How lawyers bill their time undergoes a lot of scrutiny from clients. So, it’s probably no surprise that billing (improper or the lack of it) can create fertile ground for a bar complaint getting filed. In this post, we’re going to give you some essential law firm billing best practices. Our hope is that these tips, along with the ethical rules in your jurisdiction, can help you remain in good standing with your clients and with the bar. We’d also like to point out that these law firm billing best practices can be used regardless of the size of the firm…which means it’s perfect for solo lawyers.
Set the Right Billing Rate
Before we discuss anything else, we want to talk about the most important law firm billing best practice that exists. Making sure that you’re setting the right billing rate. If you’re just starting out your firm, it can be hard to determine the right billing rates (yes, plural) for what you plan to offer. There are a lot of billing rate methods out there that can help you eventually set your rate. We want to point out two things. The first is that your prices should reflect that you are a professional. And, yes, we know that the general public has the idea that lawyers are expensive. Just remember that while it is important to think about how you can best serve your potential clients (and fit their budget), you’re offering something that not just anyone can do for them.
The second thing we want to point out is that you can use the following considerations to help you begin the process of setting the right rates:
- What do others charge in your practice area?
- What are all of your overhead expenses for the law firm?
- What do you want to make each year?
Those questions can help you determine a ballpark figure for yourself. It is important to include all of the overhead expenses for the law firm. You don’t want to lose money.
Make Sure That All of Your Billing Rates Are Reasonable
Our next law firm billing best practice tip is also related to what you charge. You need to make sure that your flat and hourly rates are reasonable. Think about what you need to make each month to stay in business as well as what you want to make as income. How many hours would you need to work at your hourly rate to make that happen? Could you make that happen? If you’re working with flat fees only, how many projects will you need to have each and every month to meet your financial obligations? Is that feasible? If you use both hourly fees and flat rates, consider approximately how many hours and how many flat projects (as well as how many hours those flat projects take) you need to meet your needs. Is it reasonable? If not, you need to look at your rates again.
Keep It Clear
Alright, you’ve set your rates. You have clients. You’re ready to create invoices to bill for your time. Except you’re not. Review how you’re documenting your time for each billable (or flat rate) activity for each client. Is it clear? Will clients understand what you did? This is an important law firm billing best practice because of how clients think you’ve spent your time. The onus is on you to make sure that clients can read the invoice and understand where their money went.
Document, Document, Document…and Then Document Some More!
Most ethics complaints that arise from billing issues get lawyers into trouble because they’re just not documenting things when they happen. Do NOT rely on your memory. Your memory won’t help defend you from an ethics complaint. Documentation of your actual time (and what you did during that time) is one of the best possible defenses.
Make It a Point to Record Your Time Every Single Day
Technology makes the process of recording your time easier than ever. There are a lot of legal tech solutions that can track and log time to whatever you’re working on. If you have a paralegal or legal assistant, you can even set up rates for billable items such as phone calls, copies, and filing fees.
If you have someone who handles your billing, you can use a notebook to write down your time each and every day. Alternatively, you could use a Google Sheet or an Excel file to write down the date, the time you started on a task, the time you stopped on that task, a description of the task (document, document, document!), the client name, and the actual matter attended (which is important if you have clients with multiple matters). Do this daily and share it with your assistant. Make sure they understand the importance of inputting this information into the billing system every day.
Read and Follow the Billing Rules in Your Jurisdiction
There is no better law firm billing best practice than this: read and follow the billing rules in your jurisdiction. Learn about the details your bills must include. Even if your jurisdiction doesn’t have extremely detailed rules, that’s okay. You should still know and understand what is required of you as a professional.
Consider the Client’s Perspective
First, there’s no pleasing every single client all the time. In fact, Megan advocates a process she refers to as “weeding the client garden.” However, there’s something to be said about having a general understanding of the client’s perspective when it comes to billing. If you’re court appointed, how you create and document your billable activities may be determined by the court. For private clients, you might find that some people want a minute-by-minute breakdown of how their money is spent. Others may not want that level of detail. Consider the client’s perspective when determining your procedures for tracking time, documenting your activities, and creating invoices. Between the client’s perspective and sticking with the billing rules in your jurisdiction, you should be in good shape!
Complaints Sometimes Still Get Filed
You can follow every single law firm billing best practice in existence, but someone still may not be happy with you. Bar complaints sometimes get filed. As long as you have the right documentation, you can create a solid defense. If you’re hit with a bar complaint, read this post. Think about whether you plan to represent yourself or whether you’d rather use partial or full-scope representation. Either way, we can help. You can check out The State Bar Playbook to get some essential information to help you if you’re admitted to the California bar or you can schedule a consultation with Megan.