Prompt and efficient billing and collecting is the key to profitability, at least in most cases. The collection rate for new accounts (less than 30 days) is over 90 percent. That rate drops to 67 percent for accounts that are 180 days delinquent.
These collection statistics are especially important in litigation. Most Texas judges will not let attorneys withdraw due to nonpayment of fees. If the client stops paying, it is human nature to stop working, or at least stop working as hard. That’s a grievance waiting to happen.
Many small firms have paralegals, secretaries, or even worse, managing partners deal with billing and collecting. Billing is not a task that someone does when time permits. If your timekeepers are doing anything more than billing clients, your firm is losing money.
Almost every law firm has billing issues. Sometimes, a billing consultant needs to get your house in order and get things moving in the right direction. Other firms need full-time billing partners for one reason or another. Everyone has billing issues, but there is no one-size-fits-all solution. That’s where we come in.
Flat Fee
Many solo practitioners and small firms use flat fees. That’s especially true if they handle criminal defense, bankruptcy, family law, and other matters with predictable time requirements. Most criminal defenses involve plea bargains, most family law matters are uncontested, at least for the most part, and so on.
Many clients like flat fees too, especially if they are individuals as opposed to groups or companies. Such clients are often wary of billable hour arrangements. Consumer clients are used to knowing what items or services cost before they buy them.
Unless your firm and client base fall into these narrow categories, flat fees are probably not the way to go. Even if flat fees are best, there is usually room for improvement. Billing consultants can help you determine if your flat fees are too high or too low. Additionally, a time analysis conclusively shows whether or not you are making money on flat fee billing.
Periodic Fee
These hybrid fees combine some elements of hourly billing and some elements of a flat fee. They protect firms when uncontested divorces become contested. They also protect firms if settlement talks break down and the matter goes to mediation. Instead of charging by the hour or by the matter, attorneys charge by the week or month.
Stairstep fees are a variation of periodic fees. For example, a criminal defense attorney might charge X for a plea, X + Y for a bench trial, and X + Z for a jury trial.
As mentioned above, periodic fees have a few positive aspects. They also have a number of negative aspects. For example, the effective hourly rate could be unreasonable. Frequently, civil cases involve flurries of activity and long periods of relative inactivity. Periodic fees do not account for these variations.
Contingent Fee
Most attorneys know that contingent fees are only ethical in a handful of situations. Personal injury claims are probably the biggest area. A few contracts and other business litigation claims might qualify for contingent fees as well.
Hourly
Of all these methods, hourly billing is the only one with a number of significant pros and no meaningful cons. Some of these pros include:
- Monthly statements broken down hourly double as attorney-client communication about the status of the case,
- There is no need to renegotiate the attorney-client fee agreement if the case is more complex than the attorney initially anticipated, and
- Attorneys are compensated for all the time they spend on the case, and not just some of the time they spend on the case.
Amount of time involved is the only significant drawback. Some attorneys spend almost as much effort calculating invoices as they do billing time.
That’s where a billing consultant enters the picture. As mentioned above, our professionals quickly assess your billing needs and make your firm more profitable.
The Changists are dedicated to making your law firm more profitable and more efficient, so contact us today.
