More so than perhaps any other service business, law firm billing and accounting
require stringent recordkeeping…and a heightened level of duty to
your clients. Even among practice areas, the styles-and
efficiencies-veer wildly. Figuring all of this out, and then tracking it
carefully, consumes valuable time and effort-none of which is billable.
Fortunately, lawyers today can rely on technology to
help them navigate the landscape-and increase their accuracy and
efficiency exponentially.
We’ve put together a list of the top
ten most prevalent billing and accounting mistakes that law firms make.
The right legal time and billing software can help you steer clear of
these mistakes-for good.
Pitfall #10: Lumping Matters Together
Your
accountant may advise you, and also file your taxes. Similarly, your
family doctor might write a prescription for your cough-and also answer
questions about your indigestion. Chances are, you’d get a single
invoice for any services rendered in the same month or other billing
period.
Law firm billing is different. In a law firm, you’re well
advised to separate your clients’ bills by matter. Not only does this
help to resolve inquiries and disputes, it also sorts things out when
the state bar comes knocking-and wants to perform an audit.
So
you need software that will allow you to separate your billing and
timekeeping-not just by client, but by case file, dispute, or other
matter.
Pitfall #9: Not “Accounting” for Varied Billing Arrangements
Pardon
the pun. But different types of accounting are extremely different-and
if you vary your billing methods from matter to matter: you’ve got to
“account” for all of them.
If you handle a variety of cases
through an assortment of client billing arrangements, your billing
system’s got to be able to handle all of it. Whether you’re using
hourly, retainer-based hourly, fixed or flat fee, contingency basis, or
some other method of billing, your law office billing software should
take note-and process the numbers accordingly. Otherwise, you’ll be
calculating and manipulating your numbers manually-and your math will be
ripe for error.
Pitfall #8: Not “Accounting” for Billing Rate Flexibility
Chances
are, your law firm’s timekeepers (lawyers, paralegals, subject matter
experts, lobbyists, and other professionals) offer variable “standard
hourly rates.” These rates vary-for different tasks. Some rates might be
discounted, and others fully priced. You might grandfather a client in
under last year’s “old rate.” If you’re attorney billing software
doesn’t account for this, then you’re looking at complex and convoluted
calculations-and again, a great potential for error.
Pitfall #7: Failing to Track and/or Allocate Expenses
Since hours are your law firm’s main inventory, your focus is squarely on your billables.
But
while not a profit basis, expenses are a potential source for loss.
That’s an area where a lot of law firms fall short-and carve into their
profit base.
Regardless of how your expenses are paid (by check,
credit cards and/or cash), your billing software should be able to track
and allocate effectively and effortlessly.
Pitfall #6: Skimping on the Quality of Your Invoices (and/or Reminder Notices)
No
matter what you learned in law school (or simply weren’t taught):
billing is branding. It presents a facade to your clients, creates an
image, and sends a message with a crucial subtext. It’s as vital a part
of your client communication process as your website, brochure and other
collateral materials, and any other marketing material you put into the
world at large.
So it’s always a puzzle to us how top-quality
law firms think they can make do with sub-standard invoices and reminder
notices. You can-but your image and credibility take a direct hit.
It’s
very simple. You’ve got to generate invoices on a fixed billing
cycle-and create consistency. They’ve got to look professional-which
means neat and uncluttered, clear and easy-to-understand.
Any
less-and not only are client communication, timeliness, and crucial cash
flow on the line, but so is your image and reputation.
Pitfall #5: Overlooking Software Collection Support
It happens quickly. Your unpaid bills pile up, and before you know it, you have a collection issue.
Don’t
wait another billing cycle to get paid. Take a proactive approach to
debt collection. An efficient legal time and billing software provides
built-in collection support that’s easy and practically effortless.
Pitfall #4: Failing to Check for Client Conflict of Interest
It’s
a basic tenet of law office management. You’ve got to check all new
matters for conflicts of interest. Fail to do so, and you can never be
sure you’re the right lawyer for your client (if you’re not, then you’re
wasting your client’s time).
While developing a fully
bulletproof conflict checker is challenging, the right software already
contains an integrated database you can use to spot issues and potential
conflicts off the bat.
With the right attorney billing software ,
this is easy to do-and doesn’t require wasteful and redundant software.
Rather than disappear into your law firm file storage room for hours on
end, or use a duplicative conflict checker, you can simply run a new
matter into your firm’s roster of clients-the one that’s already
embedded in your billing system.
Pitfall #3: Mishandling Client Retainers
Retainers
are the lifeblood of your business. They infuse your firm with
much-needed cash flow-and signify a client’s trust and commitment in
you.
But here’s the law firm difference. Client retainers require
special treatment-which varies per matter. For one matter, you might
need to make an initial deposit to a trust account, and transfer
balances as fees are earned. This alone will complicate your back office
operation if your billing system is not capable of systematically
processing retainer transactions.
Apart from itemizing legal fees and expenses, a legal billing program must always display
“remaining retainer balances” on your client invoices.
Pitfall #2: Failing to Integrate your Trust Funds
Every
law firm endeavors to keep its trust books clean and accurate. But they
either fail, or spend significant time and resources trying to do so.
You win 90% of your trust fund tracking battle if your system provides integrated billing and trust bookkeeping
. This can work to prevent common trust errors (e.g. ledger card
overdraft), and provide a bank reconciliation tool and three-way
reconciliation reports.
Pitfall #1: Failing to Protect the Integrity and Security of your Data-and Complicating your Life
The
most common and dangerous of all legal billing pitfalls is choosing
complicated software that fails to protect the integrity and security of
your law firm data.
If your software is too complicated to learn
or use, then you’re not receiving the benefit of leverage. Technology
isn’t making your life easier…it’s making it harder. Need an external
consultant or trainer? Time to nix the software in question, and find
something hassle-free.
Data integrity and security involve taking
precautions to protect against unauthorized access and use. You need a
legal billing system with built-in features for data access control,
built-in checks for error detection, and a regular data back-up
function.
Reap the Benefits of Legal Billing Software Development
Computers
and software have changed how companies everywhere do business.
Technology today allows law firms and other businesses to compete with
their larger counterparts on many levels.
Choose your law firm
billing software with care. Analyze your program features to ensure that
the software’s design can help you avoid the ten common legal billing
pitfalls-before you make the purchase.
The right software will
not only enhance your firm’s in-house capabilities and productivity, but
will also help you comply with state ethics guidelines and increase
profitability.