Better Billing for Law Firms (Revisited)
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Transcript of Better Billing for Law Firms (Revisited)
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Better Billing for Law Firms (Revisited)Joshua Lenon – Clio
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Instructors
Joshua Lenon
• Attorney, admitted in New York• Lawyer in Residence at Clio
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1. Billing Woes (5 minutes)2. Tap into Billing Data (10 minutes)3. Bill Processes (10 minutes)4. Payment Methods (15 minutes)5. Best Billing Practices (10 minutes)6. Conclusions (5 minutes)7. Questions (5 minutes)
Agenda
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BILLING WOES
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Billing Woes
• 73% of small law firms surveyed say they experience past due client accounts
• Firms with past due bills affect 10- 39% of client accounts.• 45.6% say collecting on invoices 90 days past due “unlikely” or “very
unlikely.”• 71.2% offer discounts prior to invoicing
Source:“39%ofClientAccountsArePastDue,”LawPracticeAdvisor,09/10/2014.
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Time Does Not = Money
• Most small law firms (61%) reported spending about eight hours per month on their billing process
• Average number of hours worked in a day were 8.9 and average hours billed = 6.9.
• 39% of time worked is not being billed in the solo and two-attorney firm segment.
Source:LexisNexisLawFirmBillableHoursSurveyReport
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Billed vs Unbilled Time
60% 60%76% 74%
92%
73%
40% 40%24% 26%
8%
27%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1 2 3to5 6to10 11to20 20+
Unbilled
Billed
Source:LexisNexisLawFirmBillableHoursSurveyReport
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43%
43%
14%
Yes,undocumented
Yes,documented
No
Source:“LawFirmBillingSurvey,”BusinessofLawBlog,08/28/2014.
Does Your Firm Have a Billing Process
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72%
18%10%
No
Yes
Unsure
Source:“LawFirmBillingSurvey,”BusinessofLawBlog,08/28/2014.
Does Your Firm Analyze Client Billing Trends?
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TAPPING INTO BILLING DATA
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Lock-Up
Unbilled work in progress plus debtor days
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Lock-Up Data
- 1/3 UK law firms had lock-up in excess of 150 days
- Average number of lock-up days of 109 on average days
Source:“Unlockinglock-updays,”TheLawSocietyGazette,02/09/2012,andNatWest2015FinancialBenchmarkingReport– LawFirms
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What Data Do Lawyers Track?
• Hours• Rates• Types of Cases• Lengths of Cases• Case Resolution Outcomes• Clients’ Legal Histories• Amounts Billed• Payments Received
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Ways to Generate Data
• Bills Sent
• Bills Paid
• Payment Methods
• Tracking Time
• Custom Fields
• Expenses
• Consistency
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What Can Lawyers Determine?
• Financial Health of Firm• Profitability of Clients Over Time• Average Earnings Per Case by Practice Area• Profitability of Practice Areas Per Effort• Productivity of Associates• Projected Workload by Case Type
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Clio.com
4,500,000 matters
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Monthly Billing Data
• ~115,000 bills generated in the first 3 months of 2015
• 36.5% of those bills were marked as paid on the SAME DAY– Trust Accounts Advanced Fee
Deposits– Flat Fees Upfront– Credit Card Payments
Unpaid63%
SameDayPaid37%
Q12015Bills
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Bills not paid on the same day took 22 days to close
on average.
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Billing Data Conclusions
• Billing problems start months BEFORE issuing a bill.• Law firms generate lots a data around billing.– Work in Progress Reports– Accounts Receivable
• Lawyers CAN get paid quickly, but need a process.• Lack of process leads to further delays
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BILLING PROCESSES
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Traditional Billing Process
1. Hourly Billing2. Generate Invoice at Matter’s End3. Mail the Bill4. Sticker Shock5. Wait
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Modern Billing Options
Source:PatrickJohansen,CLM,CPP,“PatrickonPricing,”http://www.patrickonpricing.com/continuum
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Alternative Fee Arrangements
• Flat Fees for entire matters– 20% of GCs require flat fees in ACC CLO 2015 Survey
• Unbundled Legal Service– 47% of solo practitioners and 43% of those in firms of 2 to 9
lawyers report providing unbundled services. 2014 ABA Legal Technology Survey Report, at IV-xii.
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Client Preferred Pricing Strategies
• Transparent pricing - 37%• Guaranteed pricing - 27%• Value-based pricing - 26%• Lowest price - 10%
Source:AltmanWeil2014ChiefLegalOfficerSurvey
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Big Law Approach to Billing
• Regular time input• Digital bills and payment options• Frequent billing• Staff for accounting and collections• Discouraging write-offs
Source:“FirmsTurntoSpecialiststoBoostCollections,”NewYorkLawJournal,12/08/2014
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Discounting
Discounts & write-offs rewards good and bad clients alike.
<10%
10-19%
20-20%
30-39%
LateBills&Discounts
Often NeverSource:“LawFirmBillingSurvey,”BusinessofLawBlog,08/28/2014.
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Discounting
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PAYMENT METHODS
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Powered by LawPay
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Clio Payments Setup
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Share Bills via Email
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BILLING BEST PRACTICES
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Billing Best Practice #1
Walk clients through their first bill
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Billing Best Practice #2
Don’t wait to send a bill.
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Billing Best Practice #2
Source:HowtoStartandBuildaLawPractice,JayFoonberg
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Billing Best Practice #3
Send Detailed Bills
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Billing Best Practice #3
Re: F/UJohnDoe the clientJ.Doe john doe
Source:Aluvion LawFirm
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Billing Best Practice #3
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Billing Best Practice #4
Make it easy to get paid
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Billing Best Practice #5
Get paid first
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Billing Best Practice #6
Don’t skip trust accounting & regulatory duties
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Billing Best Practice #7
Don’t let unpaid bills sit
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Manage Advances Against Invoices
http://gocl.io/fundbox
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Don’t Wait for Collections to Collect
InvoiceSherpa.com
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Custom Scheduling & Reminders
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Automated Invoice Reminders
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Recurring Payments
InvoiceSherpa.com
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CONCLUSIONS
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Conclusions
1. Billing currently troubles many firms.2. Better billing starts before you send the bill.3. Client are seeking transparent bills; not lower bills.4. Timing matters with billing. Bill consistently & frequently.5. Use alternative fee arrangements to avoid collections.
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QUESTIONS
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Legal Artificial Intelligence: Replacing or Helping Lawyers?
A Clio Webinarwith special guest ROSS Intelligence
February 23, 2016 at 11 AMhttp://gocl.io/legalai