Drafting a Bullet Proof Bill

by Terri Olson

In days gone by, lawyers could submit bills to clients reading "total for services rendered" and generally expect to be paid. Nowadays, more and more clients, especially business clients, review each billing item and even employ outside auditors to check invoices and dispute any ambiguous or irregular entry. How can you avoid sending a bill that irritates or confuses your clients, while at the same time accurately reflecting the value of the work you've done and expenses you've incurred? The following summary of problem areas and possible solutions may help.

Billing for overhead. This is a thorny issue because no two professionals may agree all of the time on what constitutes overhead. For some, overhead is simply the rent and the utility bill -- all else is charged to the client. For others, all work done by the firm staff and all expenses are considered part of the overhead, which is included in the lawyer's hourly charge. Who's right?

Certain things should be obvious. Charging the going rate in your area for a service plus charging for administrative expenses will always dissatisfy the savvy client. If you are going to charge separately for administrative time and expense, such as faxes, copies, postage, on-line research charges, or contract workers' pay, it is only fair to pass that savings on to the client in the form of a generally lower hourly rate or flat fee. The argument that "you only pay for what you use" can be a persuasive one with clients once they realize that they are not footing the bill for another clients' massive photocopy and fax costs. But if this tack is chosen, good communication with the client is essential. Otherwise, the client will simply feel that you are overcharging him or her, or, as some disgruntled clients put it, "nickel-and-diming me to death."

Also critical to charging for administrative time and expense is proper record keeping. If your records are sloppy, this will show up on your bills as incomplete or inconsistent charge-backs. This will readily prompt an audit or complaints from the client. If you are not absolutely sure that accurate records will always be kept, it's better and safer to include your overhead in your hourly rate or flat fee. And remember, even though your procedures may be accurate and fair, failure to communicate this to the client will result in lost business and hard feelings. So as indicated above, if you doubt your communications skills, it's probably better not to attempt separate charges.

Always a no-no is billing for administrative time related to billing. Believe it or not, some firms will charge for time spent discussing the bill with the client, or time spent correcting a bill. While there may be some internal logic to this, suffice it to say that there is probably no other billing item or strategy guaranteed to have such a negative effect.

Double billing. Examples might include having a lawyer and a paralegal both charge for drafting a document, or two associates charge for attending the same deposition. While there are firms that consciously or unconsciously promote this practice -- either through outright falsehoods or through forcing billing minimums that the associates cannot legitimately reach -- in many cases it's simply a failure to word the bills carefully enough.

Let's take the first example given: a lawyer and paralegal both charging for drafting a document. Now, what most likely occurred was that the paralegal did the initial draft of the document and the lawyer reviewed, revised and corrected the original. No duplication here -- but if the bill reads simply "drafted motion," or worse, "worked on motion," the client's eyebrows will go up. Similarly, although a law firm should look closely at situations where two lawyers attend the same event to see whether this is in fact necessary, if the associates had different but vital functions, the wording of the bill should carefully reflect that.

Travel time. What about charging for time spent in route to a deposition or a meeting? Clients do not like seeing lawyers bill $150 an hour for time spent relaxing at 25,000 feet or driving. However, firms correctly point out that this is time that the lawyer often cannot use productively on other work, and it's not fair that the firm should lose money simply because the meeting is not a local one. To reconcile these opposing viewpoints, try the following: First, the obvious solution is to limit travel as much as possible. Schedule local meetings, combine trips, or use video and telephone conferencing if available. If you must travel, try to work on that file while traveling and bill at the normal rate for the legal work, not the travel. And last, if you must travel by a method -- such as driving -- that prevents you from concentrating on and billing for time spent, bill for the travel, but at a discounted rate.

Lawyers also sometimes attempt to have the best of both worlds by working on one file while traveling for another, and then billing the first client for the legal work during the travel time and the other client for the travel time itself. ABA Formal Opinion 93-379 states that it's improper for a lawyer to bill clients for more time than is actually spent on their matters. If you bill one client for three hours of work done during six hours of travel time which is also billed for, you're billing for nine hours of work during a six hour period, a physical impossibility. So, for ethics reasons as well as client relations reasons, don't try this. You could, however, apportion travel time if you're traveling on behalf of several clients, billing one for half the time and the other for the remainder.

Poor outcome. There is no rule that says you cannot charge for work that has a poor outcome -- unless of course the work was so bad that it constitutes malpractice. But generally, lawyers will keep their clients happier if they write down or write off work that did not have the anticipated result. The key is "anticipated". If you tell a client from the beginning that you don't think he will prevail, and indeed he does not, then there is no reason you should not bill for your efforts. But if both you and the client expect a favorable outcome, and for some reason the motion is denied, the jury comes back with grim expressions, or the insurance company laughs at your settlement proposal, it's common practice to offer a discount to offset the chagrin the client must be feeling. This is especially true for long-term clients, whose good will you need to preserve for more than one matter.

A final point on billing for work that has been discounted for one reason or another: always indicate the fact that the rate is discounted on your bill. For one thing, it will please and surprise your clients that they are getting a "bargain rate" -- but only if you tell them. For another, if you don't put down in the bill that this is a discount or courtesy rate, your clients will quote the rate to all their friends, who will then come in expecting you to make the same arrangement for them.

Some more tips for wording bills that clients are more likely to pay:

• Use different billing terms (and codes) for attorneys versus paralegals to avoid charges of double-billing. A paralegal would always record 005 -- draft document -- while an attorney would always record 006 -- document review.
• Be as specific as possible unless the client has made an explicit request for a summary bill. Instead of "telephone conversation," use "telephone consultation with opposing counsel to review most recent settlement agreement terms"
• Use "power words" that convey the value of what the attorney does. Instead of "worked on," "talked to" or "made", try "researched," "consulted", "developed" or "analyzed".
• Similarly, use verbs instead of nouns to convey action. Remember how you were always told to use verbs in your résumés to show the responsibilities you'd had? The same applies here.
• Never tell a client that the bill "has" to look a certain way because your billing software won't accommodate any variation. Most billing packages now come with invoice editors that allow you to customize the look for each client. Make sure your staff is trained on how to accomplish this.