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Law Practice Management. Class #9 Billing. Billing Essentials. Fee Contract Fee Sharing Setting Fees Credit Card Payments Creating and Sending Invoices Keeping Clients Satisfied Withdrawing for Non-Payment Handling Client Costs. Fee contract. Must be in writing

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billing essentials
Billing Essentials

Fee Contract

Fee Sharing

Setting Fees

Credit Card Payments

Creating and Sending Invoices

Keeping Clients Satisfied

Withdrawing for Non-Payment

Handling Client Costs

fee contract
Fee contract

Must be in writing

Define the matter involved

Amount of the fee

if non-refundable, cite the relevant ethical requirements

Payment terms

What the fee covers

What the fee does not cover

fee contract cont
Fee contract (cont.)

Out-of-Pocket costs

Right to terminate services

Client signature on agreement

Many other possible clauses

See Foonberg, pp 255-260 for examples

non engagement disengagement
Non-engagement/disengagement

Need contact info for all potential clients

Name, mailing address (street address preferred), email address, fax number

Confirm in writing if you will not be taking case

Confirm in writing when representation is completed

Useful to trigger running of statute of limitation on possible malpractice action

non engagement letter
Non-engagement letter

Protects both lawyer and non-client

Important because you can be responsible for both malpractice and ethics violations for even minimal contact:

No money asked for or received

Single telephone consultation

Casual conversation with friend or relative

Pro bono consultation or bar assoc project

Response to email inquiry

content of non engagement letter
Content of non-engagement letter

Specify nature of contact(s) with non-client

Refer to the nature of the matter discussed

Give a reason why you are not taking the case

Don’t give advice on statute of limitation problems

Encourage non-client to seek advice from other lawyers (include number of local lawyer referral service)

Return client papers (and mention that in letter)

Make it clear that you are not taking case and will take no further action

fee sharing
Fee Sharing

Division of Fee

Usually requires some sharing of work and responsibility

Referral Fee

Generally no requirement of shared work or responsibility

Sharing Fees with Non-Lawyers Prohibited

Except bonus plans within firms

Out-of-jurisdiction lawyers are often deemed non-lawyers

general conditions for fee sharing
General conditions for fee sharing

Fee must be no higher than if only one lawyer were being compensated

Client must be notified in writing or consent in writing to the fee sharing arrangement

fl rule on fee division
FL rule on fee division

Rule 4-1.5(G)

Division between lawyers in different firms must be:

Proportionate to the services performed by each lawyer

With client’s written consent

fl rule on referral fees
FL rule on referral fees

Rule 4-1.5(F)

25% referral fee permitted in personal injury cases

Must be a written agreement to assume joint responsibility and be available for consultation

Can’t collect referral fee if you referred the matter out due to your own conflict of interest

setting type and amount of fees
Setting type and amount of fees

Easy to make a mistake, must learn from those mistakes

Readsurveys on law office economics sponsored by local or state bar associations

Talk to other lawyers in your community and/or doing similar work

types of fees
Types of Fees

Hourly – remains most common

Contingent fee – mainstay in personal injury work

Flat or fixed fee – becoming more popular

Value – also increasing in popularity, may include bonus for good result

Blended – combining one or all of above

hourly fees
Hourly fees

May not be appropriate for brand new lawyers

Hours devoted in first few cases will be high as you learn, then drop with each successive case

High hourly rates can scare away working class clients who want to know what the cap will be

contingent fees
Contingent fees

Know state limitations on percentage

See FL Rule 4-1.5 which specifies varying % depending on:

Stage proceedings at which case is settled or resolved

Amount of recovery

Contingent fees prohibited in some practice areas such as criminal and domestic relations

contingent fees prohibited
Contingent Fees Prohibited

FL Rule 4-1.5(f)(3) says that a lawyer shall not enter into an arrangement for, charge, or collect:

(A) any fee in a domestic relations matter, the payment or amount of which is contingent upon the securing of a divorce or upon the amount of alimony or support, or property settlement in lieu thereof; or

(B) a contingent fee for representing a defendant in a criminal case.

flat or fixed fees foonberg calls them lump sum
Flat or Fixed FeesFoonberg calls them “lump sum”

Fixed fee no matter how much or how little work is done

More common in criminal and domestic relations

Many clients like to know that they have a fixed fee

Starting to penetrate into business and commercial law firms

Fixed range of fees with a minimum and a maximum

value billing
Value Billing

Lawyer and the client determine the fee together

Focus on client needs, wants, expectations, and values

Focus not on lawyer’s time or specific services provided

Must define scope of the engagement, the results the client wants to accomplish, and establish value with the client up front

The fee, or a substantial portion of it, is paid up front

bonuses
Bonuses

Fees related to results

Increase fee for unusually good result

Reduce fee for unexpectedly bad result

Requires client’s agreement in advance

FL does not permit result-based fees in domestic relations, but other states do

consultation charges
Consultation charges?

