Billing Procedures for Law Firms: Clean Up Your Policies

While billing procedures for law firms might not be the most exciting topic, it’s essential. After all, at the end of the day, law firms need to be paid for their work!

Not only can efficient billing procedures help lawyers get paid, but they can even help grow a law firm’s business over time. For example, research from Clio’s 2021 Legal Trends Report indicated that the most successful firms in the study (those who increased their revenue by 20% or more over a five-year period) were more likely to adopt new technologies, such as online billing platforms.

In this blog post, we’ll cover best practices for billing procedures for law firms so you can rest assured that you’re covered for everything from invoicing to chargebacks.

A bird’s eye view of billing procedures for law firms

In many cases, the law firm billing process looks something like this:

1. The firm brings on a new client and opens a case.
2. Billable time and disbursement fees and expenses are logged throughout the case.
3. At the end of each month (or at the end of the case, if it’s a shorter or contingency case), bills and expenses for each client and case are put into a draft bill.
4. Solicitors add notes and adjust costs as needed and approve the bill.
5. A final version of the bill is created and sent to clients for payment.
6. Clients pay via whatever payment methods are accepted at the firm.
7. The accounting team sends follow-up reminders regarding late payments.

While it seems pretty straightforward, there’s plenty of room for bottlenecks and wasted costs. For example, solicitors or partners taking too long to approve bills or adding too many edits can cause a delay in bills getting sent out. Or, the accounting team may have to spend hours upon hours chasing clients for payment.

Managing expenses is a challenge in its own right. From the costs to bring in new clients, to non-reimbursable firm expenses (rent, salaries, technology, association fees, etc.). You need to ensure you have an efficient billing process to ensure cash keeps coming into the firm. 

How can I improve my billing process?

To save your law firm valuable time and money, having a clear, standardised law firm billing policy in place is essential. It gives lawyers and staff something to refer to and keeps everyone in sync.

If you’re writing a policy for the first time, you’ll want to consider:

• How your firm bills clients.
• Where you see the most errors.
• Which stages of the process are causing the biggest bottlenecks.

Though developing a billing policy may take up time up-front, remember that Investing early on in a transparent and accessible billing and expense process will save you time later on.

Your law firm’s billing policy

With that in mind, follow these steps to write an effective billing policy:

1. Provide a template and guidelines

Your standardised template and process  should include:

• When to send invoices.
• How long descriptions should be.
• What expenses must be included on bills versus what should be written off.
• Any standard introductory communications on bills, if needed.

Templates and guidelines will likely need to be tailored to your specific practice area.

2. Write out the flow of your law firm’s billing process

Become an expert in the lifecycle of your bills. You should be able to quickly answer the following questions about your firm’s billing process:

• Which solicitors on a case need to review a bill?
• In which order?
• Are bills mailed or sent electronically?
• Who should one inform when sending a bill out?

Write out your entire process from start to finish, so there’s no confusion—even if you’re a solo lawyer. This understanding helps support your bottom line, and helps you better understand your clients. Giving you momentum to invest in the client-centered experience.

3. Set requirements for invoice review

It’s helpful to ask lawyers to use a specific system, such as your legal practice management software, to conduct reviews electronically. This helps speed up the process and leaves less room for error—you can even use automation software.

4. Integrate the finance team with your billing process

Ensure your accountant or finance team knows when your firm is sending bills to clients, what still needs to be collected, and what’s being written off. Communication gaps can cause confusion and delay the payment process.

5. Include a standard process for disputes and collections

Don’t leave unpaid bills languishing for months. The longer you wait, the less likely your clients will pay, so have a straightforward collections process. Identify who needs to follow up on unpaid bills and when. Have a standard but personalised reminder email or letter you can easily send to clients. It’s okay to repeat the same phrasing, but the tone and message should feel friendly, calm, and kind. Paying for legal services is stressful enough; it’s important to empathise with and reassure your clients.

If a client disputes a bill, know who will review the dispute and provide frameworks for resolving the issue. You’ll also want to consider your process for dealing with chargeback requests if you use online payments. If you are a Clio Manage customer, Clio’s Payment Operations department will help every step of the way with chargebacks.

6. Have a public billing policy for clients

Your clients should be well-acquainted with your billing policy, so they’re clear on:

• When and how often bills will arrive.
• The different payment methods available.
• How much time clients have to pay.
• The consequences for late payments.

Write this out clearly and provide it to all new clients, preferably right after their initial consultation. New clients might feel overwhelmed by new information and potential strife and uncertainty about their case. Having your billing policy in writing will ensure clients can go back and review it at their convenience.

Law Firm Billing Responsibilities

Once you’ve developed your law firm billing policy, it’s time to implement and set expectations around the policy. Ensuring your staff understand the policy and what is expected of them, executing billing tasks (such as time entry and invoicing) quickly, and providing clear, accurate descriptions in your bills will all help to make the billing process as seamless as possible.

Educating staff

A billing procedure for law firms is only valuable if all staff members understand it. Once you have developed a billing policy, take the time to educate your entire staff on expectations and, if you notice that staff members aren’t following the policy, let them know as soon as possible so they can rectify their errors.

Providing descriptive invoices

Make sure your invoices clearly explain what the client is being billed for. Providing little to no information, or using ambiguous language, can result in more work as clients seek clarification or dispute aspects of your bill. This practice can take some getting used to, since you don’t want to provide too much or too little information.

Recording time accurately

It’s essential for both lawyers and other staff members to enter their billable and non-billable time accurately. Time entries should reflect the actual time spent on the task and provide an accurate description of the task. This information not only informs how much you bill and what information you provide to your client about the tasks involved but also helps the reviewing lawyer (or other staff member, in some cases) decide which tasks should be billed to the client.

It’s also important for staff to enter their time promptly. Many lawyers and other staff members may be in the habit of writing down their billable and non-billable hours on a notepad and entering their time manually into a software program at a later date. This practice can be problematic as context is lost with time. For example, you might jot down a vague description of a task and later forget what you had been working on, or even forget to record the case the task is associated with! Programs like Clio Manage can help you record your time automatically—you can even record time on the go through the mobile app.

Sending bills on time

As we mentioned above, it’s important to make your billing expectations clear for clients. Billing isn’t a one-way street, though—after all, your client can’t pay you if you haven’t billed them. Sticking to a regular billing schedule will help your law firm stay organised and keep clients happy.

Final thoughts on billing procedures for law firms

Developing billing procedures for law firms helps to set expectations, increase efficiency, and maintain good relationships with your clients. However, developing a policy is one piece of the puzzle. Actually implementing the policy and educating both staff and clients about billing expectations will ensure that everyone involved enjoys a straightforward, clear billing experience.

We published this blog post in August 2023. Last updated: August 22, 2023.

Categorized in: Business