Confidential Law Firm Tax Planning Memo! Leaked! Part 2 of 2
Part 2 of 2 in our leaked** letter detailing the worst billing practices in law firm history, from attorney Major Bill Fail. Installment 1 is found here…
(**And entirely fake)
2. EVERYONE LOVES A GOOD ONE-LINER.
Listing a single “Amount Due” on a bill (e.g. “Pay This Amount”) with no accompanying explanation or detail, can also help us keep our taxable revenue down.
First, presenting a single number at the bottom of an invoice can create a kind of fun, psychological “shock and awe” for the reader. Absent an opportunity for prompt physical relief to the shock – like throwing a breakable object at one’s office wall – the natural reaction often tends to be some version of “I’m not paying THAT #$%#)@ much.”
Interestingly, it seems to make little difference how much the “THAT” actually is; rather, the fact that it’s sitting there all alone, unexplained, in boldface type tends to ensure a strong reaction. When the immediate shock wears off, the client will predictably call and: (a) complain about the amount; and (b) demand an itemization. At that point, we’re firmly on the path for a solid write-down!
Of course, the genius of sending that first bill without the accompanying detail makes sure that we implant the objection to the total amount in the client’s mind before the client has a full description of what actually comprised the amount. Locking in that “write off” bias right from the start is key to our income minimization objective.
3. BUILD IN SOLID, TIME-TESTED WRITE OFF OPPORTUNITIES
Clear time itemizations and work descriptions can be problematic when trying to justify a write-off. When a client has signed an engagement letter agreeing in advance on professional service rates and is subsequently presented with a well-written, clear description of the work performed, it’s much more difficult to find an opportunity to write off time.
Bills that could be read as though they are a concise summary of everything you’ve carefully done for your client, all the guidance, experience, and value you delivered may be good reading but it’s certainly not conducive to generating valuable tax write-offs. We just can’t risk collecting all that money at once.
Professionals who still use “pen-and-pencil” timekeeping, or who submit random little scribbles or voice mails to an admin, or who regularly use weekends as trips down memory lane trying to reconstruct what happened last Tuesday – these folks virtually assure us of plenty of useful write-off opportunities.
These timekeepers often rely on the multi-hour “Worked on File”, “Prepared for Hearing”, or “Intra-Firm Attorney Conference” descriptions which provide easy targets to justify several big red slashes through the bill. Similarly, including terms that suggest pure admin work like “downloading”, “copying”, “assembling” are also usually good to spark up some revenue reductions.
Resist the temptation to spend too much time accurately spelling out exactly what you did for your client, lest we collect the full amount we’re due.
Unfortunately, the adoption of convenient web-based practice management tools is slowly but steadily phasing out some of these traditional, outstanding write-off opportunities. (As some of you know, handling timekeeping and billing as a simple – almost passive – task, integrated with your workflow, virtually eliminates the gaps and deficiencies that we tax folks count on for our write-downs.)
So – for those of you who are still using notepads, paper scraps, voice mail, or dictaphones to itemize and track your time, and who continuously endure browbeating from colleagues using today’s productivity applications – take comfort. A loose description or two, a little missing time here or there, it’s all helping us to open the door for a useful write-down. When your colleagues push, push back and remind them that you’re doing your part to keep our Firm’s revenue from ramping too quickly.
For the Firm’s professionals who already are experiencing the convenience of a modern web-based practice management solution to facilitate your time and billing, we simply ask that you refrain from convincing your colleagues to follow your lead. While you’re (selfishly) enjoying your free weekends, we tax folks will log whatever extra hours are necessary to try and deal with problems associated with the incremental cash you generate.
Let’s all do our part in 2011 to continue to provide the absolute best in legal service to our clients, while making sure we keep our revenue from growing too quickly. Following even a few of these simple billing practices will go a long way toward keeping those big bill write-downs happening and, in turn, keeping our taxable revenue down.
Major Bill Fail