Pitfall # 8 – Not Handling Client Advances Properly
In today’s difficult economic climate, cash flow and profitability for most law firms depend on a roster of clients who pre-pay (also known as client advances or retainers). However, from an accounting/bookkeeping perspective, law firm client advances (retainers) need special treatment and must be handled very carefully. While most other businesses deposit client advances in their business account, lawyers cannot do so that easily.
For attorneys, improper handling of retainers can result in disciplinary action. Time and again, attorneys are admonished for failing to handle funds properly. Client advances may need to be deposited in a trust account or in the firm operating account, a decision that must be made carefully because state rules vary and change from practice to practice.
Since client advances are debited as legal fees are earned, your legal billing software must track the remaining retainer balances at all times and invoices must correctly reflect balances.
The varied nature of client advances, an initial deposit to trust and/or operating account, and reducing balances as fees are earned can significantly complicate your back office operation if not handled systematically. Due to the uniqueness of client advances and the consequences of mishandling them, choose your legal billing software with this fundamental requirement in forefront rather than as an afterthought and you can avoid Pitfall # 8.
To see a more detailed presentation and learn how easy it is to account for advances if your billing system is set up properly, register for Easy Soft’s interactive webinar, How to Avoid Legal Billing Pitfalls. Learn how to evaluate systems that can streamline your back office operation for legal billing, trust account management and collections, and in turn, tighten state regulation compliance and improve your firm’s financial picture.
In my earlier post Reduce Professional Liability Risk, I outlined how an effective conflict checker mitigates professional liability risk and how modern computer programs automate this tedious, but very necessary task.
Since then, I received many enquires about how to actually get a conflict checking system in place. Most first time users of Easy TimeBill program face the same “how to” dilemma.
The core of a reliable conflict checking system is your database of names; names of clients, key witnesses, adversary (the spouse in a divorce case), opposing counsel, etc. To build a database, you will need to integrate your current client information and contacts from closed cases. Just how should you go about adding all the pertinent details from your inactive case files?
One obvious choice is to add prior client information as individual clients. It would seem to make sense that if ALL past and current clients are in the database, you would have a reliable means to check for conflicts of interest. However, I do not like this approach because it clutters your current client database with closed case files.
A better method to inventory inactive case related contacts is to:
1. Create one “fictitious client,” e.g. your own law firm.
2. Enter all prior clients and their related contacts in the address book as a type of “friend.”
3. Go back to the fictitious client and assign all the newly created “friends,” designating the relationship type as “former client.”
Using the above method allows you to add former client case related names and details to your new conflict checker database, without commingling old and current cases. You will see only current clients as active clients, yet you will have a robust conflict of interest checking system because your database will contain current and prior client contacts.
The prevailing common law doctrine holds that if one lawyer in a law firm is disqualified from representing a client because of the former client conflict of interest principle, every lawyer in that firm is also disqualified. Describing the varying practices of firms’ conflict-checking procedures, and confirming that most firms rely on some computerized systems. Lawyers and Paralegals should use a conflict checking system to screen for conflicts. Developing “bulletproof” conflicts checking systems is a necessary function of good law firm management. Hopefully this article has given everyone some ideas on how to design or improve current conflict checking system. While this may seem to be trivial, one cannot overstate the possible negative consequences of learning that one has a direct conflict at a critical stage in the representation of the client.
Pitfall # 9 – Billing Systems Unable to Handle Varied Fee Arrangements
Most law firms handle a variety cases and use an assortment client billing arrangements, such as hourly, retainer based hourly, fixed and contingency. Even if you predominantly practice one type of law and bill hourly, you are likely to have cases where you want a client to advance funds (retainer) or prefer a fixed fee or a contingency basis arrangement.
Your legal billing software must be able to handle all types of billing arrangements and the intricacies that arise. For example, when it comes to client retainers, states generally have strict accounting rules that require depositing unbilled/unearned client funds in trust accounts. Thus, it is important that your billing system can identify client funds vs. firm operating funds and process them correctly to meet trust accounting requirements.
You do not want to run into a situation where your legal billing system cannot process a fee arrangement properly. For a complete and uniform legal billing solution and to avoid Pitfall # 9, choose a system that can handle every type of billing arrangement your firm uses or may use in the future. Stay tuned for Pitfall # 8.
