Legal Billing: Your Basic Guide and Best Practices

CosmoLex Team

Legal Billing Guide
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Successful legal billing is the lifeblood of a law firm. Without it, you can’t pay your staff or keep the lights on. Yet to up the stakes, even more, legal billing also represents a key opportunity to build positive relationships with clients.

Our basic guide to legal billing best practices breaks down how you can balance getting paid on time with offering clients a positive billing experience.

Make sure all billable work ends up on the invoice

To start with, if you do the work, you should get paid for it. But if you’re tracking billable hours by writing everything down at the end of the day—or even at lunch—it’s easy to miss those ten or fifteen minutes of research you did between phone calls.

To capture billable hours more accurately, strive to track time as it happens. Your practice management system should have a time tracker that links to your legal billing, meaning that your billable hours are captured—and they end up on the matter record and the invoice.

Similarly, lawyers sometimes forget to immediately record hard costs, like filing fees. When that happens, you can end up paying for something the client should reimburse you for.

Instead, leverage your practice management system to immediately record hard costs or even import your firm’s monthly credit card statement to double-check for items you may have missed.

Support your team’s work from anywhere with native cloud

Your legal billing process will run more smoothly if your team can access it from anywhere. Even if you don’t work remotely, it can still be helpful to capture hours or hard costs from your mobile phone on-the-go or at the courthouse.

A native cloud-based practice management system can securely be accessed by you and your team from anywhere, on any device. Likewise, if your management system has a mobile app, you can log updates and notes without bringing your computer with you.

Keep invoices clear and consistent

Creating a good invoice can be a powerful way of reminding a client of all the work you’ve done for them, and it’s an excellent opportunity for relationship-building.

However, if the invoice is either too vague and short or too confusing and overwrought, it may have the opposite effect of frustrating the client and leading to an unpleasant phone call.

Aim for clear, concise, and consistent invoices. A great way to do this is by drafting invoices in bulk with short but informative descriptions imported from your time tracker or matter file.

Bulk invoice generation also saves you time by letting you accomplish in a few seconds what used to take hours.

Minimize collections issues by staying proactive

One of the most frustrating experiences for law firms is when a bill goes to collections. No one wants to spend a lot of their time and energy trying to get a client with a delinquent balance to pay.

Many lawyers try to avoid this problem by using retainers. While this can solve some issues, there are also times when a firm is caught by surprise because a retainer has been depleted without their realizing it.

If your practice management system offers a single-platform legal billing and accounting program, it can monitor works-in-progress (WIPs) for you. This means that if a retainer balance gets low, it will be noted.

With the help of your practice management system, you can also take the proactive approach of employing evergreen retainers. For example, if a retainer balance falls below a certain threshold, your practice management system can notify you and automatically send an email to the client asking for replenishment.

Replenishing retainers can go a long way toward preventing collections issues from ever occurring in the first place, thereby helping to preserve your relationship with your clients.

Accept credit cards with the support of a legal-specific merchant

When it comes to paying their legal bills, clients expect the convenience of online payment options with credit cards because it’s how they are used to paying for many other services. Using a credit card online takes up a lot less of their time than mailing a check or dropping a check off at your firm’s offices in person.

For lawyers, offering a payment option that makes their clients more inclined to pay—and pay promptly—seems like a win. But using a credit card merchant not created specifically for lawyers can lead to an accidental ethical violation.

The reason for this is that traditional credit card merchants remove card transaction fees from the account they deposit funds into. That may work fine for a baker, but not so much with a lawyer. After all, the money in a trust account belongs to the client—not the lawyer.[1]

For ethical reasons, it’s critical that retainer payments made by the client get deposited directly into the client’s trust account. They can’t go through the firm’s operating account first. And any transaction fees withdrawn by the credit card merchant—which are the law firm’s responsibility to pay—must be withdrawn from the operating account, not the trust account.

Fortunately, legal-specific credit card merchants are designed just for law firms. They can handle depositing money into one account (the trust account) and withdrawing fees from another account (the operating account).

Long story short: you can accept credit card payments; just be sure to use a legal-specific merchant.

Enjoy trust safeguards with single-platform legal billing and accounting

One final consideration for getting the most out of your legal billing process is using a single-platform, legal-specific billing, and accounting program. A single-platform system lets your billing and accounting “talk” to each other, which results in a number of benefits.

First, it saves you time. It eliminates the need for double data entry and reduces the likelihood of human error since you’re only entering the data once.

Second, it allows for your practice management system to have trust account safeguards in place to prevent unintentional ethics violations. For instance, a single-platform system can prevent your team from accidentally overdrafting a client account—which often leads to the bank pulling funds from another client account to make up the difference.[2]

Even if they are made unwittingly, overdrafting and other trust accounting errors can have consequences, so look for a program that encompasses both billing and accounting—and is legal-specific, of course!

Leverage legal tech

Good legal tech can provide a lot of support by ensuring the work you’ve done makes it onto the bill, saving your team time, seamlessly supporting on-the-go and remote work, preventing retainer depletion, helping your firm accept credit cards, and providing trust accounting safeguards.

By streamlining your legal billing process, you’ll have more time to actually practice law.


References

1. American Bar Association Model Rule 1.15: Safekeeping Client Property
2. Ethics Article: Don’t Buy a Yacht with Client Trust Funds and Other Practical Reminders Concerning Client Funds and Property

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