Law Firm Fees & Compensation
Our new book is now available. See the comments of Carolyn Elefant, Allison Shields and Bruce MacEwen.
Learn why legal fees and compensation are integral components of the same dynamic!
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Tag Archive: Cash Flow – Finances
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Fraud by lawyers
Massachusetts followed similar actions by Connecticut and Rhode Island. Insurance carriers are now required to send a notice to consumers whenever $5,000 or more is sent to attorneys to settle clients’ claims. The objective is to prevent fraud by lawyers; some lawyers resolve clients’ claims without the consent of their clients or endorse/forge the settlement checks and deposit the funds into their own accounts.
The theory is that knowledge by clients will prevent fraud. I’ve never known knowledge of such settlements preventing thievery. But, then, I’ve also never known clients who walk away just because a lawyer has one sentence in a fee agreement that they have no malpractice insurance.
First, there is a very small percentage of "bad apples" in the legal profession. Second, remedies such as the "disclosure" requirement are band-aids on a scab. They are not truly remedial of the cause of the problems. While the rubric is "client protection," the real protection will come from better education of lawyers, including practice management education, providing affordable malpractice insurance, and then requiring every lawyer to have malpractice insurance — real insurance, not self-insurance!
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Collecting Your Fee — Sue As Last Resort
In my book, Collecting Your Fee: Getting Paid from Intake to Invoice, I maintain that your intake procedure is the most important step in the collection process; that an appropriate conversation with your client about payment of fees in the beginning of your relationship will almost certainly assure payment; and that a business-like approach to the pricing of legal services and collection of legal fees will assure collection of most, if not all, your outstanding billings.
However, where there is delayed payment, be sure it is not because of a legitimate complaint against you or the service provided. Given that, if the client has the ability but not the commitment to pay, you may want to consider filing suit against the former client.
You should review certain considerations before doing so: (more…)
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Getting Paid to Complete the Cycle
The business cycle of practicing law includes getting the client, doing the work and, finally, getting paid.
David Leffler, in GPSolo Magazine (Oct/Nov 2007) suggests that there are five stages to paying a lawyer’s bill:
1. Denial – Client says this couldn’t be my bill, the charges are too high.
2. Anger – Client says lawyers are way too expensive for what they achieve.
3. Bargaining – Client seeks to negotiate a reduced fee with the lawyer.
4. Depression – Client doesn’t contact you and is unavailble for your calls.
5. Acceptance – When Client sends you a check that clears the bank.
David talks about the importance of the beginning of the lawyer-client relationship. I agree. The intake process is what essentially sets the tone of the relationship. In my opinion, your success in the intake process at the beginning will determine your success in collecting your fee at the end.
For more about suggestions about lawyers’ collections efforts, see my book.
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E-billing: Blessing or Burden
In an article in the September 2007 edition of Law Firm Inc., e-billing is discussed. Here are some of the primary points made in the article:
Pro
• Find errors and charges that aren’t in keeping with the client’s billing standards
• Compares costs among various outside law firms
• Saves 15 – 18% of its outside legal costs in some instances
• Reduces workload in reviewing and approval process
• Increase payment by 30 days to the law firm
• Faster pay increases profit for the law firm
Con
• Increased cost connected with e-billing
• Usually have to hire a dedicated person/staff to deal with the e-billing detail
• Places small firms at a competitive disadvantage because they generally can’t afford the cost of the software, the learning curve and the additional staff required to handle the process
• On-going software maintenance fees
• Additional fee for each additional custom billing template needed for a new client
• Added accounting requirements
• Steep learning curve for attorneys to learn different billing codes for each client
• Increased possibility/likelihood of billing errors because of lack of uniformity in codes
• Rejection of total billing invoice when there is a human error on one element – invoice is returned for correction
• Notification of error is seldom complete and law firm is expected to know what the error is; if this is not the case, the process becomes process, return, fix, return, reject, etc., until it is finally determined what the error is and it’s fixed.
The article concludes that, at the moment, e-billing today is not likely to benefit law firms, though it may in the future; but it clearly is an added cost of doing business.
Thus, whether it’s a blessing or a burden depends on which side of the table this discussion finds you.
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Malpractice Insurance Disclosure Sent to Committee
The State Bar of California’s Board of Governors narrowly voted to amend the current proposal to require lawyers who don’t carry malpractice insurance to disclose this fact to their clients. The amendment would require such disclosure only in those situations where a lawyer is required to have a written engagement agreement pursuant to Business & Professions Code §6147 & 6148.
That amended proposal, then, was defeated; a subsequent sense of the Board was to send this issue to its own committee (Regulations, Admissions & Discipline Committee, not the original task force that was submitting the proposal) for further study. Two issues were uppermost in the Board’s mind. One was whether the amended proposal could be adopted by the Board without further public comment and, second, whether the full ramifications of the original proposal were completely understood by the Board.
It is hoped that the RAD committee will be successful in addressing the issues that face all of the stakeholders involved, the public and members of the Bar, without the perception of self-interest or financial gain for the Bar … and with the interest of all lawyers in mind (including the 30,000 not currently insured). (more…)
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Collecting Your Fee mentioned
Don Downey graciously mentioned our book, Collecting Your Fee: Getting Paid from Intake to Invoice (ABA 2003) with the following comment:
“… a client who genuinely respects you and the work you did will pay your bill in a timely manner.” ED Poll (2003)
In meeting Ed a few years ago and having the opportunity to speak with him on several occasions, I can’t help but say that those few words embody AR collections. Not just law firm collections, but all collections. When we communicate with our clients, we need to keep in mind that every communication either gets us closer to payment or further from a payment. Our motivation, if you haven’t already seen it, should be closer to receiving payment!
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Legal Fee Guidelines
Guidelines from North Carolina for billing at hourly rates were recently sent to me by Tom Grella, immediate past chair of the ABA’s Law Practice Management Section.
The focus of the opinion is whether it is reasonable to charge for email and other communications among the staff and lawyers about a client’s matter.
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Save money by knowing the earth is flat!
With tomorrow being October 8th and Columbus Day, it is time to recall the great traveler who taught is that the world is, in fact, round! He went from the East to the West.
It took Thomas Friedman to teach us that “the world is flat” by going from the West to the East!
Friedman teaches, among other things, about “outsourcing.” Many lawyers are using this principle (sometimes also called “delegation”) to lower their cost of operation and thus increase their profit. Even sole practitioners and small firm lawyers can effectively use this principle.
I encourage you to read Friedman’s book.
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Malpractice insurance disclosure
The tidal wave has not yet struck! That means there is still time to save ourselves.
The California State Bar Board of Governors voted today on the proposal to require disclosure to prospective clients that they do not have malpractice insurance (if they don’t). Other lawyers who are either exempt under the rule or who do have E & O coverage do not have to discuss malpractice insurance or disclose anything about the subject in their engagement agreement.
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