Clients and Successful Billings
Clients and Successful Billings
Jan 13 2011, 10:13 PM
Joined: 17-July 09
Member No.: 125
Communication with clients is the best guarantee of a successful engagement. Lawyers have a consistent tendency to focus on the task at hand, without communicating to the client what they are doing. The lawyer may be doing a great job with documents, the court, or the opposing party, but the client is never told. No matter how successful the end result, the client doesn’t understand what was accomplished, and may refuse to pay the bill when it comes due.
The primary billing obligation imposed by Chapter XI of the Canadian Bar Association’s Code of Professional Conduct is only that “the lawyer shall not stipulate for, charge or accept any fee that is not fully disclosed, fair and reasonable.” “Reasonable” is often in the eye of the beholder, and the CBA adds in its commentary on the rule that “the lawyer should try to avoid controversy with the client over fees and should be ready to explain the basis for charges, especially if the client is unsophisticated or uninformed about the proper basis and measurements for fees.”
The point about controversy is especially important because, although the main purpose of a bill is to make sure that the firm gets paid, there is a secondary purpose that lawyers often miss: to leave the client with a favourable impression of the services he or she received. In other words, the bill is another tool for client communication. Communication skills are obviously vital ingredients to a successful lawyer-client relationship. It's essential that the client knows what the lawyer is doing, and that the client approves of the tactics to be taken to achieve the client's strategy or goal. Lawyers must communicate with clients at their level of understanding, and do so frequently. If clients don’t recognize the benefits of what has been done, they will become dissatisfied and no amount of marketing effort will retain them.
Start Up Front
Lawyers can control fee collection to a greater degree than they usually believe is possible. When agreeing to initiate a professional engagement, the lawyer and the client are entering into a two-way bargain. The lawyer agrees to perform to the best of his or her ability in accord with professional standards, and the client agrees to communicate and cooperate fully – which includes paying the bill. At minimum, both lawyer and client should agree to the following points regarding payment and collection:
Stipulating payment rates and terms up front is the best way to get paid. This is particularly true when combined with a budget that addresses events, time and anticipated fees, and that the client accepts. It increases the chances of collecting the fee significantly because the client understands what to expect. The agreement between the lawyer and the client should state explicitly that the lawyer will stay in continual touch with the client about expenses.
Once you establish your benchmarks, bill in a regular and timely way, using statements that contain a full narrative of the work done and the goal accomplished by that work. This allows you to provide status updates easily and to reinforce that every action you took on behalf of the client had a purpose. Also, because legal services are often intangible, the more information you can provide about how hard you worked and what your work accomplished, the more likely the client will be to perceive the bill as fair and to pay it promptly.
For example, bills can document how quickly phone calls were returned (provided, of course, that the response time is good), how often you talked to clients at no charge to learn more about their business, how often you made and kept your promises, complete with examples of value and service as defined by both parties in the engagement agreement. Such value-added elements will let you generate billing statements that are easy to understand and that clearly list actions taken on the client's behalf while relating them to the time it took to realize that value. These billing statements will be more meaningful to the client, and will go beyond a mere laundry list of tasks performed. A number of these suggestions involve actions and items that will be noted on the bill as time increments with “no charge.” That’s a vivid way of letting the client know that, although your time is valuable, you value your working relationship together even more.
Most clients recognize the importance of and are willing to pay a fair fee for value. What they do not want is to pay too much, or to pay for inefficiencies, duplications, or unnecessary services.
Surveys uniformly show that clients are unhappier with surprises and unexplained costs in their bills than they are with high bills themselves. An up-front general statement about fees and alternatives, estimates and budgets, and flow charts to explain who in the firm does what, are all crucial communication tools. Tailor this communication, and the fees themselves, to individual client perceptions of value. Clients are not particularly knowledgeable about billing, and there is no universal best format to make a billing.Client preferences and each firm’s operations differ, and each project or case has factors that should be reflected in the way the bill is detailed.
Billable hours, in theory, will provide the necessary details, but not with entries like “work on motion for summary judgment, 20 hours.” Brevity is not a benefit in billing. Break any such charge into its basic elements, with the amount of time needed for each: review key documents and deposition testimony, draft statement of uncontested facts as required by court procedure, research precedents in four similar cases, and so on. Such itemization does not try clients’ patience – it helps them understand just how much you did on their behalf.
Send Status Reports
In fact, it can be an excellent idea to supplement regular invoices with interim status reports that demonstrate you are on top of the job and are actively working to accomplish what the client wants. Status reports do not have to be a detailed administrative burden. A simple form can easily be saved as a word processing file, with appropriate boxes to be checked and blanks to be filled in for a few basic categories. For instance, a litigation status report could have boxes to be checked showing current activities (case evaluation, research, pleadings, motions, and so on), what you might need from clients themselves, and what your next steps will be. Particularly useful is a section that shows clients the current status of their account, and how they can make it current. Periodic status reports also make it much easier to construct detailed invoices that itemize exactly what services clients have received for their money.
There is another advantage to the combination of status reports and detailed invoices – it absolves the lawyer from any possible allegations of bill padding. It is a fact of life that the ability to take this unethical action, or to be left exposed to allegations that it has been done, depends in part on how inattentive the client is to the lawyer’s bill, and how lacking in detail that bill is. When the Madoff investment adviser scam first broke, press reports emphasized that client statements received from Madoff had very little detail – but because the bottom line on their investments looked so good, few clients cared to peek “under the hood.”
If a billing comes into question, either by a judge needing to approve the fee, or because of a fee dispute needing to go before an arbitration panel, the tried and true method of demonstrating what you’ve done is the best defence. Adequate billing detail can defuse controversy. A bill that says only, "For legal services rendered,” or that is inaccurate or confusing, potentially opens the door to concerns, or actual allegations, that the bill is padded.
Show your clients how highly you value them by how much you communicate to them and interact with them. That reinforces reliability and trust. Demonstrating to clients what you’ve done for them is the best way to be confident when you bill for it. Lawyers sometimes wonder at what point in their careers they can decide that their bill is what it is, without feeling the need to be defensive about it or to reduce it. No matter what the economic conditions are, this question goes to the heart of what it means to be a lawyer. Lawyers help improve people’s lives. Our objective should be to provide and account for our services in such a way that clients understand and accept the value as well as the cost of what we do. When that happens, fees are not an issue and lawyers do not have to apologize for what they charge.
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