Billing clients for services is not practicing law and it does not take a ton of thought to create a procedure. However, it is important to design a system that works — and to continue to revise and improve it based on experience. If you have little or no procedures in place, here is a template you can borrow. If you have one, keep reading for tips on making improvements.
Invoice clients for completed work on at least a monthly basis. If cash flow is an issue or the work of billing once a month is burdensome, split your clients into two billing rotations. For example, you could bill A–M clients on the 15th of the month and N–Z clients on the 30th of the month.
If you have an advance fee deposit, the rule is that you must invoice the client and wait “a reasonable time” for them to object. What is a reasonable time? When I was in practice, I waited 10 days, but I have since heard it described as fewer days. (See Washington Advisory Opinion 2177.) The best protection is to have the period of time set out in your policies and procedures, as well as your fee agreement, and then stick to it. Calendar payments on your calendar so that you pay yourself from the IOLTA when it is time, and do not let funds that should be in your operating account languish in the IOLTA when they should be paid to you. RPC 1.15A(f).
If your agreement says that you have an evergreen advance fee deposit (that the client must refill the deposit when it hits a low threshold, maybe $500) then your bill should explain where you are paying yourself from (the IOLTA), when that payment gets transferred, and that the client must send a certain amount to refill the deposit (maybe $1,000). This communication should mirror what is in the fee agreement.
To Bill or Not to Bill
Do not send a bill if there is nothing due or it is a de minimis amount. Tack it onto the next month’s bill. (But do figure out how you will have regular check-ins with those clients who do not touch base with you regularly, so that their cases do not languish.) Billing periodically, or at key points in the case, gives certainty to the client. Legal services are expensive; regular bills spread out the cost over a client’s budget and help the client monitor spending and expenses.
Avoid billing for everything at the very end unless it is flat-fee work that was not collected at other intervals. Even so, if you did all that work, the surprise of a large bill at the end does not bode well for client satisfaction or the bill getting paid. Billing a flat fee at completion can be risky, and here’s why: you have invested all the time to do the work and the client has no skin in the game. Think about asking for half before work starts and half at the end to try and avoid the apathetic client who fails to follow through at the very end.
The Psychology of Billing
There is a bell curve of client satisfaction that peaks at the completion of the matter. At that point, clients think their lawyers are competent, geniuses in court, did copious amounts of work, and deserve every dollar earned. But as time lapses and the client gets farther from the courtroom experience or the settlement agreement, they may begin to think they could have achieved the same result or better without the lawyer, that it was a somewhat easy case, that lawyers deserve less than they get paid, etc.
Receiving a bill a month later (or even more) may send the client a message that the lawyer doesn’t really need the money owed. Clients may resent paying more as they forget the work that went into their legal matters. They may have even moved on to the next crisis in their lives and consider ignoring the bill altogether. Therefore, invoice as close to the top of the bell curve as you can get in order to maximize the likelihood of being paid and creating as much client satisfaction as possible.