January 9, 2006
Why Are Law Firms Slow to Bill Their Clients?
I enjoyed reading Andy Peters’ article recently in the Daily Report. He was reviewing the highlights of a session that placed two prominent law firm attorneys as panelists before 100 in-house corporate counsels. Jeffrey Haidet, Chairman of Long & Aldridge, and William Brewster, the managing partner of Kilpatrick Stockton, took their lumps and served with honor handling such questions as:
- Why are outside firms slow to send invoices…..?
- Why don’t outside lawyers understand the business models and corporate culture of their clients?
Regarding the question on invoices, I am always amazed that law firm’s don’t understand that their corporate clients are not happy about being billed for work done over two months ago. It isn’t even unusual for the bill to be three months behind the actual work by the time it gets to the corporate counsel. That causes problems with their records. People tend not to be very appreciative of work done two or three months in arrears. The average law firm has 78 days of work in process and it takes 60 days to collect once the bill has gone out the door or across the Internet. That is money that is not in the partners’ pockets and it is an irritant to the law firm’s client. So, why not solve the problem? It isn’t rocket science. The steps are clear and simple:
- Require fee earners to track and report time extemporaneously as work is performed
- Give them the tools to do so including the ability to do so anywhere, any time preferably using BlackBerries or other PDA devices
- Use tools with spell check and automatic testing against the engagement standards (pricing and billing rules) required by the client
- Require time entries to be correct as submitted by the fee earner or as edited, throughout the month, by the fee earner's secretary or assistant
- Run bills immediately after month end
- Require billing attorneys to return changes within three business days or the bills go out the door “as is”
- Send bills electronically or by e-mail wherever you can
- If clients will accept it, change your service (billing month) to cover the period from the 26th through the 25th. Doing so means you have a bill in the clients hands by the end of their month even though it is a few days out of sync with the calendar. Many clients will prefer it.
As for the second question—why outside lawyers don’t understand the business models and corporate culture of their clients - I will save my comments for a later post.
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Filed under Cash Flow Issues, Policies/ Procedures by Tom Collins