[00:00:46] Well, hey there everybody. Welcome to Life in Law. It is officially season six of the podcast. This is your host, Heather Moulder And as always, I am truly excited to be here with you. I'm especially excited, excited that we are finally getting started on season six. We are a bit delayed. When I took my break or started my break back in May, I did not expect to be back in mid September. I thought it would be mid to late August, maybe the first week of September at the latest when we would be back. But things got delayed, as they sometimes do, because life happened. We moved this past summer. We ended up in temporary housing a couple of times. We moved three times to be precise.

[00:01:32] And we are finally in our home. It is not 100% done, but it's getting there, it's closer.

[00:01:38] And I'm finally in a place where I can hit record.

[00:01:41] I wanted to talk today in our first episode of the season, about something that I have seen happening quite a bit over the last couple of years with clients, with new clients especially, and something that specifically came up.

[00:01:58] I think it was the beginning of this summer with a current client, and that relates to legal billing.

Why Regular Legal Billing Matters

[00:02:06] We all know billing is important, but I think sometimes we don't really understand the true importance of how we bill, of what we do, how we describe what our bills look like, how we describe our narratives, how the structure, the cadence of billing, when we're billing, it all matters. And today I really want to go into why it matters, all the reasons it matters, and some are going to be more intuitive, and some may not be. So let's just dig right in because there's the first and foremost thing, the thing that all law firms and law firm owners are looking at, and that's the financial portion, why it matters so much financially. Now, we know we have to bill to get paid, generally speaking, duh, right?

[00:02:56] But here's the deal, y'. All. The longer you wait to bill, the longer you're waiting to get paid. And I cannot tell you how many young, growing, scaling law firms end up with cash flow problems because they are not billing on a regular cadence. They're forgetting to bill for a month or two. They're not doing things regularly. It's. It gets to be bad. But there's more to it than that. It's not just an immediate cash flow issue.

[00:03:26] So let me give you an example. Perhaps you have a client that's come to you for a potential litigation, and you talk through it and you say, okay, I don't see a lot going on right now. It's probably going to be, you know, when you give them a big estimate overall, if we go down a certain road, but initially, the bills won't be as much because we're not doing a whole lot.

[00:03:47] Okay, great.

[00:03:48] So month one, you bill virtually nothing. Month two, you might have $5,000 worth of work, and you don't bill it because you're like, nah, that's not that much.

[00:03:58] Month three, things pick up. It's gonna likely go to litigation. You're trying settlement negotiations, but they're really falling apart. And those took a bit, and that was $15,000 worth. And then another month comes by and you have 25,000 in that month. Well, before you know it, you've got a $50,000 invoice and you've yet to bill.

[00:04:18] Now, you might think in that scenario, well, the client should understand when they get that bill four months later why it's so large. And maybe they should remember and understand, but they. Not really, when you think about it, don't assume they know that the bill will be as much as it is because litigation's ramping up and the deal and. Or a deal is getting contentious. The truth is, clients are not tracking your time. They are not actually doing the work you are doing. So they don't really know how much time is being spent. They don't know how long some of these things take.

[00:04:55] They don't know the daily issues that might be upping the bill.

[00:05:00] They forget also. Four months later is a lot.

[00:05:04] People forget the conversations that were had. And so it might be a surprise to them. I mean, yes, they might remember then once they get the bill. But this is kind of a shock, right, to get a bill that large all of a sudden Also, and this is really important.

[00:05:20] You never know as their lawyer if they are having cash flow problems. And there's no way for you to know it if you haven't been billing them regularly. Regular billing enables you to keep up with whether they're paying in a regular manner and enables you to have conversations with them if they're not, as to why that is, so that you can get head of, okay, they're having financial trouble, do we need to put them on a payment plan? Do we need to scale back the work we're doing?

[00:05:52] Might we need to, you know, stop our representation if we can? This enables you keeping up with it to course. Correct. While the matter is still in the early stages, you might lose that ability if you don't bill regularly because you would have no way to know.

[00:06:15] So the point I'm trying to make is two things, actually. There are two points. Number one, billing regularly gives you information.

[00:06:25] Not billing regularly deprives you of important information.

[00:06:32] The other point is, psychologically speaking, you are less likely to get paid the more time that has gone by without having been paid.

[00:06:44] So when you are taking 2, 3, 4, 5 or more months before you send that initial bill and you're letting that just build up, you are less likely to get paid in full, you are less likely to collect everything, and you're more likely to have more heated discussions and clients might not be happy. It's going to sour the relationship.

[00:07:11] And let me just note, even if work was done well, even if the client was extremely happy with whatever it is you've been doing, let's say that over a six month period, you didn't bill, but they were very happy with your work and you ended up getting a settlement they were really, really happy about, but you didn't bill them until the end and you weren't conversing with them along the way about what to expect.

[00:07:39] Well, you could all of a sudden have a very unhappy client even though they were happy with the outcome, not only are you less likely to get paid, but you are more likely to end up with an unhappy client who may or may not come back as a result.

