Law Firm Billing Procedures: 10 Best Practices to Follow

by Bruce Policky / January 04, 2024

Law Firm Billing Procedures: 10 Best Practices to Follow

An unwieldy billing process can eat into one of a law firm’s most valuable assets: time. Attorneys know this, but changing office workflows requires planning and is best accomplished through manageable steps.

As a leader in legal practice management software, Tabs3 understands the importance of optimizing law firm billing procedures to create a streamlined experience for attorneys and their clients. In this guide, we dive into strategies to enhance your law firm’s billing process, ensuring both effectiveness and client satisfaction.

1. Track your time

The precision of time tracking directly influences the accuracy and fairness of billing. It’s not just about recording time; it’s about understanding the value of each minute spent on a client’s case. If you track your time, it’s easier to estimate how long tasks take, determine effective billing rates, and evaluate profitability. Firms should foster a culture where consistent time tracking is the norm. Attorneys and support staff should be trained to capture every billable moment as this accuracy benefits both the firm and the client.

Technology is a powerful ally for effective time tracking. Implementing intuitive time-tracking software that integrates seamlessly into daily workflows can dramatically improve accuracy and reduce the burden of manual entry. Tools like those offered by Tabs3 are designed with the legal professional in mind, offering features that simplify the time-tracking process.

To improve timekeeping habits, start with a month. Commit to thirty days and make it a daily practice. Consistency is your friend.

2. Get tech to work for you

The integration of technology in law firm billing procedures is a transformational move. The right technology can automate repetitive tasks, reduce errors, and provide valuable insights into the billing process. For instance, the Tabs3 practice management software, PracticeMaster, has toolbar plug-ins for the programs you use every day, making timekeeping less of a chore.

Those who work on the go can also get mobile access with Tabs3 Connect. With Tabs3 Connect, time tracking, accessing client information, and managing billing tasks can be done effortlessly on smartphones or tablets. This mobile access not only enhances convenience but also ensures that billable time and expenses are captured promptly and accurately, reducing the risk of lost revenue due to forgotten or unrecorded activities.

Additionally, Tabs3 Cloud extends the capabilities of traditional billing software by offering the flexibility of cloud-based access. This means that all the functionalities of Tabs3’s billing software are available to users wherever they have an internet connection. This is particularly beneficial for firms with multiple locations or for those who have embraced a hybrid working model.

3. Make tasks easier with legal billing software

The choice of billing software can make a significant difference in how a law firm operates. Tabs3’s legal billing software is more than just a tool for tracking hours and expenses; it’s a comprehensive system that can transform the entire billing cycle. From capturing billable hours to generating detailed invoices, the right software can streamline every aspect of the billing process.

4. Pre-bill review as if it’s you

When you’re reviewing pre-bills, ask yourself, “Would I pay this bill?”

Pre-bill review is about more than simply glancing at an invoice before it’s sent out. It’s a critical quality control step that ensures accuracy, fairness, and transparency in billing. The process involves a detailed review of the billable items, ensuring they accurately reflect the work done and are communicated in a manner that is clear and understandable to the client. It’s an opportunity to catch and correct any inaccuracies, whether they are in time entries, expense allocations, or descriptive narratives.

The pre-bill review process should also be seen as a client service opportunity. It’s a chance to demonstrate to clients the value they are receiving for their legal spend. This requires that bills are not only accurate but also detailed enough to give clients a clear understanding of the services provided. Firms should train their attorneys and billing staff on the nuances of crafting billing narratives that are both informative and client-friendly. This involves using language that is clear and devoid of legal jargon, making it easier for clients to understand what they are being billed for. This transparency not only builds trust but also reduces the likelihood of disputes over charges.

5. Plan billing into your schedule

A systematic billing schedule is vital for maintaining financial discipline within a law firm. This involves setting and adhering to regular intervals for preparing and sending out invoices. Such a schedule ensures that billing does not become an afterthought or a task that is only addressed sporadically. It also helps in managing the firm’s cash flow more effectively, as regular invoicing leads to more consistent revenue streams.

The benefits of a regular billing schedule extend beyond just financial management. It also reflects a firm’s professionalism and commitment to service. Clients appreciate regular and predictable billing, as it allows them to manage their own finances more effectively. Moreover, prompt and consistent billing can often lead to quicker payment turnaround times, as clients become accustomed to the firm’s billing rhythm.