Register for Easy Soft’s interactive webinar, How to Avoid Legal Billing Pitfalls. Learn how to evaluate systems that can streamline your back office operation for legal billing, trust account management and collections, and in turn, tighten state regulation compliance and improve your firm’s financial picture.
Pitfall #10 – Not Using Matter-Based Record-keeping
The ABCs of billing and accounting practices at law firms start with keeping all transactions details at a matter level rather than at the client level. Many service businesses perform multiple types of jobs for a customer and generate one invoice that covers everything. The same billing process does not work for law offices.
Law firms are usually required to keep each task (called “matter”) completely separate from other matters for the same client or other clients. For example, if client John Smith gives his attorney two assignments, one for a “divorce” and another for “will preparation,” the law firm must track time and expenses separately for Mr. Smith’s two matters. The same concept extends to generating invoices, handling client advances, etc. For law firms, matter-based recordkeeping is critical because it allows them to produce proper records easily in case of client inquires, billing disputes or state audits.
Whether your firm uses a manual billing system or legal billing software, make sure your recordkeeping is matter-based and you can avoid Pitfall #10. Stay tuned for Pitfall #9.
Register for Easy Soft’s interactive webinar, How to Avoid Legal Billing Pitfalls. Learn how to evaluate systems that can streamline your back office operation for legal billing, trust account management and collections, and in turn tighten state regulation compliance and improve your firm’s financial picture.
When a law office decides to implement legal billing software, the billing workflow of the entire office will usually change dramatically for everyone involved in the billing process. This will result in the need for training and development of a workflow that makes sense for that specific law office. This will require the involvement of technical support for implementation, documentation of the new workflow and training for the employees.
Understanding the Role of Legal Billing Software
Legal billing software is a great way to improve productivity and client time tracking in a law office. This can help identify what clients require the most time, balance workloads and provide cost analysis. While there may be a hiccup in productivity while employees in the office learn the new legal billing software, in the long run, the software will be a positive end result for all those involved.
Understand the Role of Legal Billing Software Reviews
While the law office’s employees are attending classes or utilizing other training options to learn the new legal billing software, there is an often-overlooked training opportunity that can provide information a manual or training classes will not. That is reading legal billing software reviews. These reviews are written by those who use the legal billing software on a day-to-day basis. The legal billing software reviews can provide insight into both the positives and negatives to utilizing the software. These reviews provide an honest assessment of the software, which will better prepare the new users as to what to expect from this new software and their newly established workflow.
When a law office decides to implement a new legal billing software workflow, it can prove very stressful for all the different employees involved. However, by those employees attending training, reviewing supplemental training videos, reading software manuals and, quite possibly most important, reading legal billing software reviews, those employees will be better prepared for the billing workflow changes, and hopefully, less stressed about the workflow change.
Legal billing software is utilized by more than just attorneys to track work on a client’s legal issue or case. Support staff, paralegals and those working in accounting and billing functions will all need to understand and utilize this software on a daily basis. Therefore, it is a good idea that employees in functions that will use the legal billing software read different legal billing software reviews for that extra edge of information.
Why Read Legal Billing Software Reviews?
There are a variety of different ways an individual can learn a specific software package. Employees can attend classes to get the basics and get “hands-on” time with the new software while a trainer is available for guidance. Some prefer to just “dive in” and experiment while still others prefer feel they learn best by reading through a manual or utilizing online training videos. Everyone learns differently, and by utilizing a variety of tools available, chances are increased the individual will learn and retain more.
Another important part of learning a new legal billing software package is reading different legal billing software reviews. Unlike manuals, and sometimes even corporate trainers, those who write legal billing software reviews actually utilize the software on a day-to-day basis. These individuals can provide insight to both the positives and negatives of the software package. Additionally, legal billing software reviews can alert new users to software pitfalls and how to resolve them if they arise, saving valuable time and avoiding user frustration.
Learning New Software from Legal Billing Software Reviews
Learning a new software package is often difficult. If an individual needs to learn a new software package quickly for work, frustration can be added to that difficulty. While the law office installing the new legal billing software will provide training and support, it is definitely worthwhile for employees to seek out legal billing software reviews for that extra bit of insight that will more than likely not be noted in user manuals, which are usually written by engineers; whereas legal billing software reviews are written by individuals who use the software daily.