As we draw near the end of 2020, many attorneys find themselves faced with the same universal question — “Is there any way I can collect on my outstanding receivables before the year is out?” Although it’s not something you dreamed about in law school when you thought about practicing law, collecting on unpaid bills is a vital aspect of your business. Ideally, you should want to end your year with as much money in your pocket as  possible. But, how can you collect on invoices that some clients thus far have ignored or refused to pay?

First, some quick definitions. Accounts Receivable, or “A/R,” is a term that refers to unpaid balances left on a client’s account. Furthermore, an “Aged A/R” is an unpaid balance that has been left standing for a certain, prolonged amount of time (say, for example, a client has not paid their invoice in over 60 days).

Now, let’s present a common scenario: Your client emails you saying she cannot pay her outstanding invoice. In this instance, many lawyers choose one of three options: 1) hang on to the invoice and hope their client eventually pays it; 2) enlist the help of a debt collector to obtain the funds; or 3) simply write off the debt when the year is over. Option One is less than ideal, because you have no assurance of ever getting paid. Option Two is hardly ever preferred because you still want referrals from that client, and handing over their outstanding balance to a collections firm is not likely to instill good feelings between attorney and former client. Thus, the majority of attorneys end up choosing Option Three, wherein they simply write-off the debt at the end of the year.

But, is there another way to get paid on an account that you were all but ready to write off? 

The short answer, for the most part, is yes! Attempting to collect on unpaid invoices is not a fruitless endeavor, no matter how aged the invoice is. Let’s look over a few quick tips to point you in the right direction.

Get organized

Naturally, every client you take on is unique in their own special way, and this also translates into their invoice payments. There is no “one-size-fits-all” solution to collect on A/R—every client with an outstanding bill will require a different strategy, but there are still some universal applications that you can utilize to track down your payments.

You can accomplish this by first creating a list of every client with an unpaid invoice, including their name, their matter number, the amount they owe, and how long the balance has been overdue (i.e., 30 days, 60 days, 90 days, and 120+ days). If you work at a firm with multiple attorneys, you could also label each invoice based on the primary attorney overseeing the case.

Once you’ve put your list together, you can then determine which invoices you should go after first. You may consider tackling the “youngest” invoices first—that is, the invoices that have gone unpaid for the shortest period of time (let’s say 30 days, for example). Set aside time in your day to email these clients with a short, to-the-point message about their outstanding invoice, including the amount they owe. Include a link for the clients to pay online - the goal is to eliminate friction between your client’s pocketbook and your bank account. From there, you could expedite the process by duplicating the email for the remaining clients on your list—simply change the names and the amount owed, and send it off. This email should come from the attorney working the case; the attorney’s email address is more likely to grab the attention of the client. 

When dealing with the older invoices, you can follow a similar plan as above, at least with the clients whom you believe will pay if prompted (or will have a way to do so in the near future once you’ve reminded them). However, there is a high likelihood that you have clients on your A/R list whose ability and/or willingness to pay don’t inspire much hope on your part. These are the clients that you fully expect to write off at that end of the year. 

In these cases, consider offering the clients an opportunity to wipe a portion of the debt away if they pay within a certain period of time. For example, if a client owes you $10,000.00 and has not paid you in over six months, consider emailing them with an offer that if they pay half of their balance ($5,000.00) within the next three business days, you will forgive their remaining balance. You would be surprised at how many clients will take you up on this.

Adopt online payments

Another way to turn unpaid invoices into paid invoices is to make it easier for your clients to pay you. That’s where an online payment solution can make a big difference. These solutions give you the power to email your clients an electronic invoice that they can pay with a credit card, debit card, or eCheck. Rather than having to find their checkbook, write out a check, find an envelope, and break out their stamps, your clients can pay you with a few clicks of a button.

You would be doing yourself a favor in the long run by integrating online payments into your practice. Like it or not, cash and check payments are becoming less popular in favor of online payments and credit cards, with less than half of U.S. adults carrying cash on them on a regular basis.

Ideally, you should use an online payment solution that was built with the legal industry in mind, with features that can correctly separate earned and unearned fees and protect your IOLTA account from third party debiting. You can stay compliant with your state bar and also provide a benefit to your clients at the same time.

In short, giving your clients the ability to pay online will not only entice your late-paying clients to pay their invoices, but will also entice future clients to seek your services by giving them the payment options they most commonly use for most every service in their daily life.

This is only a cursory look at some of the strategies you could employ to get more cash in the door before the year’s end. If you’re looking for a deeper dive on collecting unpaid invoices from clients by the end of 2020, read LawPay’s latest e-book, Finish Strong: How to End the Year on Better Financial Footing. You’ll discover essential steps to keeping your cash flow strong at the end of your year, and you’ll leave with the right tools to reduce your outstanding receivables going forward into the new year.

Jordan Turk is a practicing attorney in Texas, and is also the Legal Content and Compliance Manager at LawPay. She earned a B.A. in Classics, History, and Religious Studies from the University of Texas, and went on to earn her law degree from the University of Arkansas School of Law. Prior to LawPay, Jordan worked with a high-asset family law firm in Houston, Texas.

You can be the greatest law firm in your city or even your state, but lacking the necessary legal billing processes means your practice won’t be sustainable. Proper client billing is not a one size fits all approach – you must find what works well financially and work with a system that allows the flexibility needed to be efficient (without reinventing the wheel). There’s a major shift to cloud-based software for firms looking to get their bills out faster and to consistently generate more billable hours.

We’re going to walk you through the top legal billing features your law firm needs in order to account for the specialization and unique processes that go on in day-to-day billing. Chances are, you’re aware many of these systems must coexist, but you may not realize how to make them work together to effectively work for your staff.

From the moment a client contacts you to when they pay their last bill, a lot of things are happening behind the billing curtain that they don’t see. There are so many intricacies and steps that have to be taken to ensure the right bills go out to the right clients at the right time. Because of this, it’s important to have a solid standardized billing policy that is accepted uniformly across the firm. This policy may differ from firm-to-firm but consider including elements such as a timeline for pre-bill approval, a hard date for when invoices should be sent to clients, how the bill should be delivered to the client, and how your firm would like to accept payments.

