By Nerino Petro at 7 August, 2007, 10:08 am
Raising the issue of how you are to be paid or questioning why fees earned have not been paid can make even the toughest lawyers squeamish. Lawyers who are willing to ask the tough questions on behalf of their clients nevertheless often are afraid to address payment issues head on with their clients. Why this is a continuing issue in the legal profession is puzzling; when you go into the office of a medical, dental, or some other service provider, you generally don't leave that business without making payment. Why should it be any different for lawyers and their clients?
In addition to the obligations that you have toward your clients, you also have an obligation to yourself, your family, and your staff to see that payment is made on time. Many attorneys keep a family picture on their desk to remind them of their obligations when they're listening to the reasons the client can't pay the requested retainer or has not paid outstanding bills.
Lawyers need to approach the issue of fees and getting paid the same as any other business does:
1) Discuss your fees at the initial consultation. Discuss the basis of your fees and your retainer requirements at the initial client consultation. Describe in detail how you will bill – hourly, fixed fee, or contingency. Discuss what expenses the client will be responsible for and the amount of any retainer and how it will be applied against their bill.
2) Use written fee agreements. Using written fee agreements is a "best practice" in running your law practice. Use the fee agreement to detail your billing practices, fees, and expenses, how you expect to be paid, and your right to withdraw for nonpayment. One practice consultant advises having the withdrawal-for-nonpayment provision be a separate paragraph that the client initials, reinforcing the client's obligation for timely payment.
3) Use written engagement letters. Clearly explain in your engagement letter the scope of your representation and specifically list what you will not do for the client. The engagement letter is an opportunity to set out lawyer and client obligations to each other and what the client can expect. The letter establishes the nature of the two-way relationship between the lawyer and the client.
4) Use your bills as a regular status report. Send bills regularly – either monthly or biweekly – even if you are doing the work on a fixed or contingency fee basis. This lets clients see what actions you take on their behalf. Use the bill as another tool to communicate with your clients. Look at the bill with a critical eye – as though you were the customer. What makes more sense to you: "TC with atty Smith re: Dep Scheduling" or "Telephone call with attorney Smith to discuss scheduling of his client's deposition"? Keeping the client fully informed in understandable language helps to keep the client happy and improves the client's desire to pay promptly.
5) Stay on top of your accounts receivable. Keep track of the status of your accounts receivable on a regular basis; close monitoring helps you to identify potential issues with clients if they're not paying or are slow paying and to discuss with them any potential unhappiness with your legal representation or other issues. Regular monitoring also may prevent you from continuing to work for a client who is not paying and gives you an opportunity to withdraw in accordance with the rules.
6) Don't nickel and dime your client. Nothing will irritate clients more than to feel that they're being charged for every paperclip or every minor detail regarding their case. Bill for significant legal work. Rather than charge for every item or expense – such as the actual telephone charges – either build these charges into your hourly rate, assess an overhead charge when you open a case, or do not charge for any expense under a set dollar amount, such as $10. Any work that you do for the client but do not charge for should be shown on your bills as "no charge" (n/c). These billing ideas may not sound like big things to you, but they can engender a great deal of goodwill with your clients, and happy clients pay their bills.
Jay Foonberg, author of the ABA book How to Start and Build a Law Practice, is considered by many to be "the source" for techniques on how to run your practice. He has a very simple rule to ensure prompt and complete payment, which he calls "Foonberg's Rule," consisting of only three words: cash up front. Spend two minutes online and review this brief video , and let Jay explain his rule to you himself; it will be time well spent.
Author's Note: This is the first in a series of Articles that I am contributing to a new column titled "What Keeps You Awake at Night" for the Wisconsin Lawyer Magazine. You can read this column and other articles at on the Wisconsin Lawyer portion of the WisBar website.