Getting Out From Under Overhead Expenses

You expect to be reimbursed for the time and expenses associated with a case. That isn’t a problem for significant legal work but what do you do about all those tiny costs that crop up in the course of handling a matter? Should you track every phone call and photocopy in CosmoLex law firm billing software?

Nickels And Dimes

The answer is both yes and no. For your own benefit you need to track your actual costs. A few dollars here and there may not seem like much but they can add up quickly. Ignoring these costs can significantly impact your firm’s profit margin. The question is not so much how to track them, but rather how to bill them.

On the one hand it is completely reasonable to expect clients to reimburse you for every fraction of an hour, every postage bill and every parking fee you incur when handling their case. On the other hand sending a client an invoice filled with pages of trivial charges isn’t likely to build up a lot of goodwill. Over-itemizing — not to be confused with overcharging — can give the impression you are padding a bill, and you are likely to end up with an annoyed client or even a non-paying one.

Charging Overhead

A more appropriate way to bill these kinds of small administrative is to charge an overhead fee. Go ahead and bill your major legal hours and expenses but add a percentage to cover these kinds of small costs. You can implement overheads in the CosmoLex legal billing system as a percentage of time cards, expense cards or both.

Determining the proper overhead fee requires some experience and analysis. There is no standard percentage that will work for all practices. You’ll need to look back over past cases and compare office expenses to the amount you billed on each matter and estimate how much you need to charge in overhead. Once you’ve set a percentage, you might want to track overhead costs on a matter, marking them as non-billable. The reason is you can analyze each matter and see if the overhead percentage you set is appropriate to your actual costs.

CosmoLex legal office management software makes billing and collection, as well as other practice management tasks, a lot easier. However the tools we put at your disposal need to be backed by smart billing policies that ensure you get the fees you are owed without alienating your clients.

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