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.
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.
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.
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.
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:
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.
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.
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.
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.
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.
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.
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:
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
If you’re moving to a new legal billing or practice management software, it’s a good idea to understand all the possibilities of what can be imported. What can be transitioned over will be contingent upon the export capabilities of your current software as well as what import technology your new billing software includes.
In this post, I will detail everything you should be able to import along with some of the ‘gotchas’ that can result from what’s imported into your new legal billing software.
If you’re a midsize law firm that’s been in your current legal billing software for over 10 years, there’s a good chance you have more than 100 rate tables. You’ve accumulated this many rate tables because every time one timekeeper had a slightly different rate, you had to create a new table.
When you’re discussing how to bring your rates into the new software, it’s important that you understand holistically how the program handles rates. Some allow you to create rate tables system-wide and assign the rate tables to clients/matters, while others require you to set up your timekeeper’s rate every single matter.
If you don’t convert the rate tables properly, it can create a huge headache for your firm when you go to run your first round of bills out of the new legal billing software. When you’re scoping your conversion, make sure the vendor includes a line item detailing what the rate table conversion will look like.
This is important if you expect the attorneys initials to show up on the client’s bill. Make sure the vendor can import the initials for you and display the initials on the bill layout.
A lot of law firms use their legal billing software to track and calculate attorney compensation. This can include origination (an attorney earning a percentage of all fees received on a case for bringing in the client) and production (attorneys are compensated a percentage of the fees received on payments allocated to the attorney’s fees).
It’s more common for a cloud-based, legal billing software to track origination only, although some track origination and production. Make sure you understand what the legal billing software’s functionality includes and if they can import your originators and the compensation percentages, so you’re not stuck setting this up yourself.
Similar to origination, you want to make sure the new legal billing platform can import your fee arrangements so you don’t have to set them up manually.
This could include whether the matter requires eBilling files (LEDES 1998b, LSS, etc…) or is a flat fee matter (what is the agreed upon flat fee and when are the clients supposed to be billed), a subscription matter (how much does the client pay and how often), split billing matter (who are the involved clients and what percentage of the bill is each client paying), or contingent matter (are we billing expenses or not).
The vendor needs to import this information for you, so you’re not having to reenter it once you’re live in the new software program.
All of your fee WIP (work in progress), meaning it has not been placed on a pre-bill or posted bill, should be imported from your previous system. A good number of vendors will be able to import this data into your new system, but you’ll want to confirm this before purchasing.
Speak with the software vendor about how they can bring over expenses that have not been billed to the client. If your new and old billing software includes accounting, there is a good chance they won’t be able to tie hard costs back to the vendor bill or check in your conversion.
There are a few options when it comes to importing your clients’ billings. Some vendors won’t bring any billing into the system and others will provide you with different options.
This is the most basic of billing data imports. If you choose this option, your first bills out of the new system will include your client’s previous balance, but you will not be able to reproduce old bills because the full history wasn’t imported.
If you opt for and if the vendor can provide full history, you’ll be able to pick up right where you left off in your old system. This option will give you the ability to see previous client bills and run reports (including compensation reports). A full history import will include all client bills, with the individual fee and expense entries as they were in the previous software.
Typically, you’ll only import payments into your new software if you’re importing full billing history. If you import payments, you’ll get the individual payments and payment distributions for compensation reports.
In my experience, the majority of law firms decided to bring over a trust balance. Although, some family law firms want to see full history. This decision is typically based on whether or not law firm clients’ need to see a full history of trust transactions on their bill.
We hope this article will help you in asking the right questions to your potential software provider. If you have questions for us, feel free to reach out.
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.
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.
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.
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.
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:
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.
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.
To help your bookkeeper, here are some best practices:
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.
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.
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.
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.
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.
