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Billing – Remove the Pain and Make More Money. It’s not difficult!

Oct 04 2017

The word “Billing” tends to strike dread in the hearts of lawyers who view it as a necessary evil.  Other professions view it as an opportunity to convey value and strengthen client relationships.  Sounds easy?  Well, actually it is if we adopt established Best Practices.  David Ellis, a former billing Partner at PwC for 10 years, shares some insights into successful and painless billing.

Firstly, let’s be frank about the comparisons with other professional services providers like the big 4.  Lawyers tend to write off 20% of time on the tab before raising the bill. They bill on average 3 months - and more - after the start of a matter (and frequently, only at the end of a matter). They  regularly have uncomfortable discussions with clients about the final bill and end up writing off further amounts.   The big 4 just don’t operate like that at all.  

Why?  Largely because they have adopted well established Best Practices to their Billing Disciplines.

And while we are at it, let’s get rid of a one urban myth.  Yes, our work is uncertain – we don’t know exactly what will happen during a matter.  However that is no different from these firms.  Far more importantly, it is no different from our clients

So what are these Best Practices that make Billing easier and improve collections?  Here are 5 unerring Must Do’s 

1.       Tell the Client how and when you are going to Bill.  State it clearly in the Engagement - and then do it!!  This sets expectations, is professional and gets you on the front foot. 

2.     Set a Budget for the job and manage to it.  Budgeting Pricing.  Set your colleagues a time / value budget and manage to it.  This is how our clients operate their projects and they expect us to do so too.  Yes, things change during a matter but we can also adjust our approach too (often in agreement with the client). So manage the client too.

3.       Bill Monthly. Review WIP and bill the client.  Again, this sets expectations, shows them we are operating professionally and alerts them (and us!) to and changes.  Not least it improves cashflow for the firm – and worth remembering at appraisal time!  Variations to this principle include stage payments, milestone billing and so on.  But don’t wait until the end!

4.       Talk to the Client about the Bill.   Yes, it sounds obvious but we generally shy away from it.  Ironically, it is invariably on the mind of the client.  Ideally a simple comment of “we are on time and on budget” is enough (and we should be if we have followed the above Best Practices J)

5.       Let your Finance department take the strain.  The lawyer’s role in the billing cycle is to review and make decisions.  It is Finance’s role to execute those decisions.  So let the finance professionals prepare, adjust, issue, and collect the bills.  They should also deal with first line queries and chasing of payment.  That is their skill after all!

Do all of this and you will have happier clients and an easier and more lucrative life.  Told you it was easy.

p.s. (There’s a sixth Best Practice too.  Bill Fixed Prices.  Don’t hourly bill.  No other professional service does it, clients don’t do it, it is grossly time consuming to review (pun intended), and focuses on inputs not outputs.  Time to join the 21st century)