THE NEWSLETTER FOR LEGAL OFFICE MANAGERS
Volume XVIII / Number 6 JUNE 2009
(Reprinted with permission of Ardmore Publishing Company)
Some pokes and prods to get the billers to turn in time on time
Late bills spell lost revenue.
Time needs to come in and bills need to go out no less frequently than weekly.
Let it go beyond that, “and the losses can be significant,” says law firm management consultant ROBERT HENDERSON of Jackson Hole, WY.
Nobody can remember every detail a week after the fact, so the bill descriptions get vague — and easy for a client to argue that the time isn’t justified.
What’s more, mistakes creep in. It’s easy, for example, to give the wrong date for a phone call with the client. “And sure enough, that client will say ‘we didn’t talk on that date,”’ and the firm has no option but to write off the charge.
And on the payment side, late bills invite collection problems. As the days pass, the work loses its new-car smell and the client’s attitude starts to slide downward to how high the charge is. By contrast, when the bill comes in while the appreciation is stilt fresh, the client is more willing to pay.
There are two ways to get the hours in, he says. One is with a stick, the other with a carrot. Each works, but there are caveats.
FIVE GOOD PRODDING STICKS
On the stick side, Henderson cites five ways to prod the attorneys into action.
One is simply to say “you’re not getting your paycheck until you get your time turned in.” The efficacy of holding up the money “is pretty good.”
Another is to make it a rule that late birds have to meet with the managing partner to explain the reason for the delay. Don’t pass that job off on the administrator, he says. It’s the fear of having to face the managing partner that shakes up the attorneys.
Yet another approach is to make good use of peer
Law Office Administrator / June 2009 Page 5
pressure. Hold weekly meetings with all the attorneys and pass out reports of who billed what hours and what’s been collected. Also discuss whatever collection problems are occurring.
Any laggard is going to feel “a little hot under the collar,” because the showdown is embarrassing, he says. But more, the section leaders will see who the lazy timekeepers are and won’t stand for it, because it lowers the profit distribution.
The firm can also make it a rule that only the hours that are turned in on time can get billed. “Whatever time isn’t recorded is automatically lost” — and taken out of the attorney’s pay.
Any client loves that. But for the attorney, it’s brutal. There’s the money loss plus the scare of facing a dimming future with the firm.
The fifth billing prod is a last resort. It is to lay off or even dismiss the habitually late billers, and that includes voting out late partners.
Many firms “go along with nonproductive partners for long periods of time” without ever taking action, he says. “But in today’s economy, it’s time to start taking a look at whether those attorneys should be retained.” No business can keep somebody on board who doesn’t produce. Lay out the cards: “you’re not getting your bills out, and we’re losing money as a result.”
PLUS A FEW CARROTS
There can also be carrots to go along with the sticks
— or even stand alone.
One is to give bonuses to the top billers.
Those are best given out annually, Henderson says, because the goal is to reward long-term good habits, not the occasional spurt of energy.
As to who gets a bonus, don’t take the route of giving it to the attorneys who exceed their billable hour requirements, he cautions. That gives everybody an incentive to pad the hours, and the firm can lose clients as a result.
Far more effective is to give a percentage of whatever an attorney brings in over and above that individual’s direct costs. So if Attorney A’s salary, benefits, and overhead share come to $200,000, the firm might give a bonus of 10% of whatever that attorney brings in above that up to $250,000 and a diminishing percentage of anything exceeding $250,000.
Or eschew the bonus for a reward such as a paid vacation where the amount isn’t tied to any specific collection amount.
That type of carrot does it all. It gets the hills out on time, because the attorneys know the sooner the bill, the faster the payment. And it’s failsafe for the firm, because there’s no bonus to pay unless the money comes in the door
There’s also the option of not offering any bonus at
all but focusing instead of encouragement. Sincere and well phrased compliments from the managing partner may well turn out to be carrot enough, he says. “Sometimes people respond to those type of things better than they do to financial incentives.”
BUT WATCH OUT FOR ABUSE
Nothing comes without a downside, however. Whenever there are incentives, “people will abuse them” They will record phantom hours and they will overbill.
Be watchful, Henderson says.
The billing partner — or in a small firm, the administrator — needs to question any spikes in someone’s billable hours.
Demand clarification on time descriptions that don’t tell precisely what work was done.
Make sure that what’s billed is consistent with the work and time that historically has been acceptable.
As to approaching the guilty attorney, however, that’s not ajob for the administrator. Inmost firms, “the administrator is not going to be able to apply the kind of pressure that’s needed to bring them into compliance.”
Also, be aware that whatever enforcement route the firm takes will require analysis.
For example, if the firm opts to dismiss its nonrepentant late-billing partners, the partnership agreement will need to set out billing performance as a partnership requirement and tell when and how a non-compliant partner will be removed.