Changing the Billing Paradigm – Parts 10 (Final): Cover Letters on Client Bills

By on July 24, 2011

Law firms can improve cash flow and increase profitability if they improve their billing process and practices.

 The client billing process, in many firms is based on a slow, painful monthly schedule. Why … because it’s always been that way. In part 1 of this series we identified the nine (9) current painful and costly steps to client billing. In this posting we’ll discuss idea of adding a cover letter to the front of a bill.

The idea of drafting a personalized cover letter and attaching it to the monthly bill is just outright misguided. What is the purpose of the cover letter? An attorney should be communicating with the client on a routine basis, the client should feel comfortable that they know what’s going on.

 The idea of sending a personalized cover letter with each bill does nothing more than slow up the billing process, cost the firm cash flow and may allow the attorney to think that he/she is actually communicating with the client. The fact is, that anything important the attorney needs to communicate to the client probably can’t be put in a general cover letter that passes through the accounts payable department in any case.

 The firm might be better off setting up a policy that says a billing attorney must call a client, on every final bill after a matter has closed or any bill over $xxxx dollars to explain it personally to the client.

 In summary, cover letters on bills really don’t serve the intended purpose and only delay the firm’s cash flow.

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Categories: AFA - alternative fee arrangement, Best Practices, Financial Management, Law firm billing

Changing the Billing Paradigm – Parts 9: Getting Bills to the Client.

By on July 17, 2011

Law firms can improve cash flow and increase profitability if they improve their billing process and practices.

 The client billing process, in many firms is based on a slow, painful monthly schedule. Why … because it’s always been that way. In part 1 of this series we identified the nine (9) current painful and costly steps to client billing. In this posting we’ll discuss the issue getting the final bill to the client.

Here is how to improve cash flow and profitability by dealing with getting the bill to the client in the shortest possible time:

  1. The issue here is that the firm has done the work, incurred the hard costs and now wants to get paid. Unfortunately the firm can’t get paid until the client has had adequate time to process and pay the bill.
  2. Where possible, firms should try and get enough retainer in advance to cover the next month’s fees and costs. Therefore, there is never an accounts receivable.
  3. The second best option is to get the client to accept an emailed bill. Emailing a “pfd” copy of a bill is a major improvement in cash flow and profitability.
  4. Another option is to provide all client bills on a secured web site like greenlegalbills.com, send them an email with a link that will automatically take them to the site and allow them to download the bill themselves. Emailing bills is no longer a novelty, businesses are doing it everywhere. 

 In summary, the faster a client gets a bill  the better cash flow a firm will have,  and attempt to get all clients to accept email bills instead of paper copies.

 In the final post of this series will briefly discuss delays in the billing process due to personalized cover letters.

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Categories: AFA - alternative fee arrangement, Best Practices, Financial Management, Law firm billing

Changing the Billing Paradigm – Parts 6, 7 & 8: Dealing with the entire Pre-billing Process

By on July 10, 2011

Law firms can improve cash flow and increase profitability if they improve their billing process and practices.

 The client billing process, in many firms is based on a slow, painful monthly schedule. Why … because it’s always been that way. In part 1 of this series we identified the nine (9) current painful and costly steps to client billing. In this posting we’ll discuss the issue of the entire pre-billing process.

 Here is how to improve cash flow and profitability by dealing with both the pre-bill process and the attorneys who review the pre-bills:

  1. The entire pre-bill review process is, quite frankly a poor process to start with. Why do you need to review a pre-bill, what are you looking for? Time entered against the wrong client/matter, time that can’t be billed, lousy narrative …. this is like taking every car off the production line and having to redo poor workmanship in the QA department.
  2. Should bills be reviewed, maybe the larger, more complex ones. If the billing attorney properly supervises work done on his/her matters, a complete pre-bill review should not be necessary.
  3. Pre-bill reviews should be done to match the continual billing throughout the month as covered in my earlier post.
  4. Print pre-bills on a slightly off color paper so that they are real easy to recognize on a crowded desk. .
  5. Set a pre-bill review deadline, for example 3 business days after delivery. Enforce this review time. Where possible allow secretaries to edit narrative for all pre-bill changes and accounting can do such things as adjustments and transfers. Maintain an ongoing list of all outstanding pre-bills by billing attorney, if they are late contact them or their secretaries and work out a timeframe for submission.

 In summary, getting pre-bills reviewed and ready for billing is the final critical step and sometimes the most costly one.

 In the next post we’ll look at finalizing bills and getting them to the clients, why is it a problem and what can you do to improve the process and become more profitable.

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Categories: AFA - alternative fee arrangement, Best Practices, Law firm billing, Productivity

Changing the Billing Paradigm – Part 5: Dealing with Soft Costs.

By on July 4, 2011

Law firms can improve cash flow and increase profitability if they improve their billing process and practices.

 The client billing process, in many firms is based on a slow, painful monthly schedule. Why … because it’s always been that way. In part 1 of this series we identified the nine (9) current painful and costly steps to client billing. In this posting we’ll discuss the issue of processing billable soft costs each month.