[00:07:59] All right, so the moral of the first point is you need to bill regularly. And the reason I bring this up is this issue came up with that particular client that I mentioned earlier and it was really interesting. It came up with work that came in from a current client that he had, but it was for another partner. It was in another area, not in his area of expertise. And so he got this other client going and six months had gone by without that partner having billed anything. And yet they'd been racking up quite a bill.

[00:08:31] And they kind of, you know, made the excuse of, well, this is how I do it. This is how we usually do it in our group, which by the way, if that's how you do it, that's insane. Don't you need, for obvious reasons that we just talked about, you really should be billing regularly. My preference is at least monthly. And you know, he had to go back and say, well, wait, I have all of this outstanding. And now I have to go back to the client. I have to make sure they understand it was a tough conversation that he needed, needed to have. So he needed to get some guardrails around that partner and get that bill out. Number one, talk to the client, number two, about why it was where it was. And number three, get a payment plan going. And then number four, start billing on a regular basis, moving forward and paying the client, paying on a regular basis as well. So you want to be billing regularly. It just sets up the relationship so much better from the get go and it enables you to collect on a regular basis, which we all want.

Billing Regularly Isn't Enough. You Must Also Bill Well.

[00:09:33] Okay, so that's number one. Number two, it's not enough to just bill regularly. Sorry.

[00:09:41] You also need to bill well.

[00:09:45] So you could send a bill every month and still not get paid. Well, the question is not whether you're billing, it's how you're billing and also collecting.

So the first point here is to make the bill understandable.

[00:09:59] There need to be clear and specific descriptions of the work that's been done by everyone.

[00:10:05] Do not make a client decipher what it is you're talking about.

[00:10:09] Avoid vague entries that leave them wondering what they're actually paying for. And especially important, when multiple lawyers are working on the matter, you need somebody guard-railing this. If you're the billing attorney, you should be the one doing this most likely, because usually the billing attorney is the person that has the relationship with the people you're working with. And there's got to be somebody with a relationship to those who the work is being done for, who understands their billing policies and procedures, who understands what they're looking for, who understands their desires and their wants in respect of bills. Somebody needs to be looking at this and you need to make sure all of the descriptions make sense individually and then all together as well. Does it tell a correct narrative around the value that's been provided? And that is really important, y'. All. You need to make sure those descriptions clearly indicate the value that's being provided to the client, not just spent 20 minutes doing X.

So the second piece is this: make the bill match expectations.

[00:11:23] Your bill should never be a surprise to a client, ever. If a Matter takes more time than expected. Do not let the invoice be the first time the client learns that you need to communicate it before the bill becomes a surprise. If the scope expands, discuss it. If the budget needs to change, discuss it. If, if something unexpected happens, explain it.

[00:11:47] You must learn to start picking up that phone and talking to clients as you are going about what's going on with your matter, whether the bill is going to match the expectations and what's been discussed. And if not, why never have the bill be the first time they hear of it?

The third piece is don't ever hide behind an invoice.

[00:12:12] Okay? And this goes kind of hand in hand with what I was talking about in B. But I, you know, I think a lot of times we think it's a communication. It really isn't. An invoice is not a substitute for real life communication.

[00:12:27] You need conversations, not just a number, not a quick email either.

[00:12:34] Pick up the phone and have the conversation.

Finally, look at the bill from the client's perspective.

[00:12:38] The other thing I would note is you always want, when you're looking at bills, to think about what it says and what it's communicating from their perspective, from the client's perspective. So ask yourself, if I were them, if I were the client receiving this bill, would I understand what's going on here?

[00:12:58] Would I understand why it cost this much?

[00:13:02] Would I get a feel for what to expect in the coming month?

[00:13:10] So you want to make sure that bill clearly communicates those things. Again, the value, what is it they're getting out of the work that you're performing? There is real value. It's not just the actions you're taking. A lot of lawyers are really bad about just putting down the actions they're taking. Explain it a little bit more. Explain to them why, what is it you're doing for them and why that typically goes over a lot better than pure actions. Because when you put the actions down, just FYI, that's not encompassing everything. It's not really including the analysis, the strategy, the time it's taking you to think through issues, the brainstorming that must occur sometimes, right?

[00:13:54] You don't just say, oh, I brainstormed. You talk about, analyze, strategize, and you can't just say, analyze, strategize, and kind of leave it at that. You have to give them an indication of the, the real work that you're doing on their behalf. That's why they're paying you. Make sure they understand what it is you're really doing for them.

Have a Legal Billing & Collections Process

[00:14:16] So the other piece to this, when I talk about having to bill well, is the process.

[00:14:23] You need a good billing process, and the process needs to be transparent, consistent, professional, and show that you have an awareness of their business and their expectations.

[00:14:40] Because let's be real, especially if you're in a bigger law firm, most companies, if we're representing companies, have processes of their own around what's expected, how the bill needs to look, how it gets submitted, timing of payment. You need to understand that you may not be the one doing it, and I actually do not recommend that the attorney be the one you handling that portion of it. But you do need to understand it, and you need to have people on your team who understand it very well and stick to it.

Know Their Business and Their Expectations

[00:15:12] So you need to demonstrate that you have an awareness and understanding of their business and expectations.

