Billing is the bloodline of your practice and one that ensures your practice will profit. Billing arrangements used to fall into two categories – hourly and flat-fee – and that normally created a straightforward billing process. However, in the past decade billing has become a more complicated task.
Billing arrangements have grown more complex as the market continues to become more competitive and clients dictate billing requirements. Clients are demanding lower hourly rates, monthly fixed fees, percent complete, contingency and LEDES electronic billing. Complicated bills often lead to a higher probability that questions will be raised by clients and that invoice processing will be delayed – both of which can hurt your firm’s cash flow.
Fortunately, attorneys can simplify and automate the process of billing with innovative software. This software can allow law firms to easily set up billing arrangements, submit bills that fit with clients’ needs, and ensure that the final invoice is always accurate.
This article will address billing arrangement types, issues to consider, the role of software in billing and how to evaluate billing software.
How Would You Like to Be Billed?
The billable hour rose in popularity in the 1950s and quickly became a standard for law firms. The capturing and invoicing of the time was a fairly simple process with this model.
In the past two decades, alternative fee arrangements have taken center stage in many practices. Clients are aware of options and, many times, select the manner in which they would like to be billed. Beyond hourly or flat fee rates, these billing arrangements can include minimum or maximum fees, contingency fees, retainer billing and task-based or value billing.
Different types of billing arrangements lend themselves well to certain types of practice areas. Litigation, corporate, family law, and insurance defense law firms tend to be hourly billers. Other practice areas – such as bankruptcy, criminal defense and estate planning – often rely on flat-fee arrangements, which generally involve clients paying 100 percent upfront or 50 percent upon completion depending on the practice area.
Underlying Complications for Attorneys and Staff
Taking advantage of the competitive industry, clients are more demanding regarding how they require invoices to be presented. There are also several options for invoice templates based on the type of billing arrangements and the clients’ individual requirements. For example, attorneys may want to limit or detail the information that appears on the final invoice that is presented to the client.
Law firms find these billing arrangements a necessity in order to compete in the market. It can take a great deal of time and could adversely affect billable hours during the process.
However, this is an area where software can greatly enhance the law firm’s entire billing process. In my experience, most firms have been using the same antiquated billing programs for years – mostly because law firms are reluctant to change. The mindset is: “If it’s not broken, why fix it?”
While these outdated software programs have worked well in the past, some have failed to evolve with modern technology in order to conform with the ways that today’s attorneys and staff work (for example, a lack of mobile access.)
What to Look for When Evaluating Billing Software
If your firm is struggling with billing or with legacy software that doesn’t accommodate multiple forms of today’s modern billing arrangements, it’s time for a software evaluation. Implementing a new billing system or replacing an existing but known commodity can yield benefits in terms of simplification, automation, accuracy and higher, more accurate billings.
Ask yourself these questions during the evaluation of your firm’s billing tools:
- Is the current billing system flexible enough to allow for different types of billing arrangements?
- Does the software produce the invoices in the format that the client is requesting?
- Have the reports been updated to reflect the calculations based upon the billing arrangements?
- Are you sending information to Excel and having to manually calculate the detailed information the shareholders’ require?
- Do attorneys have apps on their mobile devices while on the road for anytime, anywhere time and expense billing?
- Does the software have automated reporting and reminders when time is late or not entered?
If you find more frustration or negative responses to these questions than positive ones, it is time to explore a new approach to billing.
As you begin to evaluate the features, keep in mind the reports your firm needs and IT requirements that will help you increase productivity – which means profitability.
Important items to consider when evaluating time, billing and accounting solutions include:
- Database structure to protect data integrity
- App and cloud-based technology that will support enhanced mobility and anywhere, anytime access
- The ability to export files in a LEDES-compliant format
- Integration with accounting programs such as QuickBooks, Sage 50 and MYOB
- Robust reporting capabilities that can determine billing productivity and profitability
- A variety of billing arrangements that meet every client’s needs
- Fee allocation and fee schedules
- Easy to use time-entry options including spreadsheets, sheet view, calendar view, simple time card and timer options
- Automated billing for yearly, quarterly and monthly client billing
- Automatic monitoring and reminders to timekeepers for missing time
- Client trust account/retainer management
Consideration of All Parties during a Billing Software Evaluation
When evaluating software and potentially undertaking a major change in technology, remember to get buy-in from all levels of the law firm. This includes the managing partner, billing manager, IT manager and individual timekeepers. Also, take into consideration your client requirements and professional requests that are currently in demand. Otherwise, there could be resistance to the idea of a new solution.
By implementing a feature-rich and flexible billing solution, a law firm will be able to offer multiple alternative billing arrangements and streamline the internal billing process. This agility will allow law firms to set themselves apart from the competition, provide sophisticated, accurate bills and report on valuable billing metrics. Not only do the clients benefit, the law firms will see an improvement in the frequency of bill payments and a minimization of invoices with inaccurate information. Finally (and most importantly), the ideal billing solution for your firm will also free up partners, billing managers and staff to focus on more billable time.
About the Author
Rosemary Kupfert, legal technology consultant for BQE Software, has more than 25 years of experience in legal billing and case management. Prior to becoming a consultant for BQE Software, she was in the legal industry for 20 years holding positions such as legal administrator, paralegal and legal assistant at bankruptcy and civil litigation law firms. She is responsible for growing awareness for the company’s legal billing solution BillQuick Legal as well as analyzing software requirements and working hand-in-hand with clients.