Lawyer Billing Ethics: Billing Tips for Lawyers
November 15, 2022
Reading time: 6 minutes
What Is a Reasonable Fee?
MRPC 1.5 discusses attorneys’ fees and provides several factors to help determine whether a fee is reasonable. Some of these factors include: the time and labor required; novelty and difficulty of issues; fee customarily charged for similar services; the experience, reputation and ability of the lawyer. While the factors listed in the rule are not exhaustive, they provide a good starting point for determining what is considered a reasonable fee. Keep in mind that each state’s Rules of Professional Conduct may have additional factors to consider when determining reasonableness.
Put the Fee Agreement in Writing
When it comes to legal billing, it is critical to get everything in writing. Sometimes clients do not fully appreciate or understand the value you provide or the effort and skill required to do the job well. Also, clients may be confused by whether certain things are itemized or concerned about inflated billable hours given headline stories about lawyers swindling and overcharging. A written fee agreement will ensure that both you and your client are on the same page, and it will help prevent any potential misunderstandings. Your client can refer to it later if there are any questions or disputes about the bill. If there is a later dispute, it is important to make sure your practices are in line with the ethics rules. Below are some common pitfalls to be aware of to ensure your firm’s billing practices remain ethical and efficient.
At its most basic definition, double billing is when you invoice two clients for work done during the same time period. If you end up doing an hour of research that can apply to two matters, split the difference and invoice each client .50 (30 minutes). Double billing becomes more of an issue if you are traveling for a client matter but end up doing work for a second client during the travel downtime. It’s great to be proactive, but you might be better off single-tasking on the primary matter at hand.
Lumping together many distinct tasks into a single billing entry is block billing. This billing practice is dubious because you fail to accurately report the time it took for each task individually. Timesheets need to be clear and easily interpreted by someone reviewing them.
There may be instances where block billing is appropriate, like during travel. But generally, avoiding block billing is a best practice that benefits the client, and if a fee dispute later arises, you’ll be thankful you took the time to have accurate timesheets
Marking Up Your Time
Inflating your time spent working is the same as marking up your time. Only invoice for your actual time working on a matter. This will ensure that you are not overcharging your clients and will help maintain a good relationship with them.
Charging Clients for Law Office Overhead
More simply put, do you bill a client for creating a bill? Clients do not expect to pay for your administrative tasks. It’s best to remit tasks like accounting services to general services done by the law firm. The ABA has declared this unethical, but many states handle this differently. Some states say it’s permissible to include overhead as long as you clearly state those fees in the client fee agreement. You can always reach out to your state’s Ethics or Grievance department to talk through the appropriate billing practices for your firm. Billing clients is a highly challenging aspect of any practice. However, developing a good timekeeping and billing process is critical. Technology can help with many complex tasks and considerably reduce the time involved.
Maximizing Your Minimum Time Increments
Don’t be the attorney who bills in half-hour or hour increments (yes, it’s happened). The issue with billing at a slightly higher rate, even at .25 hours (15 minutes), is that there might be too much padding for the billable tasks. Billing at .25 hours might inflate the invoice. If there were to be a fee dispute, a higher time increment would be examined thoroughly. Take a reasonable and balanced approach and choose the billing increment that is acceptable for your practice area.
Be a Better Time Keeper
You can keep track of your time in different ways. It is essential to record the time you spend on work tasks as soon as you do them. You can use a legal pad, a billing program, or even your smartphone to do this. Additionally, you can estimate the amount of time a task will take before starting it. Knowing how long you expect to take on a task will help you stay on track and avoid underestimating or overestimating the amount of time a particular task will take. The most important thing is to be consistent in keeping track of your time. This way, your records will be accurate.
Enter Time Daily
From here, I think you’re getting the hint that the more frequently you track your time, the better odds of capturing an accurate picture of your work daily. One way to ensure that you track your time daily is to make it a habit. You can do this by setting aside a specific time each day to review your time entries and update your timesheet, which will help you stay on top of your work and ensure that your billing records are accurate. Timekeeping and billing software makes this as seamless as possible.
Single-tasking means that you do one thing at a time. So, when you are editing a brief for a matter, you aren’t also answering phone calls or checking email. To be better at single-tasking, you need to create an environment conducive to it. So, turn off notifications on your phone and computer, close any unnecessary tabs in your internet browser, and keep your workspace organized. You may also want to set time limits for how long you work on certain tasks so that you’re not distracted by other things.
Don’t Underestimate Your Time
Underestimating your time can happen for two reasons. First, if you are not keeping consistent records of your tasks, you may forget tasks, like phone calls, you’ve completed. This omission will make it appear you spent less time on a matter than you did.
The other reason for underestimating time is that sometimes new lawyers think they should be faster as a task than they are. Talk to your manager instead of getting in your head about your speed and pace. Ask them what amount of time they expect tasks to take.
Break Down Your Entries
As for the billing entries, divide the tasks into separate entries to make sense of the cost of the time. For example, if the bill is for “review and preparation of draft medical documentation” the client may not understand why this charge required so much time. Break down your entries and provide the client with an explanation as to why this task is beneficial to their case.
Itemize Your Bills
Start noting the timed breakdown of your tasks and activities on your bills. Itemizing your bills will help you avoid block billing. Below is an example of a detailed time-tracked list.
02/22/2022: Zoom conf. with expert witness Wardle (1.0); reviewing documents for cross prep (.3); sent comms to and from client re: files(.3); reviewed new eDiscovery files (2.4); prepared exhibits for defendant (1.5); Zoom conf. with court for motions (.5). Total: 6.0 hours
Tracking your time diligently and detailed with a law firm CRM can add administrative time to your workday. But the lasting value is that you won’t have to go back to recreate a day or weeks’ worth of billable time – which would be nearly impossible to do accurately.
You have a responsibility to your clients, which is why billing ethics are so important. The tips provided should help you bill with ease and efficiency. Remember, following these steps will ensure you maintain professionalism in all aspects of your practice. It not only helps you stay out of trouble but also creates transparency with your clients.
Sarah Bottorff is the Head of Growth at Lawmatics, a legal Client Relationship Management (CRM) provider. She has over 15 years of marketing and sales experience and an extensive track record of success in cross-channel marketing, sales development, strategic planning, and staff development.
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