Law Firm Billing: Ultimate Guide and Best Practice
- Hannah Nguyen
- Mar 28, 2022
- 9 min read
Updated: May 26
Administrative tasks like law firm billing and invoicing can be tedious and time-consuming and you may be stuck if you don’t implement the proper law firm billing procedures at the outset. That is why it’s crucial to have a streamlined process in place, ultimately saving lots of time and resulting in faster client payments.
Reduce the repetitive and tedious tasks associated with tracking and entering billable time
Simplify and standardize the law firm invoice to create process
Make it easier to send invoices to clients
Standardize the steps required to accept, received, and account for payments
TABLE OF CONTENTS
In this law firm accounting guide, we provide you with best practices for your law firm bookkeeping that can help you tame the law firm billing beast to keep your firm profitable and well above water.
Writing Your Law Firm’s Billing Policies
To implement proper billing practices, you need to first establish them and write them down as standard office policies. The law firm's billing policy is as straightforward and standardized as possible so that it gives lawyers and staff something to refer to and keeps everyone in sync.
Provide a Template and Guidelines
A transparent and accessible law firm billing and expense process will save you valuable time and money later. Your template of the process should include the standard of description, types of expenses, introductory communications on bills, time of invoice sending, etc.
Write Out The Flow of Your Law Firm’s Billing Process
Determine how you want your billing process to work and become an expert in the lifecycle of your bills. You should assign each staff member’s duties for each stage of the process. For example, determine quickly which attorneys on a case need to review a bill, who should one inform when sending a bill out, how to send bills…
Set Requirements for Invoice Review
The invoice review process should follow the requirements to speed up the process and leave less room for error.
Integrate the Finance Team With Your Billing Process
If you have your own accountant or bookkeeper, ensure they know when your firm is sending bills to clients, what still needs to be collected, and what’s being written off.
Include a Standard Process for Disputes and Collections
Identify who needs to follow up on unpaid bills and who will review the client disputes when they occur. So it’s necessary to create a standard but personalized reminder email or letter you can easily send to clients and create a framework for resolving the disputes.
Have a Public Billing Policy for Clients
Everything should be transparent at the outset when you start their initial consultation. They 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 do clients have to pay
The consequences of late payments
Invoice requirements
If you work with a large legal company, the law firm bookkeeping is very important. You are required to follow strict invoice requirements regarding everything from you need to send bills to how you must format bills. However, according to our law firm accounting guide, regardless of the sizes of the companies you work with, you should still stick to a standard set of invoice requirements. This will keep the billing process running smoothly, good for both your law firm and your clients.
Billing Description
Legal firm billing descriptions should provide the right amount of context and information to make clients feel confident that they understand what work has been done on their case and are receiving the value they're paying for. The description should neither be too long nor too short but strike a balance between detailed and concise. Provide brief information that gives clients a clear understanding of what services you are billing for.
Law Firm Billing Codes Law firm billing codes, which are separate from descriptions, represent which activities or expenses a client is being billed for. Examples codes might look like: meeting, draft/revisions, research.
LEDES Billing LEDEs is an acronym for Legal Electronic Data Exchange Standard. If you’re working for a large company, the legal invoices are required to adhere to LEDEs standard format. It makes it easier for large organizations to handle large amounts of files and data and assess invoices as they are coded in the same format. Additionally, LEDEs files help your law firm streamline the billing process, save time and gain better control over legal spending.
You also use UTBMs codes ( The Uniform Task-Based Management System) which are a series of code sets your law firm is to classify services on electronic invoices to send to clients.
How to Bill Effectively for Law Firm
Make it Easy to Track time
If you’ve ever sat down at the end of a workday and tried to remember exactly where your time went, you know how difficult to record everything accurately on a bill. If that happens often, you not only wasted your time and money but also might lead clients to justify paying for what is billed.
Therefore, it’s so important for law firm bookkeeping to make it easy to keep track of billable time no matter where they happen to be, in the office or in the courtroom. For this law firm accounting guide, oftentimes, law firms use billing software to accomplish this goal in any number of ways. With just a click of a button, you and your staff can convert billable activities into billable time on an invoice. The easier it is for your attorneys to create a time entry, the more accurate time they record.
Bill Frequently, and Consistently
One of the most common billing mistakes made by some attorneys is not billing on a regular basis since these tasks are an interruption of the important tasks they need to complete. However, if you let weeks or months go by without invoicing clients, the task will become more challenging and you’re less likely to get paid. Sending out smaller bills consistently can lower the shock of a large unexpected bill for your clients. Plus, there’s the added benefit of encouraging positive cash flow for your law firm.
Before the advent of electronic billing, creating, sending out paper, and following up on invoices used to be time-consuming tasks and make your head hurt. Fortunately, legal billing software has reduced inefficiencies and the number of law firm billing procedures. You can automatically create and send out invoices.
Automate Invoice Reminders
Legal billing software also allows you to set up automated invoice reminders to speed up your law firm’s billing process. You can schedule reminders when you send out the vert first invoice to the client if the invoice isn’t paid at the due date. A follow-up invoice will be sent to the client and reminded them the billed amount is still outstanding. In this way, you no longer waste time resending the invoice manually.
