Create a client-friendly billing culture

Kyle Woods of Supreme Financial Management and Robin Iori of Iori Communications are members of the The Law Firm Consultants Network (LFCN).

The Law Firm Consultants Network (LFCN) recently held a breakfast panel on law firm collections practices. Titled, “Show Us the Money,” it featured several professionals who work in the legal industry. They were: Angie Hickey of Levenfeld, Pearlstein LLC; Bob Markoff of Markoff Law LLC; George Mangan of DeWitt Stern; and Elizabeth Lindberg of the Illinois Department of Employment Security. The panel was moderated by Marv Siegel of Premier Professionals International.

All of the panel members, who represent dozens of years of experience in the legal industry, agreed on one point: the collections process really begins at the start of the client relationship. Every client relationship must have an engagement letter that spells out the payment expectations for that client. If possible, the letter should be updated on an annual basis as the relationship continues.

While this was questioned by a few of the law firm administration professionals attending the event, it was still agreed as the safest way to avoid collections issues, especially with those clients that a firm has had for multiple years. Of course, going back to get an updated engagement letter with those clients for which the firm has been working for 25 years can pose a challenge.

In addition, the creation of a “client friendly” billing culture is a must. From the client side, addressed by Ms. Lindberg, the three words for law firms to remember are “communicate, communicate, communicate.” The most effective way to increase a firm’s realization rate is to keep the client updated on any and all lawyer activity. Clients should not see the amount of time spent on a matter for the first time on a statement.

Two more tips: Don’t “block bill.” Clients want law firms to list separate line items on statements. And don’t practice “catch-up billing.” Clients have budgets, too. And they do not want three months of billing jammed into one statement.

From the law firm perspective, Hickey described her firm’s process. They allow an attorney 30 to 60 days to collect an account. Then it is turned over to the collection department at the firm. This enables the client to discuss the billing issue with someone other than the billing attorney, which is often more effective. Clients of her firm may also pay by credit card or be set up on a monthly payment plan.

Hickey noted that lawyers at Levenfeld, Pearlstein know the firm’s emphasis on collections and those who come to the firm are schooled early on in the importance it plays in the firm.

Markoff discussed what is often the “last resort” option. As an outside collections professional, Markoff gets the call after all other attempts have apparently failed. He noted that litigation can be costly, and the option of receiving only 50 percent is viable. “Settle at 50 percent and run” was his recommendation. Contingency fees for collections services are around 20 percent without litigation and with it, they can surpass 30 percent. And the contingency fees usually come with the threat of a counter claim.

As for the effects on E&O insurance, Mangan said that insurance companies do take a look at E&O claims when determining premiums. The best way to mitigate counter claims – and ultimately insurance premiums – is to have a sound billing and collection process in the first place.


One response to “Create a client-friendly billing culture

  1. Thank you for this great post! I just had a conversation with one of my law firm clients about her collection problems; I am sending your blog on to all of my law firm clients and reproducing it on all of my social media sites.
    Thank you for adding value to this ongoing conversation in the legal community.

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