Why it’s Critical for Lawyers to Get Bills Out On Time (Part 2 of 2)
Yesterday we featured part one of a series on the importance of prompt billing for legal professionals. Today we follow up with the conclusion.
As a general principle, the more time that’s placed between the service you provide and the fee you charge, the more difficult it is to collect your full fee.
This principle is a function of multiple things. For instance, you know that you may have pulled an all-nighter to negotiate a workaround to that very last issue which was holding up your client’s big merger transaction. At the time, it was clear to both you and your client that it was your clever work under pressure that broke the deadlock and enabled the deal to close. Heck, the entire deal might’ve cratered otherwise.
If you wait three months to send that bill, memories fade, and your legitimate heroics are no longer top-of-mind. By then, the client may be involved in a myriad of different post-closing implementation issues, the context is lost, and your completely justifiable bill can stand out as excessive. The bill that would’ve seemed completely reasonable closer to the event now can seem totally out of place.
From the client’s perspective, getting a big legal bill long after the service was performed has the effect of feeling like a big nasty surprise. That can lead to uncomfortable discussions and, worse yet, often results in haircuts on your bill.
The bigger and “lumpier” the bill (that is, the more things thrown in together), the further it is away from the time you provided the service, the more likely a discount negotiation is forthcoming.
Remember too, we business clients are expecting to be billed. When we do business with our suppliers, vendors, and other business partners, we’re not accustomed to waiting a long time to send or receive bills. As a consumer of legal services, I want you to send me the bill on time, so I can process it in “normal” fashion, along with my other operational expenses.
Delaying sending that bill to me only assures that it’ll be flagged as unusual – out-of-the-ordinary-course, so to speak – even regardless of the amount of the bill. If my business has moved onto several other major transactions before you’ve billed me for the last one, you’re creating an unnecessary additional “process” for getting paid. The client may have to pull old records to audit the bill or get additional sign-offs from management because it’s not current.
Also, from a straight dollars-and-cents viewpoint, failing to send out a timely bill is – let’s face it – the functional equivalent of offering up free financing. Sure, from the client perspective paying over time – or deferring payment entirely – has distinct advantages.
If you’re going to offer financing, do it intentionally. There’s a cost associated with the time value of money – a dollar today is worth more than a dollar 6 months from today. If you’re fine with offering financing to your clients, then offer explicit, agreed-upon financing terms (in compliance with all applicable ethical guidelines), but don’t just let it happen by failing to bill.
So, in sum, consider making an effort to:
1. Get yourself a convenient, easy-to-use time-and-billing solution that works as you do, to eliminate the nuisance associated with tracking and reporting time;
2. Make sure your bills are consistent with your client agreement, that they’re not a surprise (which you can assure with good communication), and they give some projection of value delivered; and
3. Bill clients regularly, in normal intervals, and preferably in close proximity to the service performed.