Foonberg does not

Thinks it creates wrong impression

Lawyers concerned only about money

I did (in my trial court divorce practice)

Clients don’t appreciate what is free

Consumes otherwise billable time (assuming you have a full case load)

Small compensation for being conflicted out of representing other party

unbundling legal work
Unbundling legal work

Report by Florida Bar on 2003 rule for unbundling of legal services in family law cases (860 So 2d 394)

Florida Family Law Rule of Procedure 12.040 permits limited appearances for only specific matters or proceedings in family law matters

Designed to make legal services more available and affordable

quoting fees
Quoting fees

Don’t quote fees over phone or by email

Don’t give legal advice over the phone or by email

Get potential client into the office

Impress them over phone only enough to get them to come in

Save your efforts to impress for the face-to-face consultation

fee bedside manner
Fee “bedside manner”

Be firm

Use phrases such as “my standard fee in matters like this” to instill confidence

Don’t ask client what the fee should be

Distinguish between uncertainty in the final amount of the fee and uncertainty n the manner of setting the fee

Don’t back down

Don’t be swayed by client reports of what other lawyers are charging

fee bedside manner cont
Fee “bedside manner” (cont)

Don’t reduce fee on promise of future referrals (they never materialize from clients who use this tactic)

Discuss fees at initial conference

Use “5” in quoting fees (i.e. $195 rather than $200 per hour)

Suggest the client borrow the funds or use a credit card to pay fee

cash up front foonberg s rule
Cash up frontFoonberg’s rule

Client who won’t pay cash up front likely won’t pay later

Your choice

Do the work and not get paid

Don’t do the work and not get paid

Hint: The latter is better for you

You, not the client, should decide when you do pro bono work

getting the cash
Getting the cash

Consider “evergreen” retainers

Client expected to keep a certain balance in trust account to be used for costs/fees

Time/billing software can make this easy to manage

Make it clear to clients that you are not a banker

Let them find another source for financing the fees

Always discuss fees at the initial meeting

Clients need the relatively certainty of knowing what the legal services will cost

handling cash fees payments
Handling cash fees payments

Call in a staff person to count the money and give receipt to client

Deposit the cash intact in the bank, with the deposit ticket indicating the source of the fee

Make sure the client knows that cash payments are recorded in your books and will be reported on your tax return

May need to report to IRS large cash* payment (over $10,000 in single or series of transactions) on Form 8300

*includes cashier’s checks in some circumstances, money orders, etc.

alternative fee billing arrangements
Alternative fee/billing arrangements

Credit cards

Client borrows

from family, friends, financial institutions, credit card cash advances, etc.

Client refinances assets

Client sells assets

You offer a contingent fee arrangement

Whole, or in part

alternative fee billing arrangements cont
Alternative fee/billing arrangements (cont.)

Sharing work with client

Outsourcing clerical or other work

Flat or fixed fee

Outsourcing some work to lower-priced persons

Law students, underemployed lawyers, etc.

Matching payments to client cash flow (installment payments)

credit card payments
Credit card payments

No longer considered unprofessional

Florida Bar Approved Credit Card Processing (LawPay)

New lawyers should be especially eager to accept credit card payments

Look for state or local credit card merchant arrangements or ISO’s (Independent Service Organization)

Client paid for honeymoon trip to Hawaii with second wife from miles earned using credit card to pay fees in divorce from his first wife

credit card requirements
Credit Card Requirements

LOMAS article on requirements:

No commingling of client and firm funds

Requires multiple Merchant Service Accounts (MSA’s)

One tied to General or Operating account

Another tied to Trust (IOTA) account

Firm must absorb merchant fees or “discounts” charged by merchant service provider – can’t charge back to client

credit card options
Credit card options

Web-based

PayPal – works, but fees are on high side

Virtual Payments Systems (formerly ePayOps) – client pays “convenience fee” for using system

Integrated with software

PCLaw – time/billing/accounting software includes credit card processing

Traditional merchant accounts (swipe terminal)

Bar-approved member benefit (LawPay)

Independent services for lawyers

Chard.Net

Your bank

credit card options1
Credit card options

Mobile

PayPal Here

Square

Intuit GoPayment

preparing invoices
Preparing invoices

List every document you prepared or reviewed

Include all drafts and revisions

Vary wording for similar service to avoid client mistakenly thinking you are double-charging for same work

List dates, services, and time in detail (depending on client needs/desires)

preparing invoices cont
Preparing invoices (cont.)

