prepared to absorb a bill right after services are rendered. 6 months later, who knows? Sending timely invoices also indicates that timely payment is expected. Schedule a regularly occurring time block in your weekly or monthly schedule to review and send invoices. Join attorneys that get paid over Headnote! (84% of invoices that are paid through Headnote are paid within the first week!)
- Include detailed task descriptions
No block billing. As you’re recording hours in real time, include notes to clearly describe how you spent that time. Including detail on your invoice provides transparency. You have nothing to hide, and the client has a clear picture of what they’re paying for. Plus, it provides a means for you to defend your time if the client pushes back.
- Incorporate electronic payment capabilities
If you want to get paid faster, make it easier for your clients to pay you. Everything is digital these days, so keep up with the times and incorporate electronic payment options. Sure, a fee is usually involved, but that may be worth it to speed up collections, streamline your accounting, and save you some headaches.
- Consistently follow up on accounts receivable
You must find a means to proactively follow up on late invoices. It’s easier to keep things friendly if the reminders are timely and follow the protocols detailed in your invoice (such as payment in net 30). It also communicates that, yes, this is an actual bill that must be paid.
Some solo lawyers might have capacity to perform their billing and invoicing using hand-written notes, spreadsheets, and paper invoices sent in the mail. But many of the above best practices can be aided with transaction management software, like Headnote’s cloud-based legal payments solution, which enables online invoicing and payments, automated collections, and a consolidated dashboard that provides a snapshot of your revenue flow.
The Lexus Nexus survey found that most “very successful” law firms looked to technology, including financial management and accounting software, to better leverage their time spent on admin. Join the “very successful” group by jumping on board with digital transaction management for your small law firm so that you can more easily incorporate the above best practices.