Don’t wait to the end of the year to address billing issues

For many attorneys and law firms, the end of the year is designated as the time to address billing and collections issues. With all of the demands of the practice of law, it can be tough to devote much attention to those issues until it is absolutely necessary. However, addressing billing and collections issues throughout the year can both save money and can limit the headaches associated with the year-end push to collect on outstanding bills.

Thus, as we pass the midyear mark, there is no better time to address any issues with work in progress, accounts receivable, and overdue accounts. Below are some tips for making sure that there are no major issues lurking in the firm's billings.

Check on Bills for Work-in-Progress

July is an especially helpful time to check on the invoices sent to clients. That is because further investigation may be needed if there is work-in-progress from the first six months of the year that has not yet been included in an invoice sent to the client.

To aid in this review, law firms can use systems that flag matters for which an invoice has not been sent to a client for a set period of time. Some firms require invoices to be sent to clients at a set interval, such as monthly or quarterly. Indeed, there are clients who may otherwise recoil after receiving a large and unexpected bill that includes work performed over many months. With more frequent invoices, the smaller amount billed to the client is less likely to raise eyebrows and, if there are going to be billing issues, it is better to find out sooner rather than after a client rejects an invoice that includes over six months of work.

Regular communication with clients can avoid the misunderstandings that lead to fee disputes. It less than ideal when the first time a client learns about certain work performed by the attorney or a development in the case is when such information is included in an invoice along with a request for payment.

Regular bills can help limit the risk that the firm invests a substantial amount of fees in a matter before finding out that the client will refuse to pay or that there was a misunderstanding regarding the scope of work to be performed by the firm. It is much easier for a firm to walk away from a small unpaid invoice than to face the very difficult decision of whether to sue a client to recover a large amount of unpaid fees.

Keep an Eye on A/R

In addition to ensuring that invoices are being sent regularly, many firms will also monitor whether those invoices are in fact getting paid. While some clients may make any objections known after receiving the invoices, some clients simply fail to pay, either intentionally or merely because it slips their mind.

Clients can vary greatly in how they process and pay bills, but a significant amount of time (such as six months) without payment may indicate some sort of problem or miscommunication. For example, the bills might have been sent to the wrong person, or it could be that the firm or the invoices are not in the client's billing system for payment. There might be another logistical or administrative reason why the bills are not being processed on the client's end. Regardless, identifying the problem at midyear makes the collections task much more manageable than in December, when the firm may be facing pressing deadlines.

Moreover, like any other consumer, clients want to feel that they are getting value for their money, especially when it comes to legal services. If a client does not understand a bill or thinks they are being overcharged, it might be because the bill does not provide enough detail or because it is hard to read. The solution could be as simple as revising billing entries so they provide more information to the client.

Apart from administrative problems, some institutional clients may deduct amounts from invoices for attorneys' failures to comply with billing guidelines and/or procedures. Typically, these systems offer an appeal mechanism for challenging the deductions. Because that process can take time, though, it is helpful to address any appeals as early as possible.

Other clients may refuse to pay because they think the bill is too high. That can occur when there has been a breakdown in communication over the scope of work or the complexity of the matter. Thus, a conversation about the amount of work done and the anticipated future work and billings can help smooth over any issues. Getting everyone on the same page about both the amount of work a matter requires and the cost of that work can help avoid bigger disputes down the road.

Sometimes, a client's failure to pay is evidence of an overall concern with the quality of legal services provided. A client may refuse to pay due to a perceived mistake by the attorney in method or strategy. In that case, the firm or practice has an even greater interest in addressing the issue. Many firms in that situation will suggest in-person meetings to address client concerns regarding the quality of work performed. If there is a serious issue or concern, the law firm may want to get their insurance carrier or malpractice counsel involved.

Unfortunately, sometimes nonpayment means the client simply does not have the financial resources to pay. This issue can potentially be addressed through a change in the scope of the representation or the type of fee arrangement going forward. In such a situation, a firm can review Rule 4-200 of the Rules of Professional Conduct for a number of factors that are considered in determining whether a fee agreement is proper. A mid-representation fee change may also be subject to additional scrutiny.

The common theme with all of these issues is that it is best to know about them as soon as possible. Accordingly, now is the best time to start addressing billing and collections issues.