Make sure your billing system covers everything

Commentary: Make sure your billing system covers everything

Jim Wirken

We have just finished talking about tips in the area of billing of expenses. You will remember that billing is the fourth area of the five areas that make up every business in the world. The other four areas are: Clients or customers; Administration; Getting the work done; and Collecting.

Now that we have finished talking about the billing of expenses, we can turn to some other interesting areas with regard to the billing process in our law firm. This week’s tip is to have someone in your office conduct a work with audit on all of your monthly bills. You are probably asking: what in the heck is a work with audit? Well, let me tell you!

In our engagement letter, we have a paragraph that states as follows: it is our policy to utilize the personnel who can most effectively handle the task to be accomplished. In addition to our hourly rates, which are billed in quarter (1/4) hour task increments we will bill for all out of pocket expenses incurred on your behalf… It is this quarter (1/4) hour task increment and the work with audit that I want to talk about together.

First, let’s talk about billing in quarter (1/4) hour task increments. We have discussed this earlier in the area of administration, but it bears repeating and amplification in this section in order to make work with audits make more sense. As I have previously stated, we always bill everything in quarter hour increments as opposed to tenths of hours. The concept is quite simple, by the time you stop doing a task, accomplish a new task and go back to the previous task that you were working on, you have expended more than 7.5 minutes. Amounts over 7.5 minutes round up to fifteen minutes and therefore everything that you bill should be in quarter hour increments. Obviously, if a task actually takes you an hour to do, then you bill an hour for it. But if the task takes any amount of time to accomplish at all, it minimally has to be billed at a quarter hour, if that is what you have agreed with the client that you will do. I have only had one client ever ask that I bill in tenths of hours. Quite candidly, I think that client did themselves a disservice, because I always found myself charging them .3 hours worth of time as opposed to .25. Oh well, be careful what you ask for, you might get it!

Another concept that needs to be talked about with regard to the work with audit is the idea of never billing for any conferences between office personnel. Clients hate to see they are being billed for conferences between lawyers and between staff and between lawyers and staff. Many years ago, I simply dropped the word conference out of my vocabulary when it became time to dictate any time where I was doing something with another lawyer or staff member on a client’s matter. At the time, I came up with the wording work with to substitute for the words conference with. Believe it or not, just the substitute of these words has made an incredible difference in my clients’ attitudes with regard to what it is we are doing to try to help get their matter moved forward.

Remember, we tell our clients in our engagement letter that we are going to utilize the personnel who can most efficiently handle the task to be accomplished. This translates to using the lowest hourly rate person possible to achieve the task. How can that person know what to do unless they are told what to do? Thus, utilizing the terminology of work with, justifies the time and you telling other people what it is you want them to do in order to achieve a particular task for a particular client’s matter. Frankly, it has been almost mind boggling that by simply changing the wording from conference with to work with, I have almost entirely done away with any complaints about a client being billed for communicating with other people in the office regarding what it is you want them to do in order to help a client’s matter be properly and timely handled.

Now we get to the work with audit. We have hired someone who we approximately pay $10.00 for approximately twenty hours per week to go through all of our clients’ bills and to be sure that wherever we say we have worked with one another that each lawyer and staff member has written up the proper time ticket. Thus, the nomenclature work with audit. We pay this person approximately $200 per week for fifty-two weeks per year or somewhere in the neighborhood of $10,400 per year to perform these work with audits. But, believe it or not, this person finds approximately $5,000 in additional billings per month by simply being sure that every lawyer and every staff person who says they are doing something with someone else in the office has a corresponding time ticket. You do the math, $5,000 times twelve months is $60,000. Do you think that our $10,400 investment is worth it, you bet!

It is simple concepts like this that continue to create circumstances in your office where you can actually turn a profit. If someone like the work with auditor can work at a central workstation utilizing an existing work space and computer, preferably after hours, you have now capitalized on asset utilization. I have often thought that someone in Kansas City was going to start a practice that I have heard about in cities like New York, Chicago and Los Angeles. In those offices, they will oftentimes have three shifts a day utilizing all of the work spaces in the law firms except for the senior lawyers’ offices. What an idea, to have individuals who are willing to work evenings or the graveyard shift and to utilize all of the existing assets that you have in place but spread them across more profit centers.

If you do not have one already, go out and hire yourself a work with auditor. If you are only utilizing your office space between eight to five, think about who might be able to come in to help you out in the evenings. Surely there is a college or university nearby with some students who would love an opportunity to earn some extra cash by helping you out in your billing task.

We have set up a system in our office where every single month, every client who says they will pay us on a monthly basis, gets a monthly bill.

Next week we are going to talk about some other concepts we use in billing that I think will help you organize the billing process so that every month you can get a bill generated automatically that will go out to every client who agrees to pay you monthly. Remember, law firm nirvana is a positive cash flow!

Talk to you next week.

Jim Wirken is a civil trial attorney and the Chairman of the Board of The Wirken Law Group in Kansas City.

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