Five Mistakes to Avoid When Sending Your Law Firm’s First Bill to a New Client

The first invoice a law firm sends to a new client sets the tone for the attorney-client relationship. When handled strategically, the first bill sets the stage for a long and lucrative relationship. But too many law firms are tone deaf to the nuances of client communications with a new client.

Here are five common mistakes law firms make in their first bill to a new client:

1. Description of Work is Too Cursory.

In my experience as a consultant to law firms, the most common, significant invoicing mistake relates to the description of the work performed. Many lawyers describe what they do very narrowly without explaining the connection between what they did for the client and why they did it. Common examples include time entries that merely refer to researching an issue, drafting a brief, or calling opposing counsel. If you want to avoid resistance to your fee, your initial bill should explicitly explain what your specific tasks were designed to accomplish for the client.

2. The Invoiced Amount is Too Low

When you work with a new client for the first time you want to maximize the chances that they will pay you in full. It’s therefore tempting to bill an usually low amount in the first bill. This is problematic especially if a lower than average initial bill gives the client unrealistic expectations about the amounts invoiced in subsequent bills. 

3. The Invoiced Amount is Too High

The initial benefits of legal representation are often intangible. And if your first bill is too large, it causes the client to question their decision to retain you or whether your firm is worth what the representation might cost. Law firms should therefore scrutinize the initial bill to evaluate how the client will perceive it relative to the expectations that have been set for them, their prior experience with lawyers, what has been accomplished in the representation, and the client’s financial condition. 

Whether a bill is too high is a client-specific determination. A ten-thousand-dollar bill can be a shock for an individual and a rounding error for a large corporation’s in-house counsel. If your client’s experience writing a $10,000 check has been limited to putting a down payment on a car or house or paying for a vacation, the law firm should strongly consider sending a smaller initial invoice. The easiest way to do this is to send out the bill more frequently.

4. The Law Firm Takes Too Long to Send the Bill.

Too many law firms act as if a law requires them to wait at least a month before sending out their bill. As discussed above, it can sometimes be important to send bills more frequently than that. The more common problem is that firm wait closer to 60 days (or more) to send out their initial invoice. This practice is risky for several reasons. Most importantly it increases the nuances of creating an accounts receivables problem. The lawyers will continue to work the case without having evidence that the client has actually paid the bill. Collecting a retainer can be a partial solution. But even when the client has paid a retainer, delaying sending an initial bill sends the wrong message to the client about the importance of paying the invoice promptly. It’s better to habituate the client to paying the bill shortly after it is received.

5. Failing to Communicate with the Client Before Sending the Invoice.

An invoice should not be used to disseminate important information to the client. There should be no unpleasant surprises in your bill. The bill should provide details about what you did and when you did it. But when clients are blindsided by the amount of the bill or find out about material developments in their case from the bill, they are likely to delay payment, ask for a reduction, or refuse to pay the bill in its entirety. 

The examples listed above all relate to communication issues. That’s not an accident. If you want to ensure that your initial and subsequent bills get paid in full, focus on your initial bill as a way to establish clear and productive communications with your client. 

What issues have you encountered in connection with sending an initial invoice to a new client?

Why Law Firms Can Afford to Hire More Than They Do

Law firm leaders tend to assume that they can’t afford to hire a new lawyer or staff member. In my experience as a consultant to law firms, I’ve learned that you can’t take the phrase “can’t afford” literally. “Can’t afford’ doesn’t mean the same thing as “too expensive.”

Here are three recent examples that illustrate the variety of meaning behind the phrase “can’t afford”:

  • The transactional practice that assumed it couldn’t afford to hire a new corporate paralegal.
  • The IP firm that assumed it couldn’t afford to hire a new patent paralegal.
  • The contingency fee plaintiffs’ firm that assumed that it couldn’t afford a new litigation associate.

Sometimes “can’t afford” has to do with time more than it does with money. The first example above illustrates this point. The managing partner of the transactional practice was concerned that she didn’t have the bandwidth to train a new paralegal.

Sometimes “can’t afford” means that “I can’t afford to repeat the bad hire that I had a few years ago.” This is what the IP firm in the second example assumed. When discussing their current hiring needs, the firm’s brain trust had flashbacks of poor hiring experiences from the past. To be sure, bad hires are expensive, but that doesn’t mean that you should categorically dismiss considering a new hire on the assumption that they too will be a bad performer.

“Can’t afford” can also mean “can’t afford to hire on a full-time basis.” This statement does implicitly relate to cash flow, but it is based on a faulty assumption. This is not 1985, when lawyer hiring came essentially in one flavor. You can now select from contract lawyers, project based hires, and temp positions. You aren’t trapped into hiring someone full time or not at all.

On a related note, when managing partners have said that they can’t afford to hire a lawyer or paralegal, they often neglect to include the potential revenues that such hires can help generate. This came up in my discussions with the contingency firm in the third example above. It can be tricky to calculate the revenues associated with hiring a paralegal when that paralegal doesn’t directly bill for their time. But contingency firms don’t generate revenues without advancing certain cases to certain stages. Contingency cases don’t settle or reach trial without work being done to move the cases forward. Thus, there is implicit value and a range of associated revenues with having additional staff work on a contingency case. Consequently, when you assume that a new hire will generate no revenues, you tend to overstate the true costs of hiring. It is, of course, reckless to assume that every paralegal assigned to a contingency fee matter will be profitable, which is why the prudent approach is to hire additional staff for those cases where their efforts are most likely to help the firm generate increased revenues.

The above examples suggest that hiring decisions often create anxiety for law firms, and this is understandable. Payroll is almost every law firm’s single biggest expense, and it can be ruinous for a firm to spend too much on its people. But the expenses associated with hiring don’t justify taking a simplistic approach and assuming that a firm “can’t afford” to hire a new lawyer or paralegal.