5.4 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.

Money Matters

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.

Alta Pro Practice 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. Require an advance fee or retainer. This is wise for dubious cases and difficult clients. It protects the firm and lets you focus on the result. Don’t worry if the client hires another lawyer who doesn’t charge a retainer. Turn your attention to cases where you’re not worried about getting paid.
9. Follow your state and local ethics rules. Nothing attracts the attention of disciplinary authorities more than billing and money issues.
10. Be careful when withdrawing because of nonpayment. Follow your state’s version of ABA Model Rule 1.16. Do nothing that will prejudice your client’s case. If you’ve made an appearance on their behalf, get court permission before withdrawing.
11. Don’t reward firm members solely on gross fees and billable hours. If the most important measure of success is revenue, your firm will produce revenue in the short term—and client problems and complaints in the long term.
12. Consider alternative fees. Nobody likes hourly billing. Fixed fees, blended rates, hybrid billing or outcome pricing may work better for some clients. Check out the ABA’s Law Practice Management Section for more information on fee innovations.

The Bottom Line: Be fair to your client – and to yourself – when setting your fees and billing for your work.