Easy Solutions for Improving Your Legal Client Retainer Management

Legal Client Retainer Management

Properly managing client retainers may not be the most exciting part of an attorney’s professional life, but it is, nevertheless, often a key aspect of running a successful law firm. By definition, a retainer fee is an upfront cost incurred by a legal client to pay for the services of an attorney for legal counsel. Often, and depending on the type of case, firms choose to request retainers in order to solidify a relationship with a client, to avoid a situation in which the practice is losing “billable time” by being on standby for a case, and/or to prevent the need for chasing down collections every month. While useful, it is also important to recognize what can go wrong. Here, we’re offering quick solutions to avoid the three most common pitfalls when utilizing a client retainer, which are:

  1. Losing track of client funds and falling out of compliance
  2. No method for handling retainer replenishments, resulting in depletion before work is completed
  3. Ambiguous retainer agreements

Losing Track of Legal Client Funds

Tracking client funds properly is a serious matter when it comes to staying compliant. If a firm is having trouble accounting for client funds, whether due to improper recording or commingling, it’s best to establish a matter-centric “book” setup that allows you to track funds in a ledger format. Tracking client funds by matter ensures that not only can financial records be easily produced, but also that the firm is getting paid the proper amount for work completed.

Client Retainer Management, and tracking client funds, can be simplified even further by employing legal-specific accounting software to aid in the process. Legal trust accounting software will often include built-in safeguards that protect from accidental overdrafting or improper allocation — features usually not found in general accounting programs.

Poor Retainer Replenishment Practices

If there is no money in a client’s account, you can not get paid — it’s that simple. A common solution at many law firms is to designate a team member whose has the responsibility of reporting on work in progress versus remaining retainer amounts. As a client retainer reaches a predetermined low point, this person should notify the necessary parties so that the attorney or employee in charge of billing can seek replenishment.

Modern billing software can improve this process further by automatically tracking payments and sending reminders to legal clients. Billing software that is integrated with legal accounting software has the added benefit of being able to precisely track the amount left in a client’s trust account. When the amount drops below a certain threshold, an automatic request is sent to the client. This is a process known as evergreen retainers and is one of the best ways to guarantee your law firm is getting paid on time.

Ambiguous Retainer Agreements

One of the biggest sources of legal client fee disputes for law firms who request client retainers is ambiguous retainer agreements. The best solution for law firms to avoid any confusion when it comes to retainers is to utilize retainer agreement templates or guidelines provided by trusted sources. These templates should be standardized across all of the firm’s clients and after a customized agreement is produced, it should be reviewed with the client to ensure clarity and accuracy.

The Takeaway

Legal Client retainer management can be a vital part of the success of any law firm. Having proper retainer management procedures in place is a must. Though flexibility is a valuable and often necessary attribute in the workplace, when it comes to tracking retainers, clear and defined processes are best. To further improve in this area, utilize a tool with built-in safeguards to ensure best practices. Additionally, switching to an automated billing process not only eliminates the need for manual data entry, but it can also alert users when a balance is getting low. Lastly, document templates are vital for promoting consistency; keep in mind scope, type, and length of work to ensure the agreement fulfills the requirements of your firm and client base.

While a retainer may appear like guaranteed positive class flow for your firm, proper retainer management is essential. To learn more, be sure to tune into our webinar, Three Ways Client Retainers Are Failing You.


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