Flat Fee or Hourly billing: What To Consider

Billing options are important to law firms and to clients. Which options your law firm provides are based on several factors. Here are some points to consider when making those choices. 

Nature of the Legal Matter

Some types of law are a bit more straightforward than others. If the scope of the legal work is well-defined and straightforward, a flat fee might be appropriate. On the other hand, if the case is complex and unpredictable, hourly billing might be a better choice to account for the time and effort required.

To ensure you are making the right decision, review a handful of cases that fall in the 'straightforward' category. What were some of the potential issues, whether they arose or not? If those issues do come up, how will this affect the fee versus the cost? Consider your options when establishing the flat fee. Defining the requirements and terms of the flat fee are an important step. 

Client Preferences

Some clients may prefer the predictability and transparency of a flat fee. Other clients may prefer hourly billing so they easily identify the cost and benefit of their payments. Hourly billing also gives some flexibility to the client. As of late, clients look for the ability to be an active member of their matter. That can mean providing information, completing forms, and more.

Discuss the billing options with each client to determine the optimal fit for both your firm and the client. It's important for the client to understand the benefits and potential issues with each option. Clearly, flat fee helps with budgeting. Hourly can be more flexible, either to the benefit or detriment, depending on how their matter proceeds. Early communication is key.

Competing Law Firms

In some cases, using a flat fee billing structure can give a lawyer a competitive advantage over other lawyers who only offer hourly billing. Take a moment to look into how other law firms in your same area of law bill similar matters. Connect with your Bar Association - we are big fans. They can provide some insight as to the prevalence of hourly or flat fee billing for the same matter type in your area. 

Remember, ultimately, the client will select the law firm that best fits their needs. So it's important to  consider the client needs and be open to both billing options, if that's possible for your firm. Look for case management software, like SimpleLaw, that offers flat fee, hourly, contingency, trust, and other billing types. The right software makes the entire billing process more simple.

Efficiency

Lawyers who have well-developed systems and processes for handling certain types of cases may be able to complete the work more efficiently and profitably using a flat fee. One critical piece that helps drive efficiency is case management software that gives users the ability to automate document creation, simplify the entire billing cycle including giving clients a portal to view and upload documents, track tasks, see messages, and more. 

In general, flat fee billing may be more appropriate for routine or standardized legal services, while hourly billing may be more appropriate for complex or unpredictable cases. However, there is no one-size-fits-all approach, and lawyers should carefully evaluate each case and client to determine the best billing structure. To make it all more efficient, consider adopting case management software. Look for a provider that gives you the option to bill clients in the way that fits your firm and your clients.