You’re familiar with how it goes:

  1. A client signs up and is onboarded into the system
  2. Billable work is accrued throughout the case (hourly, ad hoc, flat-rate, subscription, etc.)
  3. Depending on the billing cycle and the length of your case, bills and expenses are compiled at the end of every month or quarter
  4. Attorneys review and approve bills with any edits
  5. Bills are sent out to the client
  6. Clients pay via the client portal, accepted credit cards, by mail-in check
  7. Follow-ups from billing staff are sent if payments are late
  8. Ask yourself where bottlenecks may be happening and where there’s room for improvement. And also, ask your staff – they’ll be sure to know the process best since they’re embroiled in client interactions every day.

Read more: Know the five questions to ask a legal practice management software vendor before purchasing

When going through all your features, ensure you’re transparent when presenting the billing process to clients. Not bringing up expectations on the cycle, billing method, payment timeline expectation, and stance on late payments can create lots of problems later when alignment isn’t there regarding a bill.

With that said, here’s what you need to have for a smoother, more efficient legal billing process:

1. Flexible Billing

While you may be accustomed to billing for work at an hourly rate, that may not be the best way to retain clients. According to the 2019 State of U.S. Small Law Firms Report, only about 60% of the day is spent actually practicing law – making generating billable hours difficult. It’s why having new billing strategies can help reevaluate the way clients are billed, and how to add more time back in everyone’s day with revenue-generating activities versus client onboarding or administrative work.

Depending on your area of law, if you’re representing a single person, a contingent fee or flat fee may work better for clients’ needs.

Consider all methods of billing, such as:

2. Rate Table Management

For each attorney at your firm, there may be rate adjustments due to tenure and other experience. For the ability to fluctuate between them, rate tables are one of the most useful features to staying agile around billing.

Some software today allows you to configure your rate tables around the matter, client, system default, and timekeeper. Not two matters are the same, and the work you provide per case is not cookie cutter.  Because of this, it is important you have the ability to change your rates and make one-off exceptions on services that may not be standard billing protocol. At the end of the day, rate tables should be as flexible as you are.

Learn more about how Centerbase uses rate tables to manage rates from multiple users seamlessly

3. Billing Portal

If you ask someone on the billing team how many times they've been asked to print out a client bill or bill payment history, you can bet that you'll probably be met with an eye roll and a chuckle. Clients can be relentless. They want hard copies when you don't have them and they want electronic copies when you have paper.

Providing your clients access to a secure billing portal will take some strain off your billing team and allow your clients 24/7 access to view, pay, and download their bills. The job of a billing portal is to increase visibility into what is due and make it easier for clients to review and pay their bills. Additionally, this increased visibility will allow your clients the ability to find answers to their billing questions on their own before calling in for support. This way, your clients get what they want, and you have peace of mind knowing that you have provided them with a solution to all of their possible requests. 

It's no secret that clients don't always pay on time, but the fact of the matter is, your client's actions shouldn't influence your firms. The more consistent your firm is about sending bills, or having them readily available to view will help create a level of consistency where your clients will soon grow to expect to see your bill and pay them more regularly.

4. Mobile & Automatic Timekeeping

In 2020, most people are texting. Compared to ten years ago, people actually prefer to text with businesses vs communicate with them through email. Not only does texting elicit faster responses, but it is much more convenient. All of this sounds great, right? Well yes, but what about for attorneys? Your time is precious, and although texting your clients may be easier for them, how do make it easier and more profitable for you? If your clients are mostly texting, and you spend hours responding to their messages on the train, at home, or on the go, you have to have a way to track how long you communicated with them for. Otherwise, you are losing thousands of dollars each month.

Today, an agile law firm has the ability to capture the time spent sending messages or making phone calls. This mobile timekeeping feature is incredibly important to not only capture more billable time but also eliminate the manual work of logging it after a conversation. The goal is simple: provide better, top of the line client services while increasing your billable hours.

5. Electronic Pre-Bill Approval

You can substantially improve your firm’s cash flow by having a simple, easy-to-follow approval process for everyone involved to send out invoices more efficiently. With electronic pre-bill approval as a feature, you can create a single or multiple step approval process, and flow a pre-bill up the approval chain. What this allows you to do is move a single bill from one attorney to the next once it’s been approved. You can keep track of every change and edit through electronic records and ultimately you'll relieve pressure on your billing team by having the attorneys make mark-ups directly to the bill.

For example, this is how it works in Centerbase:

 

Watch our four-minute video about how electronic pre-bill approval adds more time back in everyone's day

6. Centralized Reporting

For billing insights and monthly reports, having everything in one place is an excellent resource to make informed decisions about your firm’s financials. With robust legal billing software, everything from matters, billing, and accounting data can be viewed in custom reports that suit your preferences and needs.

All the legal billing features mentioned in this blog are made possible with the right practice management software. While many firms are continuing to move to the cloud in this new world of remote work, it’s important to choose the right software that meets your needs and everyone’s in your firm. This includes steps involved to get onboarded and what should be imported into your new legal billing software.

Are you ready to step into the conveniences and revenue-generating abilities of cloud software? Then let’s talk. You’ll love seeing what Centerbase can do – all at no obligation to you. Contact us today and let’s talk.

Although eBilling may seem intimidating if you have never done it, there are ways to make the adoption easier. You may have questions if you’ve never done eBilling, or if you’re thinking of taking on a client that relies heavily on an electronic billing system, but don't worry, we have some tips on how to make this painful process a little bit easier. 

What is eBilling for Law Firms?

eBilling, summed up, is electronic billing for your clients, so your billing department doesn't have to send invoices through the mail. This makes transactional payments for matters easier – especially in a COVID-19 world where in-person contact is made to be limited. 

Importance of Following Strict eBilling Protocols and Procedures

Many guidelines have been put in place for law firm billing procedures for standardization and convenience for your billing staff. The nice thing about establishing eBilling as a precedent is that it helps avoid errors earlier on in the legal billing process. There’s no more re-typing or manually generating invoices with eBilling – as you can program what in-house can enter in as a bill against invoices outside counsel sends for payment. 

