Lawyer fees should be in real time

Most business costs are in real time – why aren’t lawyer fees?

From salaries to servers to advertisements, executives today can find out most of their business expenses in real time. The one area where costs are not known until long after the fact is legal.

Planning for legal expenses is often difficult under the current legal billing system. This is because most corporate lawyers bill their clients monthly, and they usually send the bill 30 days after the month’s close. So for March’s legal expenses, you’ll probably get a bill in late April. Although the bill will be very detailed, by the time you receive it and examine it, the itemized time could be over 60 days old. Because of this long lag, lawyer fees can be a big surprise.

Law firms would be doing their clients a real service if they provided their bills daily – just like you can do with ad exchanges.  And like ad exchanges, they can still send you an invoice once a month, but at least their clients can plan and budget appropriately during the month. In today’s world where running a business requires close monitoring of expenses, near real-time legal fees would go a long way.

5 thoughts on “Lawyer fees should be in real time

  1. Paul Boal

    I definitely like the idea. I think that some other areas of expense mitigate the variability in cost through the use of pooled insurance rather than a consumption-only model. For instance, health care, what an individual actually pays for a procedure is the result of a process of coding, billing, and claim adjudication. The corporate expense for that care, though, is typically fixed within the part of the individual employee premium that is covered by the employer. In that case, an employer removes their own risk and puts that on the insurance company (and the individual).
    In the legal system, doesn’t the use of a retainer work somewhat the same way to mitigate some of the financial risk?

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  2. Cathy

    There’s a few things here… One, it is worth having a conversation with the lawyer about budgeting. Things can obviously change throughout the month, but the lawyer can probably give you some idea of how much work is anticipated and how much it will cost, and communicate if there are any significant changes.
    It may be difficult getting precise daily bills though. Entering time into timekeeping systems can itself be time-consuming, and sometimes, depending on workflow, it’s difficult for lawyers to stay on top of it daily. Sometimes even weekly is difficult, and the difficulties are even more pronounced when there are many levels of lawyers (partners, associates, etc.) involved, who would all need to have their time entered in order to give you a precise quote. Nonetheless, your lawyer/firm should be able to periodically communicate an approximate sense of how busy they’ve been on your matters.
    It is also something of an accommodation by the firm to bill after work has been performed. In smaller firm environments retainers are often required in advance, sometimes just initially, but sometimes throughout the representation. Your lawyer or firm will probably be willing to work with you on the payment logistics (after all, they do want to get paid, and the client not get annoyed!) but allowing for retroactive billing is probably seen as a client courtesy. It can actually be financially difficult for firms to have to wait a long time for open receivables to be paid.
    But I think the bottom line to all of this is to call the lawyer/firm and discuss it with them. While all lawyers/firms should aspire to be proactive and communicative with the client, if they are not sufficiently for your needs, you should feel able to contact them.

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  3. Stacyisfine

    There are a number of reasons for delays in the creation of any time and materials invoice, manly centered around a company’s time-sheet and expense report processes. I would imagine this would also apply to legal billings, which are essentially time and materials invoices. A legal retainer should cover the issue of budgeting for fees. If the volume is not high enough, or regular enough, to necessitate a legal retainer, you should be able to get *some* sort of estimate of the hours needed to complete the task at hand.
    I tend to receive invoices around the 10th of the month, for the preceding month. If receiving invoices 60 days after work is performed is a recurring problem, you may wish to speak to the partnership. It may be that they need to: increase their billing staff, revisit their time-sheet and expense report processes, update their billing technology, etc. Sometimes customer pressure is the impetus they need to get the ball rolling on their end.
    One thing to think about… I am not so sure that all clients would appreciate daily invoices, as this tends to increase the processing time demanded of their internal accounting department. Not all companies have the ability to monitor budgets on a daily basis, especially if the costs for the project are spread out over say, 20 invoices in any given month?

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  4. Irina

    The problem is that the partners need time to review the time narratives and edit them so that the client is not completely outraged when he reads what he’s paying for.

    Reply
  5. Andy Wilson

    I think in the next decade you will see newer more agile startup firms offer such services. But as I see it now, and I work with law firms on a daily basis, this isn’t happening anytime soon, especially in the big top 250 law firms. They are just set in their ways and most unwilling to adopt technology. Point in fact, I had to teach a senior partner once how to open an attachment. He then asked his secretary to print it for him x2, one for work one for home. The “if it ain’t broke don’t fix it” mindset is entrenched in many of the big law firms. I hope I’m right in 10 years or sooner. The legal industry definitely needs better ideas in how best to use technology to it’s advantage.

    Reply

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