One of the most common sources of client disputes for lawyers is around invoicing for time. “You’re charging me how much?!” “But, what were you actually doing during that time??” “I don’t remember all these charges!”
Every lawyer would prefer to avoid client disputes. But unlike other types of client disputes (“But, I deserve a bigger settlement!”), invoicing and billing arguments can often be avoided by applying a few best practices, made easier with the right tools.
Justifying fees is a top challenge
Keeping track of hours worked is already a challenge for many lawyers, not to mention a potential source of lost revenue. On top of that, lawyers are required to be transparent about their hourly rate, whereas in other professions that cost is couched within an overall project fee or subscription rate, therefore less accessible for client nitpicking.
A Thomson Reuters survey found that 62% of small law firms are experiencing rate pressure from clients who are expecting them to do more with less. On top of that, lawyers have challenging perceptions to fight when it comes to billable hours. Google “legal bill padding” and you’ll find a lot of not-so-nice commentary on this practice and how clients should avoid it.
Some lawyers reduce their rates before even sending the bill in anticipation of a potential dispute. A LexusNexus survey found that 71.2% of law firms report discounting or writing off legal work before sending an invoice to clients. Not only does this leave money on the table, which no small firm or solo practitioner can afford, but it encourages rate suppression across the entire industry.
Whether clients are genuinely struggling with tight budgets or are simply prepped to be combative due to a general culture of mistrust toward the legal profession, lawyers need to be diligent about tracking their time accurately and fairly, but also invoicing in a timely manner.
Timing is everything
Assuming you’ve been tracking your time well, the number one best piece of advice for avoiding client billing disputes is to send invoices as close as possible to completion of work. This strategy provides two benefits:
- More accurate billing
- Avoiding client amnesia
Many lawyers often wait until after work is completed to gather and record their time and put together an invoice. But doing this after the fact, digging up all the little lists and notes where you recorded time, is such a pain that most people put it off, sometimes for a month or more after a matter is closed. Trying to recall time worked from memory is even more risky—you will always underestimate.
The main problem with sending a late invoice is that the client has moved on. The memory of the excellent work and miracles solved for them has faded, so they’re more likely to react negatively to a big fat legal bill, especially if you haven’t been billing throughout a multi-month case and they’re receiving the lump sum all at once.
If they receive a bill closer to completion of work, preferably within days, clients will likely be more receptive and responsive. Legal matters can be stressful, you may have addressed an emergency for them and hopefully achieved a positive outcome. Receiving a bill when clients are still in the afterglow of relief will almost always go over much better. “Well, this was expensive, but at least the problem is solved.”
Best practice: link time tracking and invoicing
Lots of productivity tools for small law firms and solo lawyers are available, some more robust than others. To help ease the pain of invoicing, a tool that combines the simple functions of time tracking with invoicing will help you get accurate invoices off to clients faster and more effectively.
Headnote’s new time tracking feature, now embedded within the Headnote legal billing software dashboard, allows you to capture hours for specific clients, then export that time to an invoice for that client.
The Headnote time tracking feature can be accessed via mobile or browser. You simply pull up the dashboard, select which client, hit ‘start’ to commence work, then ‘stop’ when you’re finished. Once you’ve recorded your time, you can send it directly to an invoice pre-populated with the client’s details, including the agreed rate for that client. No number crunching, no hunting for post-it notes. Just hit ‘export’, then ‘send’.
You can run as many timers as you want—for example, if you’re working on one client and get a call from another, you can quickly switch over to the other client without losing time; or if you need to split time among multiple matters for one client.
Keep clients on your side and get paid faster
Legal matters can be stressful and emotional for clients. So can paying their legal bills after the fact. Don’t make them relive the discomfort all over again months later. It’s hard to put off invoicing when it’s only a few clicks away. Look at tools like Headnote to ease a common and easily solvable challenging in managing a small law firm or solo practice.