System parameters such as checking for budget limitations or accidental duplicate entries can be caught before it’s officially submitted on a matter. The same can be said about bundling bills, which can create confusion when processing and understanding what’s being paid for. 

This one-time implementation of eBilling in practice management software (or combined in a software solution you may already be looking at) helps put a stop to rogue charges that are difficult to track. 

How to Submit eBilling Invoices

Using a preconfigured billing system, outside counsel will need to submit a digital form detailing what the charge(s) for clients are in that cycle. Then, the eBilling system typically accepts and generates an invoice and ensures there are none of the aforementioned parameters that can occur due to human error before going to the in-house team to evaluate. 

Top Benefits of eBilling

Although eBilling may seem intimidating to those doing billing the traditional way, there are many benefits for firms ready to make the switch

The best value for implementing eBilling? Data insights. You can automatically capture data insights and ensure your matters don’t exceed the budget for certain services from outside counsel. All of this can be configured into the system so it automatically sweeps for this every time. 

  1. Cost Reduction

    It’s undeniable having eBilling in place saves time – thereby saving money. Many firms that have switched over experience valuable time to focus on revenue-generating tasks, rather than the arduous manual upkeep involved with bill processing. eBilling helps by setting caps on a type of case, meaning you’re protecting the bottom line for everyone involved.

  2. Increased Efficiency

    While anything takes a learning curve to understand, the amount of time saved over the months and years will be paramount to your firm’s budgeting and in-house team. At Centerbase, we have a proven system to get bills out 30% faster for your timekeepers. Imagine the boost in time that can be spent on refining processes and getting invoices paid quicker.

  3. Ease of Use

    Being able to control costs and save time processing invoices from outside counsel are big benefits to eBilling software. Ultimately, this ease of use will boil down to managing costs much better and being able to analyze where discrepancies and limits may be becoming a recurring problem. eBilling makes spotting these problems with robust reporting and is a huge benefit to gain insights with just a few clicks..

  4. Improved Client Experience with Online Payments

    Credit cards are the primary way your clients and prospective clients pay for purchases today. With an online payment solution, you can send bills that include a payment link, which your client can pay instantly from the safety and comfort of their home. Centerbase's payments feature is powered by LawPay, and it makes securely accepting credit and debit cards as well as IOLTA compliance easier than you might think. By giving your clients the ability to pay online, you will not only see your bill gets paid faster, but you will also be able to control payment options on a matter-by-matter basis. Services like LawPay do all the leg work for you, allowing your firm to seamlessly send and receive payments so you can spend more time serving your clients.

What Firms Love About e-Billing

For many of the reasons stated above, firms love the convenience of sending electronic bills for the quickness and added accuracy from the settings. Having a simplified invoice review process makes managing budgets and keeping track of where your billing is at during any given time is a huge convenience many firms have already switched to and reaped the benefits. 

Read more: Key Demands for Your Next Cloud-Based Law Firm Billing Program

Eliminates Printing eBills

With eBilling, there are no more wasted ink or duplicate bill prints. With legal billing software, you can make markups and approvals for bills directly in the software. Having trackable comments and feedback also ensures those extra copies and notes don’t get thrown in the trash in lieu of the newest, most updated copy. No one misses anything, and that multistep process gets whittled down to smooth, easy sailing.

Streamlined Approval Process

Because you won’t have to print pre-bills, the multiple rounds of approvals can be completely eliminated. That single pre-bill can be moved up the approval chain, with the software automatically tracking it to the next person needed to see once it’s approved. This relieves pressure from your billing team to have to track anyone down or clog the inbox with reminders.

Visibility and Documentation

Electronic records will always be kept of any notes attorneys make on pre-bills, making it easy to go back into the software to check anytime. This is especially useful if someone is out of the office or an attorney has left, who may have taken tribal knowledge with them on a certain client matter or bill. With extra visibility comes increased alignment from all departments.

Improving Your Staff and Your Clients’ Billing Experience

There’s no getting around it: eBilling has boosted efficiency and accuracy in law firms, all while saving time. By getting bills out more efficiently, clients have more time to review and pay their bills, keeping everything neater than before. At Centerbase, we’ve been able to help timekeepers at firms get bills out 30% faster – creating more room for firm-wide improvements that generate revenue and maintain a “work smarter, not harder” mindset. 

How Firms Can Prepare for a Move to eBilling

Interested in learning more based on the question “What is eBilling?” Some systems sell eBilling as a separate offering that can be on-premise or in the cloud. But while that can offer customization, it won’t integrate seamlessly with any existing software or outdated systems you may currently be using. 

You can prepare to move to eBilling with a few simple steps:

Read more: 5 Questions to Ask a Legal Practice Management Software Vendor Before Purchasing

Are you Ready for eBilling?

Cloud-based practice management software and eBilling are packaged together with Centerbase, which means you only have to worry about one software for everything vs. a la carte options. We’ve helped thousands of firms implement solutions that work with their team, and not against them. 

We encourage you to read more into how you can integrate eBilling into everyday processes sooner than you think, and hope this has been helpful. Feel free to subscribe to our blog or check out our resources page for more content.

 

Do you want to hear something scary? More than 73% of small law firms surveyed said they experience past due client accounts at least some of the time. And nearly half of those firms say that between 10% and 39% of their total client base is typically past due. These are staggering figures! 

Unfortunately, clients don’t always pay on time, and the truth of the matter is law firms are collecting less and less from their clients each year. 

So the question that remains is why does this keep happening? Are there specific reasons that bills go unpaid? The short answer is yes.

Aside from a clients inability to pay due to financial constraints, the primary reasons clients forgo paying their bills are as follows:

Let’s break these down further...