6. Streamline your cash flow with timely billing

Cash flow management is a critical aspect of running a successful law firm. Unlike profit and loss, which reflects the overall financial health of the firm, cash flow focuses on the movement of money in and out of the business. Regular billing is key to maintaining a healthy cash flow, as it ensures that the firm has a steady stream of income to cover its expenses.

Understanding the nuances of cash flow is essential for law firm leaders. This includes recognizing the difference between revenue and cash in hand. For example, a firm may show a profit on paper due to accrued billings, but if those billings are not collected promptly, it could face cash flow issues. This is why effective accounts receivable management is so crucial, as it directly impacts the firm’s liquidity.

To enhance cash flow management, law firms should adopt practices such as regular financial reviews, timely follow-up on overdue accounts, and maintaining a reserve fund to cover short-term expenses. These practices not only ensure financial stability but also provide a buffer against unforeseen challenges, such as delayed payments or unexpected expenses.

7. Stay on top of collections

Accounts receivable management is a vital component of law firm billing best practices. It involves not just sending out invoices but also actively managing the collection of payments. A robust accounts receivable strategy begins with clear communication of payment terms right from the outset. This includes detailing these terms in engagement letters and client agreements and setting clear expectations for payment timelines.

Monitoring accounts receivable is an ongoing task. Law firms should regularly review their accounts receivable reports to identify any overdue accounts and take prompt action to address them. The key is to be proactive rather than reactive in managing receivables.

If you don’t currently have one, develop a consistent accounts-receivable program that includes:

  • Details on how you want customers to pay
  • Terms of payment in engagement letters
  • Running monthly accounts receivable reports
  • Acting on past-due collections immediately

8. Keep good clients

Successful law firms understand the importance of identifying and nurturing relationships with their most valuable clients. This involves conducting regular analyses to determine which clients are the most profitable and which ones may actually be costing the firm money.

Developing a client-focused strategy is key. This could include personalized service plans, regular check-ins, or tailored legal solutions that cater to the specific needs of top clients. It’s about building a partnership rather than just a provider-client relationship, one where the firm becomes an integral part of the client’s success.

Equally important is addressing relationships that are less profitable. This doesn’t necessarily mean terminating these relationships but rather reevaluating and possibly restructuring them. Sometimes, less profitable relationships can be improved through better management or more efficient service delivery. Other times, it may involve honest discussions with clients about expectations, billing structures, or the scope of work.

9. Make it easy for clients to pay

In the digital age, convenience is key, especially when it comes to payments. Law firms should strive to make the payment process as straightforward and flexible as possible for their clients. This means offering a variety of payment options, such as credit card payments, online transfers, and electronic invoices. By diversifying payment methods, firms cater to the preferences of a wider range of clients, increasing the likelihood of timely payments.

Although some firms are still wary of credit cards, the traditional reason not to use them, credit card fees, is worth the expense in collection cases to get paid and be done with it. Additional concerns, such as trust accounting compliance, can now be addressed by using a legal-specific merchant like Tabs3Pay.

10. Automate when possible

Automation in billing procedures can bring significant efficiencies to a law firm. By automating repetitive tasks such as data entry, invoice generation, and payment tracking, firms can reduce the time and resources spent on administrative tasks. This allows attorneys and staff to focus more on client service and other high-value activities.

However, implementing automation requires a thoughtful approach. It starts with identifying the processes that are easiest to automate and the tools that best fit the firm’s needs. For instance, automating invoice generation can save hours of manual work, but it requires setting up templates and rules that accurately reflect the firm’s billing practices.

Moreover, while automation can greatly enhance efficiency, it should not be seen as a replacement for human oversight. Regular reviews and audits of automated processes ensure they are functioning as intended and allow firms to make adjustments as needed. Finding a balance between automation and human input is key to maintaining the quality and integrity of the billing process.

Optimize your firm’s billing process with Tabs3

Implementing these strategies in your law firm’s billing procedures can lead to significant improvements in efficiency, client satisfaction, and overall financial health. Tabs3 offers specialized solutions tailored to the unique needs of law firms, ensuring that your billing practices are not only efficient but also align with the best practices in the industry.

To see firsthand how Tabs3 can improve your billing process, schedule a demo or request a free trial today.