Here are five basic tips for hourly billing attorneys to help maximize your cash flow and realize a profit.
- Are you uncomfortable discussing fees with your clients? If so, you may be prone to setting lower hourly fees, be too willing to negotiate discounted retainers, and be unmotivated to pursue the money you are owed. Unfortunately, a whole host of issues may arise from your lack of comfort in setting and collecting fees.
Our suggestion: if you cannot go through your fee agreement and articulate your arrangements in a clear and concise way, delegate it. Have an office manager or other trusted, responsible person go over the agreement with prospective clients. Others are often less attached and better suited to have these discussions without self-doubt issues clouding the conversation.
- Are you sending out invoices on a monthly basis? This is incredibly basic, but a problem we constantly encounter in our coaching practice. If you let long periods lapse before billing clients, you are cheating yourself. The chances of being paid in full lessen over time. Psychologically speaking, clients value your work when their problem is most pressing and less so after it’s resolved. If you don’t send out bills in a timely manner, you’re setting yourself up for problems as your clients become less motivated to pay over time.
Our suggestion: if you are not doing so consistently, get into a routine in which you send out invoices at least once a month – or preferably, delegate the process and maintain a firm oversight. This is an easy way to counter the devaluation process and capture more of what’s owed to you.
- Are you good at capturing your billable time and that of your team? If you don’t capture your time contemporaneously, you will end up discounting yourself when you go back and try to recreate it. The same goes for your team, who also should be held accountable for daily billing targets.
Our suggestion: keep time contemporaneously. Have a “time cop” in your office who ensures that everyone is billing and hitting their targets daily. This person (it can be you if you can’t delegate it) can support everyone in recording their time as contemporaneously as possible by checking to be sure the time has been captured by the end of each day. Many case management systems make it easy for timekeepers to capture their hours and should be fully utilized for this function.
- Are you uncomfortable charging what you are worth even though your experience and expertise warrants it?
Our suggestion: Do a little market research and see what the people in your field are charging. Check the rates of both those whose work (or reputation) you consider to be superior to yours plus those you consider not as experienced or as good. Do this analysis for all of the timekeepers in your office as well. Then, depending on what your research reveals, consider raising your fees for all new clients by an amount of $10, $25 or $50 an hour. Do the math – even a small, incremental raise will produce a surprising amount of revenue by the year’s end.
5. Do you have a huge number of outstanding receivables? The low realization rates suffered by many firms is symptomatic of poor collection systems. These systems fail due to lack of oversight and proper follow through, usually stemming from the attorney’s reluctance to deal with financial issues. We’ve already discussed the idea of sending out invoices consistently, but that’s only half the battle in the effort to be paid what you are owed. Often clients will still drag their feet in paying you (this is a client selection issue — in most cases slow-or-no payers will telegraph their lack of reliability early in the intake process by complaining about your fees and trying to negotiate with you).
Our suggestion: one way to pre-empt non-payment is to create a credit card clause in your fee agreement, which is explained to clients upfront. This clause states that you will automatically charge the client’s card when an invoice is not paid after an agreed upon amount of time – usually 10, 15 or 30 days after receipt. The client is asked for their credit card number at the time the fee agreement is signed. The Atticus clients who have adopted this clause are astonished at how it improves cash flow and reduces aggravation.
The tips above are very basic, but fall under the category of things you may understand, but are not fully implementing. Honestly appraise your present level of compliance with them and see if there is room for improvement. If nothing else, put the credit card clause in place in order to see big improvements in cash flow. Following these simple tips can help you be paid what you’re worth this year – even if you’re squeamish about it.