When bills are sent inconsistently, it breaks the client’s trust. They may feel they are receiving your services for free at some point if it has been months since they’ve last received a bill. If more than a month goes by between billing cycles, the client may feel like they are being charged too much for services performed months ago and they will consciously choose to not pay the bill. Clients may also dispute bills if they do not know what they are being charged for. Incomplete, erroneous, or unclear billing descriptions are common reasons you may not get paid. If your clients don’t understand what they are being charged for and if they don’t believe you completed the stated services, they are simply not going to pay the bill. This is where follow-up comes into play. Clients may call you if they have a question about their statement, but they also may not. It is your responsibility to follow up with them to ask if they have any concerns or if they need a better explanation of what is in the description for the services rendered. Lastly, if you’re sending your client a paper bill that requires them to fill out and mail a check back to you, you’re making it easy for them to either forget about the bill entirely or see significant delays in receiving payment. 

This all goes back to running a client-centered law firm, yes it is your client’s job to pay you, but if you can get into the habit of billing your clients the way they expect, and not the way you have always done it, what will result is a much more efficient collection process. Additionally, it is important to keep up with the technology that your clients are already using. A majority of payments are sent and collected electronically. If you have a client who pays all their other bills online, you can guarantee that they will be disappointed if they receive a paper bill from you. Giving your clients a way to pay immediately will also increase collection. For example, integrations with LawPay make it easy to accomplish modern services like this. 

Changing Your Mindset About Billing and Collecting 

There is an art to billing. Although it is a routine part of your business, it must be treated uniquely and skillfully. It can be very uncomfortable for attorneys to ask their clients for money, but you must recognize that is your value. You worked long and hard hours and you need to be compensated for that. Firms that don't put time and resources into their billing process, are typically the firms who are getting paid less and less frequently.  

Tips to Take Control of Your Billing Process

1. Identify opportunities to train and mentor young attorneys in billing and collections

Allowing younger attorneys to bill for small matters earlier in their career will help build a framework of good habits. Giving the younger generation this experience will also help encourage them to ask questions which will ensure best practice in the future. A good young biller and collector will be a good old biller and collector, and if you make it clear that your firm coaches and teaches newer attorneys on how to bill better, that is just one more advantage you have when recruiting talent. It is important to practice technique and to have worked through a few client concerns early on, that way when you’re working with a client who has a significantly larger amount owed, you will have experience navigating those waters. 

Additionally, establishing this culture of mentorship will lead to attorney retention and a greater workplace environment. In Tips For Firms to Attract the Best Recent Law Grads, we discuss how your firm can combat challenges and find solutions to gaining the best new talent. Offering this type of mentorship in the areas that are not being covered in law school will differentiate your firm and subsequently keep your clients happy.

2. Don’t force everyone to bill

Know your staff. There may be some attorneys on your team who really struggle with the client-facing nature of billing. If you have coached this attorney before, given them all the tips and secrets to learn how to successfully bill, and if they are still not getting it, then it is time to pivot your strategy. 

There are practice management software available to you that offer easy and automatic ways for your timekeepers to keep and bill for their time. Whether it’s through phone or text, email, or word documents, make it easier for your staff to bill the way that makes them comfortable while also meeting the client’s expectations.

Your good billers need to be responsible for billing your major clients. This entails knowing your staff, communicating properly, and maintaining just the right amount of teamwork. To be able to quickly detect when something is and isn’t working will be the difference between the revenue coming into your firm and a pile of unpaid bills on your clients kitchen counter.

3. Develop policies and procedures

When it comes to billing, creating, and establishing a standardized process will not only make it easier for your team, but it will ensure more timely payments from your clients. This process will look different for every firm, but billing every possible transaction in a monthly cadence with not only contribute to a routine, but it will also be better-received by your clients. And if you bill paper copies, having a minimum dollar value threshold for bills will help offset the cost and time associated with manually printing, enclosing, stamping, and then delivering the bills to the post office. 

Some staff turnover is inevitable, so writing these policies down and training your team on how your firm bills will contribute to uniformity, overall best practice, and easier transition for newer attorneys.

4. Don’t forget about the past-due invoices

This seems like a no-brainer but a lot of firms will send bills out and then never follow-up on them. If you want to turn receivables into cash, you need to be following up with your clients. Check in on them if they have questions and give them alternative payment methods if the way you originally sent the bill isn’t working for them. If the invoice is more than 30 days old, you minimally need to be sending a new statement, with the first invoice attached. If your bill still has not been paid after 60 days, you need to speak with that biller and find out not only what their billing process is, but what their communication with the client surrounding the bill has been, and their plan to recoup what is owed. If your clients do not want to pay in full, technology nowadays will give you the ability to set up reoccurring payment plans. Asking for money that is owed to you is never fun. Discussing expectations around billing and timeliness of payments with your client at the start of the matter will help increase transparency and hopefully, eliminate the need for you to consistently reach out to your client for payment.

5. Make sure your client understands what you’re billing them for

Your bills need to describe your services. If a client can understand and digest what you have done for them, it will be easier for them to pay. Each client you work with is different, some may need more explanation, others may not. Establishing what your client needs to see on their bill will help increase payment frequency and reduce any questions that may come from not understanding what the services you’re charging are. The likelihood of a client not paying their bill is higher when you give a shorter, less detailed description of your service. Investing in software can make this process easier for you.

Your pre-bill process takes a lot of leg work. But with features like epre-bill, you can seamlessly markup your bill, add descriptions, follow all the edits and streamline the entire process. To go a step further, you need to be detailing your billing processes in your retainer agreement. The most important thing you can do before you begin billing is to set expectations with your clients. Here are some potential points you should be thinking about to go over with your client at the start of a matter:

By addressing all of these questions and concerns, you will be able to quickly reference the policies you outlined with your client in the event of a dispute. 

6. Effective collections require timely billing 

The sooner you send your bill after completing a service, the faster your client will pay. Different clients will require different billing strategies. For transactional matters, make sure you bill at or before closing because your clients will likely reinvest the proceeds of their closing. If it’s a litigation file, be sure to bill monthly, and if you bill bi-monthly, make sure your clients are made known of this billing schedule beforehand so they are not blindsided by receiving multiple bills within 30 days.

7. Maintain retainers and replenishments 

If you can get an injection of cash upfront to hit the ground running, you need to. And when those funds are low, you need to be able to replenish them smoothly, and efficiently. Automation exists to make your lives easier and to improve your profitability, so take advantage of it! If you’re already a Trust/retainer heavy firm, your clients should be able to make one payment and it automatically split between AR and the replenishment retainer in trust to the correct accounts. This way you do not have to manually track and write multiple checks or transfers from one account to the other. 

