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Billing Challenges of a Small Law Firm

Law Firm Billing Best Practices for Small Law Firms

You went to school to be a lawyer, but if you run your own firm, you probably find yourself trying to be an accountant as well. Are there any solutions available to you?

Legal Billing Has Become More Complex: Why is billing more difficult now than it used to be?

  • Clients know more about your services
  • Clients have certain expectations
  • Competition includes: other lawyers and virtual, web-based services
  • Firms are using alternative fee arrangements (AFA) instead of the typical hourly billing to be competitive.
  • Large clients now expect electronic billing, requiring small law firms to adapt to the various systems
  • A wide variety of compensation structures for staff
  • Profit splitting structures for partners

So, what could once be done with a spreadsheet and invoices created with a word processor, now needs to be done with bigger and better tools.

What's the Solution? 

Luckily, there are many accounting tools available that are legal-specific. To find the best one for your firm, you will need to ask yourself some evaluative questions. Here are some things to think about when deciding on accounting technology.

Capturing Time and Expense: It is important to record billable time accurately. Look for products that:

  • Offer a variety of ways to record time and expenses including electronic timesheets and time-slip views.
  • Import expense invoices into your billing system and include such things as legal research costs, photocopy charges, postage, etc. 
  • Reveal recorded activities that have not been billed.
  • Allow capture of time and expenses through a tablet or smartphone app. 

Integrated Billing and Accounting:

These systems show client-related checks and disbursements in one system to eliminate reconciliation issues. This type of system also cuts data-entry duplication, reduces human errors, and shortens the time between billing and payment.

Alternative Fee Arrangement Options:

Look for a system that can bill activities through various AFA options like flat rates or contingencies. Automation makes this easy and will give your client accurate bills that reflect their agreement with you.

Electronic Bills and LEDES Formats:

You may need to submit a bill using a Legal Electronic Data Exchange Standard (LEDES) format. These can be difficult to set up and can result in bill rejection if done incorrectly. Make sure your system supports the bill formats you need to use. Also, look for client-specific task codes to help with faster payments. 

Compensation Reporting:

Find a system that can report compensation even when your partners and associates have different compensation. These products should allow you to assign an attorney, as well as assign a fee allocation by percentage. Good tools allow for overhead reports that identify which expenses are divided by which billable staff.

With the large selection of legal-specific accounting tools available, even small firms can find solutions to overcome billing challenges. These systems should allow you to go back to being a lawyer.

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