Utilize Reporting Features
Finally, ensure that your law firm billing procedures is as efficient and effective as possible by tracking and analyzing your law firm’s financial health to help implement improved billing habits.
Identify overdue invoices to institute appropriate collections procedures
Stay within budget for matters and projects
Identify the most profitable practice areas
Detect profit-stealing client tasks
Properly manage client trust accounts
Identify the billable time that is not being invoiced
By reviewing reports, you have an overview of your law firm’s billing, invoicing, and collection data.
Keeping Track of Billing and Reporting
Billing well is more than just sending out invoices; you also need to keep a close eye on financial data to make sure your law firm's cash flow stays strong. At Irvine Bookkeeping, we give law companies all the reporting tools they need to keep track of their unpaid bills, payments, and income. These reports give you useful information that you can use to improve payments, make your finances clearer, and keep law firm billing procedures healthy. Here is a list of some of the most important studies that help people make smart decisions and work more efficiently.
Accounts Payable Report
The Accounts Receivable Report makes it easy to see how much money is still owed on all open and past-due bills. It keeps track of partial payments and applied credit notes and lists the amounts due on approved invoices that have not yet been paid. It is organized by user, client, or case. This report helps your company set priorities for payments, lower the amount of past-due debt, and keep cash flow steady. Check out our blog for best practices for law companies that will help you speed up the collection of accounts receivable.
Report on Accounts Receivable Aging
Collections on time are very important for keeping the finances stable. The Accounts Receivable Aging Report sorts past-due bills into groups based on how old they are, such as 1 to 30 days, 31 to 60 days, and 61 to 90 days past due. This report lets you follow up on clients who owe money and for how long. This helps your company get the money back faster and reduces financial risk.
Report on Billing History
The Billing History Report shows all of your company's bills, including those that are still outstanding, those that have already been paid, and those that have already been paid. This detailed history lets you see all of your contacts with clients when it comes to legal billing. This promotes openness and gives your company the confidence to handle disputes or questions.
Matter Balance Report in Brief
For a quick look at your company's money issues, the Matter Balance Summary Report shows how much money is still owed, work that needs to be done, and costs that need to be paid, broken down by case or client. This report helps you guess how much money your business will make in the future, so you can make plans and make sure that all billable work is recorded and paid for.
Report on Bill Payments
The Law Firm Invoice Payments Report goes into more detail about payments, showing how much was paid for each service and cost item. It also shows which users are responsible for each line item, which makes it clear how funds are split. This detailed view makes it easier to keep track of money and builds trust with clients by making bills clear.
Report on Sales
To grow, you need to know how your company is doing. The Revenue Report gives exact numbers for hours worked, costs, and taxes, broken down by user, client, or case, for unbilled, billed, and collected amounts. Putting these measures on a graph helps your company find trends, make the best use of its resources, and increase profits.
An example of a revenue report that shows how well a law company did each quarter.
Irvine Bookkeeping helps law companies turn legal billing into a strategic asset by using these tools for reporting.
How to Get Paid More Quickly
Up to 9% of law firm invoiced hours go unpaid, according to data from the legal business. This can put a strain on a firm's cash flow. Your company can speed up payments and lower outstanding balances by using current tools and strategic practices.
1. Make better use of your time
Accurately keeping track of time is the key to collecting on time. Without accurate tracking, hours that haven't been billed can get lost, which delays getting paid. Start being more responsible by doing things like writing down thorough notes on tasks, reading through emails, and keeping track of time as you work. With Irvine Bookkeeping's help, time-tracking tools that are built into legal billing system make sure that every billable minute is recorded. This makes bills and collections go more quickly.
2. Bill All the Time
Billing that is always the same makes things more predictable, which helps clients make budgets and pay on time. When your bills come in at the same time every month, it's easier to keep track of them, just like when your own bills come in on a regular plan. Irvine Bookkeeping helps your business send bills quickly and reliably by automating the legal billing process. This cuts down on delays and improves cash flow.
3. Send reminders often
People often forget to pay their bills if they aren't gently reminded. Sending proactive messages to clients with unpaid bills keeps them in mind to pay. For consistency's sake, setting these alerts to run automatically saves time. With Irvine Bookkeeping's custom solutions, your business can set up automated processes that send professional, on-time reminders. This will cut down on accounts that are past due and increase the number of accounts that are collected.
4. Let people use easy ways to pay
In this digital age, customers expect easy ways to pay. Customers who prefer modern ways like credit cards, debit cards, or eChecks may find it inconvenient to only use checks. Giving customers options for online payments not only meets their needs, but it also speeds up the recovery process. But law companies need to make sure they follow ethical rules, especially when taking credit card payments. Pick a payment provider that is made for legal businesses—one that doesn't allow chargebacks on trust accounts and doesn't take fees out of pooled trust funds to avoid breaking the rules of ethics.
Irvine Bookkeeping works with law companies with law firm billing best practices to set up compliant payment solutions that are tailored to lawyers. This makes sure that transactions are safe and payments are processed quickly.
Get in touch with us right away to find out how we can help your business make more money and get paid faster.
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