[00:15:20] A poor billing process can really ruin things because it can communicate that you don't understand them, which basically means you don't care to understand them, and it can really hurt the relationship, even when the underlying legal work was excellent.

The Point of Process: Transparency, Communication, Consistency, & Professionalism

[00:15:37] So here's what that means. You need a good process in place for getting paid within a reasonable time. You need a good process in place for how you send the bills out, where you send the bills, who's doing it, the communication that goes along with it, how you communicate the expectations of what the payment date is, the final payment date. Then you need a process for how you follow up if payment isn't made within that time period. This is the perfect place, by the way, to put into place systems and processes that gives you structure around how the bill looks, how the bill gets sent out, how the bill gets followed up on if it is not paid within a particular period of time.

[00:16:22] This all creates consistency, okay? And that's what we're getting at. The consistent billing, but also the consistent collections.

Billing Is A Business Development Issue (It Builds or Degrades Trust)

[00:16:32] Okay, so let's get into the bigger issue, because everything we've talked about so far, it's obvious that billing doesn't just belong in the administrative bucket. It's not just an administrative thing we do to get paid.

[00:16:46] It's part of, of business development.

[00:16:50] It's part of the client relationship. Because business development, remember, isn't just about bringing in new clients. It's about keeping and nurturing and growing the clients you already have.

[00:17:05] So regular billing creates ongoing opportunities to communicate with clients about what's happening on the matter, to explain where time is going, to flag that something is taking longer than anticipated and why, to discuss changes in scope, to revisit budgets, to clarify what comes next, and to make sure the client understands the value they're receiving. So note that this isn't just about what's in the bill and the narratives. This is about having conversations along the way. This is about nurturing and cultivating and strengthening those relationships and most importantly, making sure there aren't any surprises.

[00:17:47] I said this before, but I'm saying it again. There is no better way to ruin a relationship - regardless of how excellent your legal advice was, regardless of how wonderful the result of a case or a matter was. No better way to ruin that than by having a billing issue and a collection issue, as we've talked about.

[00:18:08] The thing I would say when it comes to the client relationship here is just remember the clients are constantly evaluating. Do I trust them? Do they understand my business? How well do they communicate? Do I know what I'm getting and what it's costing me? Do I want to hire this person or this law firm or this group? Again, what we're talking about doing billing well and regularly and consistently.

[00:18:37] It's an incredible touch point in that relationship that helps build trust, that showcases you understand them in their business, that showcases how well you do and can communicate, that makes them want to hire you again because you've made their life easier by doing this.

[00:18:56] All right, hopefully today I convinced you that billing isn't just an admin issue.

[00:19:04] It's about law firm operations.

[00:19:07] It's about client relationships, it's about business development, and it's actually an opportunity for having better and more conversations with your client, building trust, and hopefully getting more matters into the future.

Audit Your Billing Habits

[00:19:25] So today I want you to do something.

[00:19:28] Ask yourself some questions and be honest with the answers.

[00:19:33] And then once you've answered these questions, identify the one to two things you know you could do better and where you want to make changes and how. And then get started within the next week on making those changes to your billing habits so that you can become a better biller and collector and and client manager. So here are the questions. Number one, are all of my matters being billed regularly, that is, every month? Or if you were a transactional attorney and you have the type of transactions that never get billed until closing, are you at least looking at where you are every month and updating your client as to where they are?

[00:20:21] FYI, you should be doing that if you're not. That's what I did, by the way.

[00:20:25] Second question Are my clients receiving bills often enough to understand what they're spending?

[00:20:33] Third, are my relationship and origination clients being billed appropriately even when someone else is handling a matter on their path?

[00:20:44] Make sure you're not just looking at the things you and your team are working on.

[00:20:48] Look at those matters where you've got other partners handling bigger issues who might have billing attorney status on those files.

[00:20:58] Next question Do I have a system for knowing when billing falls behind?

[00:21:04] Next Am I having regular conversations about fees before there's a problem?

[00:21:12] Next, how are narratives drafted in my bills?

[00:21:16] Are they clearly showcasing the value to my clients?

[00:21:22] And if not, highly recommend you go back and listen to my conversation last season with the billing expert, the billing coach, Molly. I will put a link to her episode in the show notes. It's a really important one to listen to when it comes to billing regularly and well.

[00:21:44] And then finally, if I looked at my billing practices through the eyes of my client, what would they tell me about our relationship?

[00:21:56] Ask these questions, get honest with your answers and identify where you can make some changes and then get out there in the next week and make those changes.

[00:22:10] The lesson is not bill your clients regularly so you can collect your money. Of course you need to do that, but it's about more because the bigger lesson is this. The way you run your practice communicates something to your clients.

[00:22:27] Regular billing, good narratives, talking to your clients. When it becomes clear that it's going to be more time and money than originally anticipated, appropriate follow up.

[00:22:38] These things combined communicate transparency, consistency and professionalism and they create opportunities to properly manage expectations and build trust.

[00:22:51] That y' all is business development.

[00:22:55] That is it for this week. We'll be back next week. Bye for now.