Clear billing guidelines are essential for effectively managing client relationships and preventing costly and time-consuming billing disputes. Well-defined billing standards set expectations upfront, ensure consistent application of rates and procedures and provide transparency around what work will be performed and how it will be billed. Let’s explore the key elements that should be included in law firm guidelines, tips for presenting them to clients and how practice management software can simplify creating, implementing and managing billing rules.
Crafting Comprehensive Billing Guidelines
At a minimum, your billing guidelines should cover the following components.
- Definitions of Billable Hours and Activities: You’ll want to specify what constitutes a billable hour (e.g., only time spent directly working on a client matter) and define billable activities like research, drafting documents, client meetings, travel time, etc.
- Scope of Work and Rate Agreements: This would outline the services and deliverables covered under engagement. It would also establish agreed upon hourly rates and fee structures for attorneys, paralegals and assistants, for example.
- Policies Around Disbursements, Expenses and Third-Party Charges: This includes explaining how expenses like photocopying, phone calls, legal research databases, travel, meals and other disbursements will be billed as well as policies for when expenses are passed through at cost vs. marked up.
- Details on Invoicing Frequency, Payment Terms, Late Fees: This specifies how often invoices will be sent (monthly, bimonthly, etc.), payment terms and due dates (net 30, net 15, etc.) and late fee assessment rules as well as acceptable payment methods.
- Standard Hourly Rates for Attorneys and Staff: Here is where standard rates for the various levels of partners, associates, paralegals, legal assistants and other staff are detailed. This section should explain if and when hourly rates may be adjusted (annually, by matter type, etc.).
- Billing Increments: Outline the minimum increments for time tracking (6 minutes, 0.1 hour, etc.) in addition to rounding rules for invoicing partial time increments.
- Procedures for Resolving Billing Disputes: It’s important to establish internal review processes for addressing client questions/concerns about invoices. This should include escalation steps for unresolved disputes (negotiation, mediation and arbitration, for example).