8 Tips for Law Firm Fees and Billing

Have you tried a hybrid billing model?

To achieve new growth in your law practice, try ditching your old ideas about fees and billing.

For example: if you’re mired in billable-hour thinking, you might be driving away business. Experiment with flat fees, sliding-scale pricing, and unbundled services. See what works for your firm – and more importantly, what works for your clients.

Or use a hybrid model that combines a flat fee with hourly rates.

“[W]e occasionally use hourly billing alone for some cases, but we try to combine it with other components,” says attorney Inti Martínez-Alemán, who practices in Minnesota and New York, in this ABA Journal article. “Start with a handsome flat fee for investigation and advice, which, when completed, converts into hourly billing. This is helpful for cases in which (a) the client is hesitant to hire you because of the uncertain nature of hourly billing, and (b) litigation could open a can of worms down the road. So if you start with a good flat fee, you could charge an hourly rate for services related to the initial scope but not necessarily contemplated in the scope.”

Have you checked out The Pro Practice Playbook? This free, online legal resource is chock-full of tips, pointers and checklists for building a safe and successful law practice. Chapters include: Forming Your Firm, Managing Your Firm, Marketing Your Firm, Getting and Keeping Great Clients, Fees and Billing, Expertise, and Technology & Security. The Pro Practice Playbook is free and available 24/7 to all lawyers and firms insured through Alta Pro Insurance Services. Click here to start using The Pro Practice Playbook and all the other benefits of membership in the Alta Pro Risk Purchasing Group (RPG). Get started now.

Fee and Billing Basics

You deserve to be paid for your work. But if you’re like most lawyers, you don’t relish talking with your clients about fees. Do it anyway. A simple misunderstanding can ripen into a malpractice claim or bar grievance. Protect yourself by (a) charging a fair fee, (b) putting your agreement in writing, and (c) having a system for time-keeping, billing and collections.

There is inherent tension between the client’s interest in getting their case resolved and your interest in getting paid. Lessen the stress by communicating candidly about financial matters – starting at the initial interview and continuing throughout the case.

Here are some pointers:

  1. Document your fee arrangement. Use engagement letters that explain how the client will be billed, when payment is due, and what will happen in the event of nonpayment. Have your client sign the letter.
  2. Discuss finances upfront. Be clear about your fee and the costs of the case. Your client needs to understand the economic realities before deciding whether and how to proceed.
  3. Charge a fair fee. Read ABA Model Rule 1.5 and follow its criteria for setting reasonable fees. Among the relevant factors: the time and labor required, your experience and reputation, the novelty and difficulty of the issues involved, the customary fee charged in the locality for similar matters, the likelihood that accepting the case will preclude other employment, and the results obtained.
  4. Keep an Activity Log. Do this even if you’re not billing by the hour. A detailed record of what you did for the client will help support a fee request in court. It could also be an important exhibit in defense of a malpractice claim.
  5. Choose clients who can afford your services. You have an ethical duty to provide pro bono services. But that should be your choice. When you’re screening a prospect, make sure they have the means to pay. Don’t let emotions cloud your judgment. You have an office to run and bills to cover.
  6. Beware of clients who say “money is not important.” Variations include “I’m suing on principle, not for money” and “Your check is in the mail.”
  7. Bill regularly as dictated by your fee agreement. Don’t let past-due balances accrue. The client may feel entitled to special favors, only to be stunned with a large bill when the case ends. Even if there is no billable activity, send a bill with a zero balance.
  8. Follow your state and local ethics rules. Nothing attracts the attention of disciplinary authorities more than billing and money issues.

For more practice management tips, see the Alta Pro Practice Playbook.

If you practice in Wisconsin, Texas, Minnesota, Ohio, Illinois, Indiana or Michigan, you can stay on top of ethics and risk management news by being a member of Alta Pro Lawyers RPG. You’ll get access to free webinars, the Pro Practice Playbook, Reminger ProLink, Ask the Risk Pro and more. Here’s how to join.

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