Clients are becoming more vocal about their needs. That includes communication methods and frequency, as well as the billing approach. While online payments are a key benefit for both the client and the firm, we are really focusing on how the bills are determined: Flat Rate, Hourly, Contingency, Subscription, Limited Scope, Capped Fee, and Sliding Scale. Below we review each approach and highlight how to make the most of the offering.
This is a great option for everyone if the law firm knows their true 'average' cost and the level of work required for each. For example, a simple will is likely a fairly standard process. However, if the assets and recipients are large or complicated, it is not the same process. Here, the devil is in the details. Clients love a flat rate so they know what to expect in terms of billing. However, it can be a losing situation for law firms, unless they know the time required and stay within the 'average'.
This is one place using technology can be very helpful. Those repetitive tasks can be automated. Clients can submit documents through a client portal so they are available to the attorney without having to upload or move. Efficiency is key here.
Got to love the gold standard. For most matters, the hourly rate is a fair one. The attorney is paid for the work they put in. With careful tracking and full descriptions, it is a fair and equitable approach to completing legal matters. For clients, it's a bit of an unknown in terms of what to expect to pay for the entire matter. Most attorneys have some experience in handling various types of matters and can give the client a range of potential costs and fees. Obviously, this is very helpful to clients. Again, the devil is in the details. Be clear about what type of work is billed, and what is not, if any. Be clear about any time rounding and payment terms. Some law firms require the client to pay any court fees directly to the court. Others pay on their behalf and send a bill for that. Whatever your approach, be sure to outline it all.
Certainly, this has limited use. But for those matters where contingency billing makes sense, be cautious about the types of matters, and the circumstances of that matter, that you accept as an attorney. The firm is taking the entire risk as to whether or not they are paid for their legal services. If there are fees involved, be very clear with the client that those fees are to be paid by them, if that's your approach. Be specific about what is included in the contingency work and what may fall outside of that scope, requiring an interim invoice. We recommend tracking the hours used for each matter. This is beneficial to the firm to understand the hours the matter required and the investment the firm made toward the case. Then, in comparison, you can see if the overall compensation was fair. Of course, each matter varies in terms of the total paid out which greatly affects your overall investment. Over time, you will see the details of each type of matter and can adjust the percentage of any payout the law firm receives. Data is powerful.
This is a newer option, for sure. And one that has caught some attention. For clients that want ongoing legal support, this is a great option. Rather than paying at the hourly or matter level, the law firm and the client agree on a set fee paid per month over a specific period of time - for example, one year. For that fee, they receive a certain number of hours of legal support per month. The firm and client should consider time usage versus planned time every quarter, to ensure it is fair for all parties. There may be some seasonality involved, so take that into account if appropriate. This approach requires the law firm to track hours, just as is done for the hourly rate approach. However, this supports both the client and the firm to better understand the monthly fee.
With this approach, the entire legal matter is not retained. One aspect of the matter is handled by the firm. Then each additional aspect, if required, is again reviewed and engaged. Perhaps there is an employment issue. Rather than engaging the firm for the entire matter, the client wants to start with a letter to start the process. You get the idea. It's all about breaking up each aspect or step in the resolution of the matter. While this can make managing the matter a bit more difficult and disjointed, some clients prefer separating each aspect. While not our favorite approach for attorneys or clients, there are some benefits.
The capped fee basically sets a maximum amount the client will be billed for the matter, under specific limitations. This is very helpful for the client. And it can be fair to the attorney as long as there is a deep understanding of the time it takes to address the matter. Similar to the flat fee, understanding the time requirements for the specifics of the matter is critical to ensure the firm is fairly compensated. The big difference here is the maximum amount is set, but not the minimum. This approach can be a bit better than the flat fee approach for the client. But it all depends on the rates and specifics of the work included in the capped fee structure. Again, the devil is in the details here.
Some clients may not have the financial ability to pay an attorney their typical rate. Rather than going all the way to taking a case on a pro bono approach, a sliding scale meets clients where they are financially, somewhere between free and a typical rate. The scale is set based on the potential client's financial income in comparison to a standard. That standard could be the local poverty line. Then, based on their income above that standard, they pay the attorney some percentage of their typical rate. We highly recommend contacting your local Bar Association for guidance in developing the sliding scale option.
No matter which billing options you offer, data and accurate tracking are critical. Everything from understanding if your typical rate is geographically competitive to understanding the flat fee or sliding scale approach requires some analysis and data to ensure both the client and the law firm are fairly treated. What other approaches has your law firm used and would you recommend them?