Communication with your client on the fee agreement regarding retainers is important as well. Is the retainer refundable? Is replenishment on a monthly basis, or on an evergreen basis? These are all questions you need to address with your clients beforehand.

8. Financial reports can improve billing and collections habits

Use financial reports to maintain better billing and collections habits. Everyone at your firm should be receiving a WIP report and Account Receivable report, every month to review. Increase transparency, make it known where each attorney is, and what work they are pursuing. With some software, you can even set up a report center to match the way you analyze data. It will allow you to easily group important reports and set up security on each table, providing different levels of access to your staff.

If you are spread too thin and do not have time to review and follow-up on these reports, then perhaps consider hiring a part-time billing associate. This person would strictly be on board to receive the AR reports, digest them, and then begin following up with the clients who are past due. 

Hopefully these eight tricks will help assist you and your firm with expediting your billing and improving your collection process. Results won't happen overnight, but instituting universal practices and methods with undoubtably increase your profitability and keep your clients happy.

If money talks, then why are so many lips sealed at firms when it comes to discussing billing? According to the 2019 Legal Marketing Association’s annual meeting, “only 49% of law firms are teaching their attorneys how to talk to clients about pricing.” That’s over half of firms out there. Although it’s a puzzling revelation, it’s not altogether surprising. There are a variety of struggles law firms face when it comes to finding that sweet spot in legal billing. Everyone wants to keep the books balanced and income regularly flowing in at a rate owners are pleased with – it doesn’t always happen, but with today’s technology, it’s definitely doable. It’s all about finding the workflow that works best with your staff and clientele.

To truly move your legal billing into modernity, you must embrace everything that organized processes, technology, and automation has to offer. In this blog, we’ll be identifying the common pieces that firms struggle with when it comes to billing, and what modern tools you’ll need in order to accelerate your monthly billing cycle to get paid faster and more regularly. 

Legal billing challenges commonly stem from an overburdened staff who are pulled in different directions and activities that don’t generate revenue. There’s no one single cause to why this happens – it’s the combined day-to-day bustle of sending out invoices and client onboarding that are likely the common culprits. 

Inefficiency and Time Lost

The bane of every legal assistant or billing staff's day is the dreaded double work. Perhaps you have an Excel spreadsheet of client expenses that isn’t synced with your existing software. If you have clients fill out physical paperwork, your staff has to file the papers while entering it into whatever digital system you have. Sure, you may have V-lookup or some other formula that appears to save a few minutes, but if they’re re-entering information multiple times, it’s not making much of a dent in the long run. That time lost is ultimately hurting your bottom line and keeping everyone from controlling scope creep. You can get time back with an effective software that integrates with your everyday systems and enters data everywhere you need it the first time. 

Poor Visibility and Communication of Write Downs

The cost of not communicating the billing process to clients upfront can add up. This will inevitably lead to an invoice sent – perhaps with a vague or unfamiliar itemization – causing a client to call upset, misunderstanding what was billed and why. Whether you’re billing hourly or a la carte, to keep clients happy, many firms are pressured to write things off and undercut themselves and the firm. Think about it: if you got an unexpected bill in the mail you weren’t informed about, wouldn’t you also be upset? The more transparent you can be about the legal billing cycle, like bi-weekly or monthly according to work completed, your clients will be happier for it. 

Keeping Track of Law Firm Billing Codes

The increased demand for clients to be billed in alternate ways from hourly has led to the creation of the Uniform Task-Based Management System (UTBMS). For flat fees, subscription, or project-based instances, using these billing codes provides transparency to your clients about what exactly is being billed, while simultaneously easing the load on your staff to push invoices through for approval. Taking the guesswork out of legal billing will, by default, help move the process along for everyone involved and create alignment for your staff. 

Billing Descriptions

Vague descriptions of billing line items perpetuate confusion and can make a client start to mistrust you and your staff. Don’t give anyone reason to feel out of the loop or like they’re not being communicated with. Many clients feel despondent and lost through their cases – they look to you for guidance and fair pricing. Instead of “Consult call: 30 minutes,” consider something like “Reviewed case details for next month’s deposition.” If your billing areas are easily categorized, labeled by date, with the aforementioned line item, your client is much more likely to remember and feel the value of what they got out of that experience. We all want to feel like our money is going toward something useful and helpful to us, especially in the form of legal counsel. 

When it comes to modernizing your legal billing, before jumping on any technology initiatives, you must first lock in the core billing process itself. This is the foundation to everything that’s automated. If there are bottlenecks and issues in the process, you can expect those same issues to emerge no matter what software or system you implement. Don’t underestimate the power of refining your billing and listening to your staff on where common problems may be lingering. Are attorneys extra delayed in approving invoices? Is there a workaround billing staff have to use that takes longer in order for it to be done right? A billing workflow is meant to be as simplistic and efficient as possible. Here’s how you can make your billing just that:

Time and Expense Entry

With a robust legal billing software like Centerbase, your staff will be able to create time entries for expenses while staying in the programs they work in every day. Programs such as Microsoft Word and Outlook can be easily tracked per matter – making the accrual of time and expenses when it comes to billing an absolute breeze. 

Pre-Bill Review

Cut down the amount of time spent waiting on bill approvals by generating pre-bills. The ability to electronically distribute pre-bills to staff can speed up your firm’s pre-bill approval process by 30%. As soon as a pre-bill is approved, it’s sent to the next reviewer in order to move things along. 

Invoice Generation and Delivery

Automated invoices can pull services rendered from a custom frame of time. For example, if a client is billed bi-weekly, an invoice can be automatically created with all the services rendered within a certain date range to be delivered to the client. All the minutiae between – the manual entry, cloning of templates – are no longer needed. You’ll find those minutes back in peoples’ days really adds up. 

Receive Payments

Having an easy payment system is just as important as presenting a clear bill of services rendered. That smooth process will really speak to convenience and professionalism – two things clients expect out of firms nowadays with the “get it now” society we live in. A compliant integration to software such as LawPay lets you send bills directly to clients’ email inboxes, meaning they can pay electronically within moments of receiving. 

