What Do Your Bills Say About Your Value?

12/01/2009
Reprinted from:
Published on 12/09

Lawyers' billings are client communication tools. The perfect bill is one that clearly and directly conveys to clients how you have provided a benefit to them.

Because most lawyers are paid by the hour, their billings are features lists: this is what I did; this is the time I worked; and this is what you owe me. If clients pay their bills without complaint, lawyers assume that such a laundry-list billing approach works. The doubt should begin to creep in, however, as increasingly more time passes without payment. An unpaid bill generally indicates that clients have one of four problems:

  • Clients didn't realize that the result you achieved benefited them, or how it did.
  • They didn't understand either the value of what you did for them, or how it addressed their concerns.
  • You charged for things they didn't request and didn't tell them you were going to do those things.
  • They didn't feel an urgency to pay, preferring to focus on bills with more personal meaning; in other words, you haven't created a personal relationship with them.
  • Note that none of these problems implies a professional lapse by the lawyer in preparing the bill—although they do imply a lapse elsewhere. While the main purpose of your bill is to make sure you get paid, there is a secondary purpose that lawyers often miss: the marketing opportunity of communicating to clients a favorable impression concerning the services they received. The perfect bill is one that speaks clearly and directly to clients about how you as a lawyer have provided a benefit to them.

Documenting Performance

Good communication with clients begins at the start of every engagement, by putting into writing as much information as possible about your billing practices. Once you establish your benchmarks, bill in a regular and timely way, using statements that contain a full narrative of the work done and the goal accomplished by that work. This allows you to provide status updates easily and to reinforce that every action you took on behalf of the client had a purpose. Also, because legal services are often intangible, the more information you can provide about how hard you worked and what your work accomplished, the more likely the client will be to perceive the bill as fair and to pay it promptly.

For example, bills can document how quickly phone calls were returned (provided, of course, that the response time is good), how often you talked to clients at no charge to learn more about their business, and how often you made and kept your promises, complete with examples of value and service as defined by both parties in the engagement agreement. Incorporating such value-added elements will help you generate easy-to-understand billing statements that clearly list actions taken on the client's behalf while relating them to the time it took to realize that value. Such billing statements go beyond a mere laundry list of tasks performed and will be more meaningful to the client. Plus, a number of these suggestions involve actions and items that will be noted on the bill as time increments with “no charge.” That's a vivid way of letting the client know that, although your time is valuable, you value your working relationship together even more.

Providing Detail

Most clients are willing to pay a fair fee for value. What they do not want is to pay too much, or to pay for inefficiencies, duplications and unnecessary services.

Surveys uniformly show that clients are unhappier with surprises and unexplained costs in their bills than they are with high bills themselves. An up-front general statement about fees and alternatives, estimates and budgets, and flow charts to explain who in the firm does what are all crucial communication tools. Tailor them, and the fees themselves, to individual client perceptions of value. Clients are not particularly knowledgeable about billing, and there is no universal best format for preparing legal bills. Client preferences and each firm's operations differ, and each project or case has factors that should reflect that in the way the bill is detailed.

Billable hours in theory will provide the necessary details, but not with entries like “work on motion for summary judgment, 20 hours.” Brevity is not a benefit in billing. So instead, break any such charge into its basic elements—e.g., review of key documents and deposition testimony, draft statement of uncontested facts as required by court procedure, research precedents in four similar cases and so on, along with the amount of time that was needed for each. Such itemization does not try clients' patience—rather, it helps them understand just how much you did on their behalf.

Defining Value

Ultimately, the client, not the lawyer, defines value. But it's the lawyer who must educate the client about “value.” Otherwise clients may find it difficult to appreciate how value is provided and measured; this applies to both transactional and litigation matters. Providing solutions gets attention, and it gets rewarded if detailed and documented properly. Identifying and providing unique measures of value will increase your revenues, allow you to provide service to clients who truly appreciate the value you provide, and result in you receiving the kind of work you want.

If, on the other hand, clients don't recognize the benefits of what you do, they will become dissatisfied with you and no amount of marketing effort will retain them. You may well have done a great job with documents, the court or the opposing party, but regardless of how successful the end result, the client needs to understand what you accomplished. A bill that only says, "For legal services rendered,” or that is inaccurate or confusing, does nothing to enhance such understanding. Show your clients how highly you value them by communicating to them fully about the benefits you provide as their lawyer. That reinforces reliability and trust.

Demonstrating to clients what you've done for them is the best way to be confident when you bill for it. Lawyers sometimes wonder at what point in their careers they can decide that their total bill is what it is, without feeling the need to be defensive about it or to write it all down in detail. No matter what the economic conditions are, this question goes to the heart of what it means to be a lawyer. Lawyers help people's lives improve. Our objective should be to provide and account for our services in such a way that clients understand and accept the value as well as the cost of what we do. When that happens, fees are not an issue and lawyers do not have to apologize for what they charge.

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