How to Avoid Getting Stiffed by Clients at the End of a Representation

Clients are less likely to pay their lawyers toward the end of a representation. This is especially true for hourly work and those situations where the client has already paid enough to feel justified in stopping payment. For attorneys, the risks of non-payment are especially pronounced when a representation approaches a game-changing event, such as a hearing on a dispositive motion or a closing date for a transaction. In these scenarios, the law firm is likely to send out a final bill after it has completed the lion’s share of its work if the matter suddenly ends. As consultants to lawyers and law firms, we have seen that these bills are especially difficult to collect in full because, at this point, the law firm has lost its leverage over the client.

Fortunately, there are ways to minimize the risks of non-payment which are consistent with the firm’s ethical responsibility not to withdraw from the representation when doing so could prejudice the client. The best strategy is to alter the billing cycle to avoid sending out a bill after the major event in the case has already taken place. Ideally, you want as much of the bill paid off before the hearing, closing, or other key event as possible.

Too many attorneys treat the billing cycle as fixed and as something that they need to serve rather than the other way around. It is generally advisable to maintain a monthly billing cycle – but not always. There are times when bills should be sent out off-cycle.

If you work at a firm where billing off-cycle is likely to be met with resistance, the best approach is to begin raising this issue more than one billing cycle in advance. We have advised lawyers to raise this issue in writing about 45 days before the date of the hearing, closing, or other event that could end the representation. If you anticipate pushback from the people who handle your invoices, provide a written estimate of how much money will be at risk for non-payment if the firm adheres to its normal billing cycle. This is especially effective for non-equity partners, Of Counsel, and associates who often don’t play a large role in sending out client bills.

In addition to changing the timing of the invoice, it can be helpful to change who provides the last significant bill to the client. Specifically, when the risk of non-payment is predictably high and the amount at stake is considerable, the client is more likely to pay attention to the bill if it is transmitted by the lawyer leading the representation. One way to do this would be for the lawyer to add the handling of the fee as an agenda item to a meeting or call with the client.

If the prospect of talking to your staff about making an isolated and fully justified exception to the monthly invoicing cycle causes heartburn, that may be a symptom of a larger problem. At too many firms, the billing cycle is run for the convenience of the staff. There are many aspects of creating an efficient cash flow system that justify making lawyers adhere to deadlines. Requiring attorneys and other timekeepers to submit their time by a set deadline, for instance, is perfectly sensible. But your invoicing system should be flexible enough to accommodate lawyers who request that bills be sent out at a specific time because of their knowledge of a particular client or matter.

The Right Way to Communicate High Hourly Rates

When you charge higher hourly rates than most of your competitors, it’s important to understand how you can effectively justify this number to prospective clients.

The first rule of quoting fees to potential clients is not to mention a specific hourly rate until you and the client have discussed what is at stake for them. Your hourly rate might be fifty times the minimum wage, which could seem outrageous to a prospective client in the framework of money for time spent. For this reason, you need to discuss the context of the representation. If you charge $600/hour – or the equivalent of $10 per minute – that could sound unreasonable unless the client has a $10 million business deal or potential jail time on the line.

Secondly, reframe the discussion to focus on total cost and costs relative to the client’s exposure or potential upside. Lawyers have been conditioned to discuss their fees in terms of hourly rates, but this is counterproductive when your hourly rates are higher than your competitors’. Instead, educate the prospective client about their total cost, cost per phase of the representation, or cost per month. Any of these options will make a lot more sense to a client than the hourly rate alone. Discussing fees this way will also allow you to showcase that a higher hourly rate doesn’t necessarily translate to a higher overall cost.

Third, and perhaps most importantly, emphasize your expertise and what makes you well positioned to solve the client’s problem. When lawyers focus too much on their hourly rates, it can have the unintended consequence of reinforcing the idea in the client’s mind that competing lawyers are essentially the same. If the client feels that they are choosing between apples, the lower-priced apple is likely to win out. That is why highlighting your specific expertise, in addition to focusing on total costs, is so important when your hourly rates are higher.

2020 Is Not the Year to Put Holiday Cards and Gifts on Autopilot

Gift giving will be a bit more complicated this year for law firms, so start planning now.

With fewer people in offices this holiday season, the usual routine of having partners, associates, and paralegals sign the same card and send it off to someone’s workplace might not be an option. A nice electronic card may not be your first choice, but combined with the selective use of gifts, this can be an effective way to stay in touch without creating a hassle.

Mail delivery may also be impacted, so take that into account when setting your deadlines. And the addresses you have on file won’t be very useful if they mostly include now-empty office buildings. This year, it’ll be important to have your key contacts’ home addresses, and to obtain these without crossing any professional boundaries, you should simply ask your clients and referral sources for the best mailing addresses for them right now.

Your firm may need to pay more attention to cash flow due to the pandemic’s economic effects, so getting a jump-start on the process presents a great opportunity to set a more formal budget too.

As you reach out this year, it’ll be important to have special sensitivity toward anyone in your network who may have contracted the virus, lost a loved one, been furloughed or laid off from a job, or been displaced by any of the recent fires. This is a valuable moment to show that you and your firm are there to help.

This is a particularly good time to consider comforting treats like baked goods and non-perishable food for those stuck at home. Making a charitable gift on someone else’s behalf can be a good alternative that bypasses the need to locate a mailing address. This is especially useful if you happen to know a certain cause that person is passionate about. Be mindful also of those who have been taking care of school-aged children or elderly relatives. In difficult times, a thoughtful, personalized message combined with a gift card can be appropriate.

Although shifting work routines and family responsibilities are requiring a lot of us right now, efforts to connect will be especially meaningful this holiday season.