Collection Tools and Reports

Satisfy the itch for data with productivity and budget reports to see how you’re doing with a new technology system in place. If you can track it, Centerbase can report on it – your billing can be laid out however you need it to with custom reporting and tracking in place. This gives you the transparency to make big business decisions when it matters most. 

How to Move Your Billing into the Digital World

It’s time to bring your systems into the digital age – safely and efficiently, of course. The mere presence of practice management software isn’t going to solve all your problems, but if used as a means to improve existing processes, it will help move your legal billing into considerable modern efficiency that helps you get paid on a cadence that works best for you. 

The Age of Digital Results

It’s time to talk about pricing with your attorneys and ensure everyone’s on the same page about billing throughout their case. The combination of communication, clear invoicing, and automation are sure to deliver top-tier results that create lasting rapport and trust from your clients. 

Have a question about legal billing? Be sure to let us know in the comments, or schedule a no-obligation demo to see how Centerbase can help you get paid faster.

Much like supermarket fruits, there are many law management software options of all shapes and sizes out there – but to make the most of your staff’s efficiency, there are some basic functionalities needed to claim that highly coveted time back in everyone’s day. These integral features include: word processing, email, practice management tools, billing, accounting, and document management. For some of you, the first two on the list often live in the form of Microsoft Office or G-Suite. While these certainly have the potential for efficiency on their own, it’s important whatever software you choose has the capability to share information in real-time between programs.

Although integrating with existing apps is one option, you’ll reap the biggest rewards by consolidating your practice management, billing, and accounting software all in one place. Why? No incredible, life-altering reason – simply that it’s easier and more convenient this way. It’s a decision that requires careful consideration, since a software investment can be quite costly upfront, and individual “best of breed” solutions may seem more appealing when comparing them.

To help your decision, we’re going to explore the advantages to consolidating your legal technology:

Advantages to legal tech consolidation

1. Easier training and onboarding

One software platform to train employees on all their day-to-day duties simplifies onboarding for everyone. Depending on the work a staff member may do, having to train them with multiple interfaces and programs means more time until they’re up and running on their own without asking for help. With three separate programs, for example, that means three systems users will need to learn and navigate. Learning only one system saves time and empowers people to be more productive quicker.

2. One Access Point for logins

There’s no dancing around it: multiple programs are more difficult to manage. Along with training, providing access and logins to new employees can be a big pain when you have to do it three to five times across all your programs. This means not only giving them a user ID and password, but also setting up permissions on what they can and cannot see. For small to midsize firms, this can be laborious when people come and go – constantly removing access and ensuring your data is secure and only seen by those currently still in your firm. This difficulty increases when you have to adjust permission types for sensitive data.

Read our tips on how to begin using legal practice management software for a deeper dive on getting everyone working efficiently together with new software.

3. Data accuracy

Data accuracy is the biggest benefit to using one program for billing, accounting, and practice management. One-time entry for a client versus multiple minimizes the chances of human error. It’s happened before – entering information in your practice management system for client communication separately from your billing system. These differences, even if one number of an email address is mistyped, can cause problems later when you need to mail important correspondence or contact the client.

Those errors cost valuable time figuring out where the discrepancy lies. Even if these different systems claim to “communicate” with each other, temporary disconnects and ascertaining which software is prioritized or “wins” in information adds more complicated variables to the confusion.

4. One place for upgrades

Regardless whether you have on-premise or cloud software, it’s important to note that your firm is always responsible for scheduled diagnostics to ensure separate systems communicate properly. An update in one program may not be compatible with another program, leaving you with the difficult choices of having to disconnect and operate separately, not upgrade, or invest time with the vendors to find and address issues.

When working with multiple programs and an issue emerges, the onus is unfortunately on the firm to troubleshoot and determine the root cause. If it’s something between two programs, the firm will need to invest time and resources to work with the vendors, resulting in them pointing at each other if neither vendor accepts responsibility. While this is not ideal, it happens more often than we might like to think.

With a single program for billing, accounting, and practice management, you don’t have to worry about who’s responsible. There’s one place to contact for support and maintenance issues. This can save the firm time in troubleshooting and help bolster efficiency.

Those errors cost valuable time figuring out where the discrepancy lies. Even if these different systems claim to “communicate” with each other, temporary disconnects and ascertaining which software is prioritized or “wins” in information adds more complicated variables to the confusion.

5. Time tracking

A single system also makes it easier to track time. Whether you bill time or not, there are valuable insights in knowing where your staff spends most of their time on areas of improvement. That way, you can eliminate roadblocks and create an open dialogue that helps empower your staff to feel they have all the tools needed to help clients.

Plus, having one system to remind you in your calendar and automatically generate invoices for tasks creates less friction for accounting and record-keeping.

6. Accurate billing, every day

Have you ever generated a client bill and received a call saying “we paid that balance already last month?” That embarrassment can be caused by separate billing and accounting systems. When you have to record the payment in two places, it’s easy – almost inevitable, even – for something to be missed. Someone must siphon time from other money-making tasks to ensure everything is correct in both places.

When it comes to billing and accounting, these reconciliations include not only payments, but trust deposits, withdrawals from trust to outsiders, as well as the firm and expense disbursements. Given the critical nature of trust accounting makes this even more important.

Failure to bill clients for expense disbursements in a timely manner can have a significant impact on firm profitability, especially if the firm is paying the vendor before receipt of payment from the client. This impacts cash flow considerably over time. When disbursements must be entered in one system for billing and a separate system for general ledger accounting, the risks of missing something increase.

7. Remove the guesswork from reporting

When information is in one place reporting becomes simpler. If data is in multiple places you may have to export data from the programs and combine into a single report using something like Excel. This is additional time as well as adding the possibility of errors. And, if something is discovered as missing, you have to redo the reports.

A single source is always more efficient and accurate here.

Consolidating practice management software has its benefits

While you probably can’t find one program that does everything, there are benefits to consolidating where possible without losing functionality. Focus on your firm’s needs and consider your choices while keeping in mind the benefits of consolidating your legal tech stack. Software can be expensive – but the amount of time and peace of mind you’ll save can be well worth the investment if it fulfills all your needs, and updates with the needs of your business over time. 