Here is how to improve cash flow and profitability by dealing with soft costs:

  1. Soft Cost items include such things as copies, faxes, phone calls and postage. Many clients no longer pay for soft costs, they assume that the billable rates charged by firms (should) include these office costs. When a partner is billing $500 – $1,000/hr. it’s almost embarrassing to ask for $0.20/copy.
  2. Charging for soft costs is highly unique to law firms, can you name another business that does this. Law firms would accept this from their vendors.
  3. So, what should a firm do to improve profitability? If your firm really deals in a lot of soft costs items negotiate a flat fee or % of fees as soft costs charges. For example, 2% of fees is deemed to cover all soft costs charges. You should first check with your state bar associations to see if this is acceptable.
  4. Getting rid of soft costs also saves money on all the “cost capture” equipment currently used in the firm and all the maintenance contracts, along with labor to download and process these costs.

 In summary, get rid of soft cost, negotiate rates with clients that will cover any revenue lost through these. Trust me, your clients will be happier when they don’t see an extra $100 attached to their bill for “office functions”.

 In the next post we’ll look at dealing with the entire pre-bill process, why is it a problem and what can you do to improve the process and become more profitable.

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Categories: AFA - alternative fee arrangement, Best Practices, Financial Management, Law firm billing, Productivity

How Bill Scrubbing works.

By on November 17, 2010

In an effort to control outside legal expenses many clients have instituted strict billing guidelines. The early rules were quite simple and easy to follow, over a period of time many of these rules went from being objective to then include highly subjective requirements.

 So, how do law firms deal with the ever expanding list of do’s and don’t? They spend a great deal of time (read cost) proof reading bills by billing specialists before sending them out. This manual process delays billing, delays cash and at the end of the day, costs both firms and clients a lot of money. Even after manual proof reading, the rejections still come and the specialists are back at it again, appealing, re-billing or in many cases just taking substantial write-off’s.

 So, how can law firm’s deal with this growing problem? By utilizing a Bill Scrubber™.

 New technology developments provide a way to “scrub” client bills prior to submission to insure they meet client requirements. A Bill Scrubber checks each bill for a series of client rules and points out time and cost entries that need “help” prior to submitting the bill.

 How does a Bill Scrubber work?

  1. Using a template design, billing rules are set at the firm, client or matter level.
  2. Rules can be set to handle both electronic and paper billing requirements. For example, check that the time entry narrative does not exceed 255 characters on an e-bill.
  3. Depending on firm workflow have attorneys scrub their own entries or have centralized billing scrub the bills before and after sending pre-bills to attorneys for editing. The pre-bill can be set to show scrubber violations for further review.
  4. Advanced technology in the “scrubber engine” can even find target words that might cause a rejection, such as “inter-office ….” or “prepare for ….”. Pop-up screen suggestions can help deal with these target words.
  5. The scrubber will provide an “ignore” function to allow for subjective interpretations.
  6. The scrubber engine will look over both time and costs entries.
  7. A full audit trail is maintained to show the history of scrubbing, authorization for ignore, and results by client and attorney.

 Firms using this new technology will make it harder for clients to reject bills or short pay because of not following the billing guidelines. The use of scrubbing technology will also identify clients with more difficult rules and additional training requirements that might be needed within the firm to reduce the billing violations.

 Bill scrubbing will make money for a firm and improve adherence to client guidelines.


Bill Scrubber is a registered Trademark of RainMaker Software, Inc.

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

Legal Project Management – 2nd Big Disconnect

By on July 7, 2010

In my June 17th posting I discussed the 1st Big Disconnect that law firms have with Legal Project Management, their fear that planning, structure, budgeting and accountability will lower overall fees.

The 2nd Big Disconnect is –  no one wants to pay for “project management”. Law firms find it hard enough to get paid for things that actually “do”. These tend to be specific tasks, write a letter, file a brief, a deposition, a court appearance etc. It is difficult to get paid for “review file” because the client believes that this type of task should be covered as part of general overhead and therefore included in the rates charged for actually “doing” something.

Sometimes it’s difficult to describe exactly what Project Management really is, what do you really “do”? We have a similar problem in our business at RainMaker where we include Project Management in each system implementation contract, and define it as:

Services including software installation, planning, scheduling, consulting, communicating, coordinating, issue resolving, other unspecified implementation services, including all conversion-related services other than programming.

Luckily we only have a relatively small Project Management component to our overall professional services agreement. Our clients find it easy to understand specific task services like a day of training, or validating the data in a test conversion, but harder to understand Project Management. So why have Project Managers, well I can tell you for certainty that mismanaged projects are VERY COSTLY from a number of angles, including unhappy clients.

Law firms will face the same exact challenge, getting paid to manage a project. Someone will need to update project plans, communicate changes in the plan both internally in the firm and externally to the client. Project Managers are not inexpensive, they may not cost as much as a 3rd year associate but these people go for a lot more than most paralegals.

Project Managers are crucial to the success of any defined project, both firms and clients must agree to a way to pay for the true cost of Project Management.

In my next posting on the subject of Legal Project Management we’ll discuss the3rd Big Disconnect – Who’s In Charge?

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Categories: Best Practices, Productivity, The Legal Market
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