Winning a high-stakes case for a client should be a moment of celebration, yet billing disputes or unpaid fees often overshadow it. Such billing confusion can create problems for your law firm, affecting its overall financial health. And while your legal expertise is what ultimately drives your practice’s growth, keeping the practice running requires efficient financial management and smooth cash flow.

So, what makes billing for law firms so complex?

Challenges in Billing Methodology

One of the unique problems with legal billing is that there is no standard billing format or approach. Each case and client is different, which requires a different billing approach.

  • Hourly Charges, where lawyers track the number of hours they put in for a particular case and charge on an hourly basis
  • Flat Fee where standardized legal services, such as filing trademarks or drafting contracts, are charged a pre-decided flat fee upfront
  • Contingency Fee where the charges depend on the outcome of the case – if the client wins, a certain pre-decided percentage is charged from the award or settlement received, but if the client loses, the law firm gets no fee
  • Retainer where a certain amount is charged upfront to the client, monthly.

In some cases, these traditional billing approaches do not work. In such instances, lawyers use creative, unique, and flexible alternative fee arrangements (AFA).

  • Capped Fees – hourly billing with a maximum upper limit. While this is good for the firm’s accounting and budgeting, it could lead to losses if the case drags on for too long.
  • Blended Rates – uniform hourly rate irrespective of whether a senior or junior lawyer does the work. This helps clients save money and helps the law firm allocate work efficiently.
  • Unbundled Legal Services – only specific tasks related to the case are assigned to the law firms (the client takes care of the rest), and the clients are billed accordingly.
  • Subscription Billing – a monthly fee is paid for continued legal support or consultation for long-term cases or legal advice.

Reasons Why Legal Invoices Get Delayed

These differences in approach often result in inaccuracies in timekeeping and invoicing, which can create stressful situations with clients and sometimes compliance issues. The most common reason for such complaints is failure to follow the client billing guidelines properly.

Errors in timekeeping (i.e., how many hours the lawyer spent on a particular case), delayed invoices, missing documents, ambiguity in details of the case, or billing structure can lead to significant delays in payments, not to mention causing you much anxiety and harming your reputation. If your clients are large corporations or government agencies, you know they adhere to strict billing rules and need efficient working.

Despite creative billing approaches, sometimes calculating billable hours can be confusing. Moreover, covering the costs of non-billable hours, i.e., hours lawyers spend on meetings, business networking, and administrative tasks not directly related to any case, is also necessary. If not handled with care, issues related to non-billable hours can cause delays, disruptions, and tensions within the firm.

How to Improve the Billing Process at a Law Firm

Whatever billing approach your firm decides to use, these four factors must be considered.

  1. Draft Fee Agreement in Simple Language: Transparency is the foundation stone of a client-lawyer relationship. Simply drafting a detailed fee agreement is not enough; it is essential to discuss all the conditions of the agreement with the client, ensuring they understand each clause correctly before signing the agreement. Moreover, draft the agreement in simple language, avoiding jargon or complicated terms that could confuse the client. Such transparent, clear communication fosters trust between the two parties, encouraging the client to pay without delay or hesitation. Whenever possible, reiterate the terms of the agreement to make sure the client remains on the same page with you throughout the legal process.
  2. Be Transparent About Billing Policies Early: Specify the billing approach you plan to use for the case during the initial client discussions. Tell them if it will be on an hourly basis, retainership, or any other method, and explain why that method works best for their case. Also, inform the client of any interest or late fees for delayed payments right at the outset. Being upfront and straightforward about billing can help your firm avoid complaints and financial stress.
  3. Real-Time Time Tracking with Software: One crucial factor in legal billing is tracking a lawyer’s time spent on a case. Usually, lawyers manually log their time at the end of the day or weekly. But this can be risky and cause gaps in reporting, leading to inflated bills and client dissatisfaction. Instead, using software that can do the job in real-time can help you make accurate invoices with details of every time entry. Not only does this help track time properly, but it also gives the client an update on how the work is progressing.
  4. Consistent Billing and Invoicing with Technology: Once you have the correct time logs and details, invoicing becomes easy. Depending on the type of case, its severity, and sensitivity, you can bill clients weekly, biweekly, or monthly. A standardized template reduces the scope for formatting or other errors, and invoicing software can send timely reminders to clients to clear their dues, keeping delays or non-payments in check.
  5. Offer Multiple Payment Options: While most legal firms still accept traditional checks, many clients these days prefer digital or online payments. Consider offering multiple payment options to clients, such as credit cards, online platforms, or digital options, to enable them to pay quickly and securely, as per their convenience.
  6. Using Retainers Strategically: A retainer can be made manageable for clients by using an incremental payment system. For instance, instead of charging a lump-sum retainer of $20,000, you can break it into periodic installments of $10,000. This will not only keep funds flowing in at regular intervals but also reduce the client’s financial burden and help build a stronger client-lawyer relationship. At the same time, it is also important to remind clients whose retainers are running low to add to their balance on time to avoid gaps in the work process.
  7. Update Clients on Progress: Sending regular updates via email or a monthly report on the case’s progress keeps clients interested and involved, while also reinforcing to them the efforts your firm is making to help. With technological advancements, this step can be further simplified by creating a dedicated portal where you can share real-time updates on significant actions taken, such as motions filed or documentation submitted, rather than writing to clients individually. This also works as an incentive to pay on time, as the client can see steps being taken to resolve their case, and is motivated to keep it going at the same pace.

While these tips can streamline and update your billing process, there is always scope for improvement. Periodic reviews of your billing system can highlight areas that need more detail or eliminate those that are overly complicated. Simplifying and automating routine processes ensures fewer errors and complaints.

​Contact Black and Gill LLP in Etobicoke to Help You with Streamlining the Billing Process

A skilled bookkeeper can help you streamline your billing process, keep detailed records of agreements, time tracking, and other expenses to ensure fair billing. At Black and Gill LLP, our accountants and bookkeepers can provide services such as detailed record-keeping, invoicing, and bookkeeping. To learn more about how Black and Gill LLP can provide you with the best accounting and bookkeeping expertise, contact us online or call us at 416-477-7681.