If you're curious about what kind of practice management software your firm should pursue, check out our blog, 3 Types of Legal Practice Management Software to Consider for Your Law Firm.

For law firms, time is money, and there’s no time to waste on inefficient billing practices. But many law firms still rely on slow, tedious, paper-driven legal billing processes that hamstring their productivity and profitability. And many have yet to implement—or enforce—billing policies that would govern the creation and review of time entries and hours worked. Yet firms wonder why they can’t shrink their revenue capture cycle.

Inefficient legal billing practices create difficulties at every level of a law firm. For lawyers, every precious minute they spend tracking and recording their time is a minute they aren’t adding value through their legal work. This drives lawyers to take shortcuts, such as omitting explanatory details or using cryptic abbreviations, that lead to unclear bills. Those ambiguous notes, in turn, require further review and clarification and add more delays. Lawyers may not check to see whether their work matches client service agreements, and they may fail to specify proper billing codes. Those that cling to paper timesheets and bills often scrawl notes incoherently in the margin of invoices or pre-bills for their assistant or accounting team to decipher, contributing to confusion and inaccuracy. At the end of the month, the law firm’s administrative team and accounting department must deal with these headaches—and more—all under the time pressure of closing out the month.

Legal billing doesn’t have to be this hard. Here are our top tips for ways that you can start accelerating your law firm’s billing processes.

1. Require Timekeepers to Enter Their Own Time in a Digital Timekeeping System

While administrative staff should support lawyers and paralegals in entering their time, they should not have the primary responsibility for it. Timekeepers themselves are in the best position to describe and categorize their time worked.

2. Require Timekeepers to Enter Time Contemporaneously

Timekeepers often wait until the end of the month to enter their time. At that point, they either consult their own manual or electronic system (both of which require duplicative work), or they comb through the recesses of their brain to recall what matters they handled, what tasks they performed, when they performed them, and how long they spent. Even attorneys who rigorously keep their time while in the office often forget those good habits when they go to court or travel to meet with clients, leading to the end-of-month reconstruction process.

When lawyers enter their time daily, they more accurately capture the time they’ve billed—and they can prepare their bills more quickly. They’re also less likely to be late in submitting their bills for reconciliation, which keeps the billing process running on time. At a minimum, your firm should require its lawyers to enter their time weekly and provide additional incentives for lawyers who finalize their bills by the month’s end.

3. Make it Easy for Lawyers to Capture Time

Lawyers, particularly when working remotely, may not capture the full extent of their billable hours. Adopt billing software that automatically captures time spent on client calls, texts, emails, and documents, whether from mobile devices, email apps, and even Microsoft Word. For example, Centerbase automatically captures client phone calls and texts as billable time, leading to an average increase of six additional billable hours per attorney each month.

4. Standardize Narrative Guidelines

To ensure consistency between timekeepers, implement, and enforce guidelines that detail how lawyers should describe the tasks recorded. The more granular your requirements are, the more uniform your bills will be—and the faster they’ll process.

5. Train Timekeepers on Outside Counsel Guidelines

Outside counsel guidelines should help to standardize the firm’s billing practices, but not all firms ensure that the guidelines are disseminated and readily accessible to all timekeepers. Make sure all lawyers and paralegals have access to the most up-to-date versions of all guidelines. Send periodic reminders to counsel to improve consistency. If you have billing software, see whether you can use the guidelines to create rules that will alert timekeepers to potential violations at the point of time entry.

6. Adopt an Electronic Pre-Bill Process

Many law firms still rely on paper-based pre-bill review processes that are fraught with issues. For instance, these processes create bottlenecks anytime that multiple lawyers must review bills. A bill’s first draft is often rife with inaccuracies, such as incomplete or vague descriptions or missing details like task codes, meaning the bills must be returned to the timekeeper for revisions—further extending the billing cycle and adding to the lawyer’s non-billable workload. If these issues aren’t corrected, clients may refuse to pay and lose faith in the firm, leading to lower collections in the near term and a decline in overall revenue in the long term.

Paper processes afford little transparency into billing practices, particularly edits and writedowns. Furthermore, there’s no audit trail documenting who made changes or when changes were made, which may create challenges if clients later dispute the charges.

An electronic pre-bill process avoids the delays of circulating paper printouts of pre-bills, reduces the risk that documents will be lost, and eliminates the frustration of illegible handwritten adjustments. Billing software that allows online revisions also enables firms to see changes at a glance and track bill changes over time, avoiding writedowns on top of writedowns and allowing businesses to identify the source of changes in the future.

7. Streamline Your Approval Workflows

Billing software can automate the approval process, notifying the next person in the workflow when the prior reviewer’s work is complete. This process also gives lawyers and accounting immediate visibility into where bills may be stuck so they can rectify delays.

8. Measure Billing Key Performance Indicators (KPIs)

Billing is no exception to the adage that what gets measured gets managed. Billing KPIs should go beyond basic metrics such as hours billed and realization rate. Consider adding metrics to improve timekeeping quality, such as the number of edits made during pre-bill review and the dollar value of those edits. A review of metrics would then suggest which timekeepers may require additional training on billing processes (and if you're curious about how to create a billing training program, check out How to Create a Legal Practice Management Software Training Program). Firms may also want to measure the time it takes to finalize a bill or other time-related measures that may identify logjams in their billing processes.

9. Establish a Set of Written Billing Policies and Enforce Them

Your firm should establish clear policies that govern billing for attorneys, administrative staff, and accounting. Outlining your billing processes will help you identify problems that you need to resolve and enforce your policies. It may be prudent to add a penalty for those who persistently violate your policies.

10. Follow Change Management Best Practices

Technology is the linchpin for effective change in billing efficiencies, but it cannot stand alone. New solutions must be reinforced with policies, training, and support. Timekeepers and administrative staff must learn how to use billing software and understand billing guidelines. Follow-up training will help to increase adoption and reduce mistakes.

