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Survey – Wide Disparity in Billing Efficiency Causes Cash Flow Issues

By on January 22, 2012

In my last post I revealed the details on a study I conducted to see how successfully firms were able to get attorneys to get their time in from the prior month. The results were not bad, 74% reported they had attorney time posted no later than the 2nd business day of the month.

Now we’ll really separate the firms with a new survey that reveals how quickly firms can get edited pre-bills back from attorneys and bills out to clients.

Question #1:

From the time you give attorneys pre-bills hope long before they are due back in business days?

  •  33%    1 – 3 Business days
  • 33%    4 – 7 Business days
  • 20%    8 – 14 Business days
  • 14%    15 Business days or longer

Note: One firm reported that the “billing assistants” bill all month long and there is no requirements; the busiest billing day is the last day of the month.

Question #2:

When in an average month when are you done billing and the bills are sent, emailed or e-billed in business days?

  •  13%   1 – 4 Business days
  • 40%   5 – 10 Business days
  • 13%   11 – 15 Business days
  • 34%   16 Business days or longer

Note: Many firms reported that their billing routinely stretches into the next month and they are sending bills at the same time they are doing pre-bills for the next month.

Here are some quotes:

Worst: “We are very rarely completely done with the bills prior to sending the pre-bills out for the following month.”

Best: “We give the Attorneys 24hrs to respond back with changes or corrections. The morning following the 24hr review period the invoices are created, stuffed and mailed out within 4-5 hrs.

Conclusions

There is a wide disparity between law firms regarding how efficiently they manage the billing process. My review showed it had little to do with size of firm, number of branch offices or type of law they practiced. For example, the “Best” firm above has over 200 timekeepers and many offices. They however are highly disciplined, automated and structured. The law firms cash flow is directly related to getting bills in the hands of clients in the shortest period of time. There are ways to improve the billing process. You might want to review my 10 part series on improving the billing process starting here.

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Categories: Best Practices, Financial Management, Law firm billing, Management

Leveling the e-Billing Playing Field – Eliminate “Haircuts”

By on September 4, 2011

The e-billing battle plays itself out every day. Corporate clients and insurance carriers look to “enforce” their billing requirements and law firms look to get paid for work done even though it may not fully meet requirements. Lawyers would prefer to just practice law, but it’s just not that simple anymore.

As Mark Herrmann, Vice President and Chief Counsel – Litigation at Aon points out in his article “Inside Straight: The Truth Behind E-Billing”, clients have the benefit of using in-house computers to analyze e-bills more  efficiently, determine items that do not meet the rules and make short pay the firm. He states, “When clients make those adjustments in the world of e-bills, the law firms are typically able to press a button and print a report of the disallowed charges”. The client has the benefit, in many cases, of specially designed e-billing software that spin- through thousands of time and cost entries and kicks out entries that don’t conform to the billing rules.

In my experience, many firms do not have the option of “press a button and print a report of the disallowed charges”. They instead just accept a 2-5% “haircut” on e-bills as the costs of doing business. Till now firms just didn’t have a way of easily scanning hundreds or thousands of bills going out each month for compliance to client rules. It’s not that firms want to send out non-complying bills, it’s just too difficult to manage complex rules on a manual basis.

The solution, automated rules! Law firms can use newly introduced technology to electronically “scrub” bills before submitting them to clients. A flexible rules engine can, just like the clients in-house system, spin- through thousands of time and cost entries and kicks out entries that don’t conform to the billing rules.

Bill Scrubbing technology can level the e-billing playing field and allow firms to submit “clean bills” and eliminate “haircuts”.

 

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Categories: Best Practices, Financial Management, Law firm billing, Management, Productivity, Technology

Can Lawyer Bill Like Doctors – Similarities in the Business. Part 2

By on April 17, 2011

In my first blog posting I discussed how legal activities could be billed similar to medical procedures. The two businesses have more in common than one might think.

 The similarities:

  1. Large companies including insurance carriers pay for most patient/client bills.
  2. Procedures/legal tasks rates can be negotiated.
  3. Hard cost items in both businesses are billable to the patient/client.
  4. Many items can be outright billed as a complete flat fee.
  5. Nurses/paralegals (medical and legal assistants) can do much of the prep work not requiring the professional.
  6. The patient/client can choose a big name facility like the Mayo Clinic or their local attorney.
  7. Areas of specialization may be called in to consult or provide specialized procedures.
  8. The phone call in the middle of the night from the patient/client is “billable”.
  9. The outcome of any patient/client matter could be life or death.
  10. Not every matter is simple or well defined and sometimes the results don’t go as planned.
  11. There are always billing disputes and special considerations; these can be handled as one-off situations.
  12. Health care and legal costs can spiral out of control and both have their own issues beyond the costs per procedure.
  13. No patient/client seeks services without some level of pain.