Clients hate being billed for telephone calls

Include something tangible that resulted from call, such as a letter or memo (which should be sent memorializing every call – even if by email only)

Make reference to court and case number in litigation billings

Clients know litigation is expensive

Proofread carefully

Invoice errors (accounting and grammar) create bad impression, clients then doubt accuracy of entire bill

preparing invoices cont1
Preparing invoices (cont.)

Ask clients where they want bills sent

Ask clients how much detail they want

Some prefer simply “Professional Services Rendered” with detail in separate document

Bills often not within attorney-client privilege, so may not want to tip off other side concerning strategy

Redact (black-out) description of legal services rendered if you must produce invoices in discovery process or a fee request

billing frequency
Billing frequency

Bill at least monthly

Need constant cash flow to pay your bills

Serves as a status report to client on what has (or hasn’t) been done on case

Tells you early in representation which clients cannot or will not pay so you can alter fee arrangement or withdraw

Consider billing one-quarter of clients each week

For problem-pay clients (or if client requests it), may want to bill weekly or twice/month

final billing
Final billing

Final bill often large due to amount of work needed to conclude matter

Get it out immediately

Client is about to pay or receive a large amount of money – be first in line either way

Clients “curve of gratitude” will decline quickly after case is done. See Foonberg, p 309

making clients happy to pay the bill
Making clients happy to pay the bill

Foonberg’s rule #1: Bombard clients with paper (or emails if client is tech savvy)

Get an “FYI – No reply necessary” stamp or create standard enclosure letter or card

Foonberg’s rule #2: “cc” means “client copy”

attorney client disconnect
Attorney-Client Disconnect

What you think you are selling isn’t what clients think they are buying

You may think you are selling your advice and counsel

Clients think you are selling a product (paperwork)

Client who gripes about $35 telephone call charge will gladly pay $95 for letter that memorializes info from that call

key to client satisfaction and prompt payment
Key to client satisfaction(and prompt payment)

Related to how well client thought he/she was informed about pending matters

ABA survey

84% of satisfied clients say lawyer kept them well-informed

66% of dissatisfied clients say lawyer failed to keep them well-informed.

leverage keeping current on the law into dollars for your practice
Leverage keeping current on the law into dollars for your practice

If you find something (new case, statute, article) that will help a current or former client, let them know

Foonberg thinks snail mail makes a better impression for this type of communication, but may depend on client

withdrawing for non payment
Withdrawing for non-payment

Don’t let a drowning client take you under too

Psychologically hard to zealously represent client who isn’t paying

Get out as soon as a client gives indication that she/he will not live up to fee agreement

rule governing withdrawal for non payment
Rule governing withdrawal for non-payment

FL Rule 4-1.6(b) says a lawyer may withdraw from representing a client if:

(3) the client fails substantially to fulfill an obligation to the lawyer regarding the lawyer's services and has been given reasonable warning that the lawyer will withdraw unless the obligation is fulfilled;

(4) the representation will result in an unreasonable financial burden on the lawyer or has been rendered unreasonably difficult by the client

how to withdraw
How to withdraw

Cleanly and honestly

Sufficient advance warning to client in writing

Letters serve as basis of motion to withdraw

client costs
Client costs

Don’t go broke advancing client costs

Have client pay estimated costs in advance (into trust until used)

May need to ask experienced lawyer what costs to expect for certain types of cases

If case is meritorious, but neither you nor client can afford to advance costs, consider referral and accepting lesser fee

typical client costs
Typical client costs

Litigation

Filing fees

Police reports

Court reporter appearance and transcript fees

Medical examinations

Investigators

Expert witnesses

Lay witnesses

Process servers

typical client costs cont
Typical client costs (cont.)

Business

Advance payment of franchise fees

Taxes

Filing fees for administrative agencies

Permit fees

Transfer taxes

Recording costs

Travel

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