What is the difference between a hard cost and a soft cost for a law firm?

A hard cost, also known as a direct cost, is one that is paid directly to a vendor on behalf of a client for services provided in association with a specific client matter. Hard costs typically include court reporter fees, filing fees, mediation fees, hearing transcript fees, etc. Good law firm practice management, through the use of a legal industry-specific accounting and billing program, ensures that these costs timely appear on a client invoice and that the firm’s books reflect the repayment of the cost when it occurs. ^[1]

Soft costs, also known as indirect costs, are general overhead expenses that can be easily attributed to a specific client matter but are not paid directly to the vendor on behalf of the client. Soft costs typically include telephone, internet, legal research materials, copy costs, etc. Some law firms bill clients for these soft costs if the cost can be attributed easily to a specific client. For example, many copy machines or telephone systems allow a law firm to assign each client matter a number and then track the number of copies or the duration of all calls made under that number. Industry-specific accounting and billing programs allow firms to then include these soft costs on the client invoice and recoup them from the client. ^[1]

References

1. [Video] Law Firm Survival Skills: Business Accounting Basics