The differences:

  1. Doctors must be efficient and their offices must run pretty smooth or they don’t make the kind of money they want. They have no incentive to take longer than necessary to complete a task.
  2. Doctors have no problem referring out patients for special procedures.
  3. Legal billings are based on inefficiencies and lack of structure, the billable hour fits inefficiencies very well.
  4. Lawyers don’t want to admit there are well identified procedures for everything they do. They will claim that almost everything they do is really a one-off special task.
  5. Income, at all but the smallest firms, is based upon leverage. Associates contribute substantially to partner income. Lawyers may be compensated based on hours worked. This is almost nonexistent in medicine.
  6.  No one seems to have the power to force lawyers into a procedure type billing methodology. There may be little financial incentive for lawyers to do this on their own.

 If lawyers wanted to bill like doctors, they could. An Alternative Fee Arrangement for lawyers has a reasonable business model to follow, doctors in private practice.

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Categories: Best Practices, Law firm billing, The Legal Market

Ingenious Tips on How to Get a Client to Pay Faster

By on March 24, 2011

This week, I have a special guest blogger, CC Drummond of Lomurro, Davison, Eastman and Muñoz. I would like to extend my gratitude for CC’s contribution. If you are interested in being a future guest blogger, please email me .

Collecting payments for services rendered at a law firm can be tricky and sensitive.  You are asking for payment for an attorney’s time and knowledge and the client, regardless of the outcome of the case, is expected to pay. Retainers will establish the rates, costs, and any other stipulations pertaining to the case. The problem is, as the fees steadily rise, so does the anxiety of the client.

There are several ways to expedite the process of collecting:

  • From the moment a potential client walks through your firm’s door they should be warmly greeted. This starts the connection between the firm and the client.  The type of relationship that is established with the client, attorney and staff, can possibly effect payments down the line.
  • Once the billing begins, if not a contingent fee matter, monthly detailed statements should be sent with a return addressed envelope for payment.  Elaborate! For example, instead of just saying telephone call .20, one should enter telephone call with ( ) regarding ( ). If the entry is .20 the client is less likely to dispute it with the added information.
  • Pre-bills must be reviewed for accuracy. Clients might find fault in additional entries, even if only one had an issue. Resolve mistakes quickly; do not make the client call 2 or 3 times trying to get it rectified. It will only bring feelings of mistrust and possibly non-payment while waiting for issues to be fixed.
  • Accept all forms of payment: credit cards, debit cards, cash and checks. Many clients are requesting their bills be e-mailed. Once they have reviewed the statement they send back, via e-mail, authorization to debit their credit card.
  • More and more companies are requesting that their billing be sent electronically. LEDES-Legal Electronic Data Exchange Standard is the format that is required. Companies can use different sites, but the format is still the same. This allows the billing coordinator to see the status of their billing and when payment will be received. Be aware, some companies do take off a percentage of their fees to use e-billing.
  • Charging interest is also an incentive for them to pay each month. It doesn’t work with all clients. Some take that as a green light that they do not have to pay in full each month. It does help at the end of the case as a bargaining tool. This may give the client the impression that they are receiving a discount when they are actually paying for the services rendered.
  • Stamp invoices that have not had a payment in over 30 days “Past Due”. Call the client as soon as payments have a lull or have ceased altogether. Communication on a personal level might have a more positive result than an email or letter.
  • Offer a small discount for immediate payment in full. 

 After every avenue has been made available to a client and they still are not paying, you may let them know their matter is going to be sent to collections. Sometimes, that’s enough to get them to at least set up a payment plan.

I wish there was one ingenious way to get clients to pay, however, if you treat your clients respectfully and personally at a time when they are having difficulty, you are more likely to have a positive outcome.

CC Drummond is Senior Billing Coordinator for Lomurro, Davison, Eastman and Munoz in Freehold, NJ. CC has been with LDEM for 12 years and prior to her position with the firm she spent 10 years in the Air Force stationed in various countries around the world. In the spring and summer, CC enjoys spending time at the beach with her 16 year-old son and, in the colder months, enjoys reading, cooking and watching movies.

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Categories: Best Practices, Financial Management, Law firm billing

Who’s Year is it – Yours or Theirs?

By on October 6, 2010

Clients typically request that firms provide them with a running total of how much money has been spent on each matter. Most clients are on tight budgets and it is convenient for them to know how much has been spent on a matter this year, including a comparison to budget when they review your bills. Pretty simple, right … yes, so long as the client is on the firm’s fiscal year or a calendar year.

Microsoft’s fiscal year starts in July, Apple starts in October …. you get the picture.

When firms include YTD billing and payment summaries on client bills they may want to show them as the clients fiscal year, not the calendar year. Much worse would be to show the information based on the firms fiscal year, which in many larger firms is not the calendar year.  The same goes budgets, can the firm provide a budget to the client based on the clients fiscal year …. might be helpful.

Check and see what is most convenient for the client and provide the analysis in a way that benefits them, not the firm.

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Categories: Best Practices, Financial Management, The Legal Market
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