Answering the most common questions around your firm’s finances and expenses are heavily tied to – yes, you guessed it – bookkeeping. One should never overlook the importance of accurate bookkeeping, especially since that’s the very lifeline to how your business keeps the lights on and your employees working. As a managing partner for a smaller firm, it may seem more economical to do the books yourself, but bookkeeping functions as a solid foundation for all your other expenses, trust accounts, and taxes that come later on in the year knocking. 

You probably have questions as to what you need to know about law firm bookkeeping and ways to get ahead of those pesky, end-of-year shuffling for those receipts and expenses that may have gotten lost. With proper records of revenue, you’ll have all the itemized data needed to move forward with important business decisions so you can stay in business and, possibly most importantly of all, stay profitable when you want to expand or sell your business later on down the line.

Now let’s dive in further to understand what law firm bookkeeping is and how you can build a solid foundation for your business.

What is Law Firm Bookkeeping?

While this may be spoken in tandem with accounting, bookkeeping is considered the baseline for how accountants and CPAs operate. After all, you need to know multiplication before you can advance into algebra. If the sums are incorrect, the rest will fall apart by proxy.

Think of bookkeeping as recording everyday business expenses, including: 

If you save it or spend it, bookkeeping must track it. Aggregating all of this data lets you move one step forward to making strategic business decisions, which is where accounting comes in.

Financial Accounting

If bookkeeping can be described as multiplication, then accounting is when you move into algebraic formulas and beyond. Far more than just helping you file tax returns, knowing accounting processes and how CPAs operate is invaluable to having accurate, profitable financials in a law firm. 

Accounting includes:

Having a CPA helps you make the right choices for your firm’s future, including the best way to manage trust accounts and avoid common costly mistakes when taxes come around. 

Bookkeeping vs Accounting

Both bookkeeping and accounting build on each other to become a powerful force of data for your firm. Not many attorneys go into business with the intent to be a numbers guy or girl. 

When thinking of how bookkeeping and accounting work together, understand these key differences:

Both cannot function without the other, so be sure to have a dedicated bookkeeper ready to have everything organized for you not just tax season, but every season.

IOLTA Bookkeeping

All funds meant to go to clients must absolutely go into a trust account separate from everyday funds. Often referred to as “interest on lawyers trust accounts,” or IOLTA, these must abide by certain compliance standards – which going against can mean disbarment in severe circumstances. Taking any money out to pay for other fees or day-to-day operations is known as borrowing and can be very problematic if mishandled.

Here are some integral pieces you need to know about IOLTA accounts:

Weekly Cash Forecast

The value of accurate bookkeeping lets you gain insights to know your inflow and outflow of cash at any given time. Since things have been extra turbulent with COVID-19, having as much transparency as possible to the cash flow in your firm is essential now more than ever. 

Working with a CPA and the power of applicable legal accounting software lets you pull data and spend history from any time period that’s been entered. From there, you can print checks and even sync with your current point of sale (POS) system easily, accounting for every dollar going out and in. 

Controller and Monthly Financial Meeting

Many times, law firm bookkeeping has a monthly overview going over firm revenue, payroll, and other operational costs and ledgers to keep you informed. 

These financial results and forecasts are shared as a way to make informed decisions without any detail left out. The great thing with software? There’s a free CPA login option on most legal billing and accounting software programs, giving them all that’s needed for reporting and state-specific compliance for your area of law.

4 Tips and Best Practices for Bookkeepers

To help your bookkeeper, here are some best practices:

#1: Know Your Accounting Method

Choosing between the two methods of accounting – cash accounting or accrual accounting – sets the stage for all your financial documents and impact cash flow. 

The cash accounting method records funds whenever they’re moved regardless of the time they were received, while the accrual accounting method records as it happens, no matter what. As you may already realize, the cash accounting method is more popular, as it isn’t as time-sensitive or dependent on accounts receivable and payable. 

#2: Be Aware of Billable Time vs Non-billable

As a law firm bookkeeper or CPA, the main pulse of profitability is evaluating whether a firm’s time is spent on revenue-generating activities or being stuck in the mud of administrative tasks. Staff productivity can be a common roadblock for law firms being profitable, even if many cases are successful and money’s coming in. Proper reporting on billable time vs non-billed hours can easily provide data to managing partners to help cut down on those tasks and get their legal billing in a better place – before it gets out of hand.

#3: Check all Tax Obligations

Law firms are constantly dealing with revenue and funds that are transferred, disbursed, and deposited. Being knowledgeable with all the taxes for firms to be aware of can help meet all the sales tax obligations before growing, hiring, or buying a new office. 

Types of taxes include:

It can all pile up and be very overwhelming to keep track of. Couple that with unique state taxes based on your property, location, and structure… well, you see it’s very complex, and not something attorneys have time to keep track of. The right CPA can sort all of the pieces with you to ensure reporting is tracked and necessary taxes are paid to stay in business. 

#4: Automate as Many Billing Processes as Possible

Since there are so many things that can get lost – receipts and other transactions such as new office equipment or training – automating billing can ease a lot of the burden on retroactively finding this information. What does this mean, exactly? Having a software system that tracks recurring expenses can help bookkeepers better forecast spend and cash flow. Plus, electronic pre-bill approval lets attorneys make edits to bills without back-and-forth emails. Notate right on the bill; it gets fixed, and sent out quicker than ever (up to 30% faster we’ve found, in fact).

Knowing your money in real-time, and giving employees the ability to log anything spent on a case from any mobile device can be a powerful tool to give you accuracy at any given moment. Plus, electronic billing is also easier to keep track of – for money coming in and going out.

Choosing the Right Bookkeeping Software for You

To help keep a pulse on your firm’s funds, law firm bookkeeping is an essential way to ensure bills are paid and clients’ trust funds are tracked accordingly. With practice management software, you can sync with any accounting software such as QuickBooks, so your CPA has a quick view of funds whenever they need it. Less stress on you, and more forecasting for them. 

Want to learn more about staying agile in a technology-driven world? Centerbase offers many of the automated billing features mentioned in this article, and we’d be happy to help see what you need for real-time reporting and insights to stay profitable. Feel free to contact us for more information, or subscribe to our blog for the latest updates in the legal world.