Byte of Prevention Blog

by Jay Reeves |

Are You Giving Clients a Triple Fee Discount?

Are you giving clients a triple fee discount?Our ethics rules require us to be fair and honest when charging for professional services.

But practice management experts say it is often the attorney – not the client – who gets the short end of the fee-billing stick.

This happens for lots of reasons. We don’t charge enough at the outset. We don’t use written agreements. We don’t keep track of our time. We don’t bill regularly.

And sometimes we give clients whopping discounts without even knowing it.

Three Fee Strikes and You’re Out

Consider this from law blogger and practice consultant Monica Goyal (My Legal Briefcase) on the dreaded Triple Discount:

1. The discount of omission. The first discount happens when lawyers don’t document their time properly. As lawyers juggle several tasks at once, it’s easy to spend 15 minutes reviewing a document that just came in and record the time as just checking e-mail. Without proper tracking, lawyers end up not billing time spent working on client files.

2. The discount of regret. The second discount happens lawyers review their bill and remove time from it. Did they really spend 2.3 hours reviewing that agreement? They must have left the clock running, they might say to themselves, so it’s better to mark it down as an hour and a half. Maybe it’s pride telling them they could have done the task faster or maybe they don’t trust their billing method, but it all amounts to unreported time spent on a client file.

3. The discount of concession. A poorly crafted invoice can seem arbitrary to clients, and many view a bill as an invitation to negotiate. Haggling with clients isn’t fun, and to get the bill paid and keep the relationship positive, a lawyer may discount a prepared invoice.”

Tips to Avoid Cheating Yourself

  • Know the rules. Rule of Professional Conduct 1.5 prohibits charging fees and expenses that are “illegal or clearly excessive.”

Factors to be considered in determining whether a fee is fair include: (1) the time and labor required, the novelty and difficulty of the questions involved, and the skill requisite to perform the legal service properly; (2) the likelihood, if apparent to the client, that the acceptance of the particular employment will preclude other employment by the lawyer; (3) the fee customarily charged in the locality for similar legal services; (4) the amount involved and the results obtained; (5) the time limitations imposed by the client or by the circumstances; (6) the nature and length of the professional relationship with the client; (7) the experience, reputation, and ability of the lawyer or lawyers performing the services; and (8) whether the fee is fixed or contingent.

  • Keep track of your time. Do it manually or do it with time-billing software (most programs offer a free trial period). Whatever. Just do it.
  • Review your time sheets regularly. Goyal recommends looking over your log entries at the end of each day. “Having confidence in how you track your time is important,” she writes. “If you’re using time-tracking software, you can get a number of graphical outputs that can help you quickly review things. Did you really spend 45 minutes this morning reading e-mails or was some of that time billable? It’s much easier to make that decision with confidence if you’re doing it on the same day.”
  • Use fixed fees whenever possible. This takes the guesswork out of billing – and it provides budgeting certainty for you and your client.
  • Factor in the unexpected. One commenter on a LinkedIn discussion group disclosed a fourth way lawyers often short-change themselves: “And for the quadruple ... I have regularly not billed clients for my time researching a novel issue, telling myself that it was not fair for me to charge for the educational experience,” writes ABA Solo, Small Firm and General Practice Division member Deborah Lagutarus. “Thank you for this GIANT wakeup call to those of us who perform intellectually challenging work.”

A good discussion of billing ethics is found in 2007 Formal Ethics Opinion 13. The opinion discusses criteria for setting a “reasonable hourly rate” and cautions against wasteful, unnecessary or redundant billing procedures.

Read the opinion. Review your billing procedures. And above all, avoid giving fee discounts that were neither requested nor required.

Sources:

Jay Reeves a/k/a The Risk Man is an attorney licensed in North Carolina and South Carolina. Formerly he was Legal Editor at Lawyers Weekly and Risk Manager at Lawyers Mutual. Contact jay.reeves@ymail.com.

 

 

About the Author

Jay Reeves

jay.reeves@ymail.com | 919-619-2441

Jay Reeves practiced law in North Carolina and South Carolina. Over the course of his 35-year career he was a solo practitioner, corporate lawyer, legal editor, Legal Aid staff attorney and insurance risk manager. Today he helps lawyers and firms put more mojo in their practice through marketing, work-life balance and reclaiming passion for what they do. He is available for consultations, retreats and presentations.

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