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David Kaufman did everything by the book when he started his solo practice in 1999. He developed a billing system complete with written rules, legal billing software, and a monthly billing system. But all of his precautions didn’t stop one client from falling nearly $100,000 in debt to him. “It was scary,” says Kaufman, whose Fairfax, Va., practice focuses on business and personal law. Although some common billing and collection problems are inevitable, those who counsel law firms say most problems encountered by small or solo practices, such as forgetting to send out bills, malpractice claims, and defaulting clients, can be avoided from day one. Reid Trautz, director the D.C. Bar’s Lawyer Practice Assistance Program, says developing a billing system that fits both the lawyer’s and clients’ needs should be a top priority. “One piece of advice I always give lawyers is to establish written procedures for doing their billing,” he says. These procedures should include deadlines for sending out bills and guidelines on how to record time and what to bill clients for. After these procedures have been established and become routine, “you can more easily tackle the job of getting the bills completed and getting them mailed,” Trautz says. When a firm’s billing is handled in a timely and professional way, many common billing snafus can be avoided, Trautz says. Among the considerations each lawyer must make when setting up a billing system are what to charge, how often and when to send out bills, how to draft bills, and what to do when bills aren’t paid. Determining what to charge can be a tricky process that Trautz says is “as much art as science.” KNOW THY CLIENT Edward Poll, a nonpracticing lawyer who coaches lawyers on how to improve their business, suggests asking others in the same practice areas what their fees are. “It’s the only way a new lawyer gets to understand what the marketplace is,” says Poll, the owner of LawBiz Management in Venice, Calif. But it’s not enough just to ask around. Trautz says it’s also vital for lawyers to really know their clients. “There are some people who like to buy Chevrolets and some people who like to buy Mercedes,” he says. “You need to know who your clients are or where your clients will come from to decide whether they will be the Chevy buyers or the Mercedes buyers.” Even for the same work not all clients can be charged the same fee. The lawyer’s market can’t be ignored in fee setting. “Lawyers often forget that not everybody who needs a divorce or needs a will is in the same category,” Trautz says. In addition to determining how much to bill per hour, there must be a proper mix of revenue from contingent fees and hourly billing. Once fees have been set, retainers have been paid, and work has been performed, bills need to be sent out regularly not only to keep the client informed, but also to avoid malpractice claims. Most recommend that bills be sent out monthly. Trautz says clients prefer to keep a record of what their lawyers are doing and want their billing to be predictable. “Clients hate getting socked with bills on an ad hoc basis,” he says. Kaufman has taken this one step further by setting up his billing system around his clients. After finding that most of his clients’ billing cycles ended on different days, he decided it would be easier on them, and him, to send out bills twice a month to give them more payment flexibility. “You do have to be sensitive to billing cycles,” he says. If they are drafted correctly, bills can also double as marketing tools, Poll says. He recommends describing services on monthly bills to project a positive image of the work being done on a client’s behalf. “Lawyers forget that anything that comes out of their office also has client relations and marketing components,” he says. Descriptions of services can be worded to “create a positive spin.” If clients get the impression that their lawyers are really working for their fees, they will be more likely to retain them and refer them to others, Poll says. But don’t go overboard with itemization. While positive explanations of services rendered can satisfy clients, listing of minute expenses such as postage or courier fees can turn off clients. Trautz says these should be incorporated into rates or charged as a one-time administrative fee. “Clients appreciate not being nickeled and dimed,” he says. Lawyers who tend to their own businesses will command respect — and trust — from their clients, which may lead to good referrals, Trautz says. “Let them know you treat your own business with the same level of effort that you treat their legal business,” he says. FAILURE TO COMMUNICATE Even when all precautions are taken, bills are sent out regularly, and work is detailed on each bill, some clients will still default. Although there are a variety of reasons for this, from sudden financial difficulty to dissatisfaction with the work performed, Poll says a client’s failure to pay can almost always be traced to the lawyer’s failure to communicate. He compares the attorney-client relationship to that of a parent and child. “It’s the responsibility of the parent to make sure the child understands what’s happening, accepts what’s happening, and understands the value of what’s being offered,” Poll says. Often clients aren’t billed in sync with their own billing cycles, meaning they have no choice but to remit payments late. Lawyers also don’t always accurately communicate to clients how much they can expect to spend for the work they are seeking. Poll says it’s not worth the time or money to go after clients who can’t pay because of a financial crisis. Instead, just “hope for the best,” he says. “They may bounce back and they will remember you and they will pay their bill and bring you more business.” Several clients of Mary Ellen Flynn, a partner at Silver Spring’s Andalman & Flynn, are lawyers whose clients won’t, or can’t, pay them. She recommends sending accounts receivable to another law firm rather than a collection agency when a client defaults. Kaufman had one billing flap when a client wrote him a bad check for a $2,000-plus retainer. By the time Kaufman learned that the check had bounced, he had already started on the client’s time-sensitive matter. To avoid similar problems, Flynn recommends evergreen trust accounts, which clients have to keep replenishing so their lawyers know they will get paid. Kaufman’s approach to keeping this from happening again was even more simple. “Don’t start work until you know the check is cleared,” he says. D.C. solo practitioner Nicholas Cobbs says he tries to be flexible with payments and forgiveness of debt. But when he senses he is being taken advantage of, he will act against a nonpaying client. “I’m not just going to roll over and smile benignly and turn the other cheek,” says the D.C. litigation and regulatory solo. After negotiating a reduced rate and flexible payment plan, one of Cobbs’ former clients stopped paying. Cobbs sued the client, who countersued, claiming malpractice. Although he successfully resolved the matter with his client, a nonprofit consumer advocacy group, “it was a messy deal,” he says. Cobbs has since added an arbitration provision to clients’ retainer agreements to make sure they are able to cover fee dispute expenses. The bottom line, these lawyers and their advisers say, is that lawyers can’t afford simply to be good lawyers, they must also have the common sense to run a profitable legal business. Kaufman’s client who owed $100,000 provides a good example of being firm and matter-of-fact about billing. He resolved the situation by telling the client if he didn’t pay immediately, he would stop working for him. The check was delivered to him by FedEx the next day. “If clients think you’re slack about your own bills and your own business, they may infer that’s how you treat their legal business,” Trautz says.

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