Solve your firm’s pricing and payment collection problems
When you make a purchase, you want to know it’s worthwhile. The phrase, “you get what you pay for” refers to spending less for an inferior product, but it also hints at expectations. You anticipate a product or service commensurate with what was spent. Legal consumers are no different.
“These are people that probably spent money that wasn't easy to come by to pay for you, and they want to see their return,” says Claudia Lagos, a criminal defense attorney in the Boston area. “I think it's important for them to see exactly what they're paying for and feel good about their decision just like you would about any decision.”
In today’s legal market where clients are expecting more for less, it’s even more important to listen to clients and engage a new way forward. Because of the shifting legal market, creating happy clients is predicated upon a successful client service process, and effective pricing and collections is a critical piece of the puzzle. Getting it right is an opportunity to leapfrog the competition because most law firms are still attempting to fix the problem of heightened client needs.
According to the Thomson Reuters Legal Executive Institute’s 2019 State of US Small Law Firms Report, 59 percent of firms surveyed said clients demanding more for less or rate pressure was a moderate or significant challenge, and 61 percent noted getting paid by clients as a challenge. And yet 76 percent said they were not addressing clients demanding more for less.
The problem expands when you consider that time spent on the administrative tasks of tracking time and managing invoices cannot be billed to clients, which cuts into overall firm profitability. In the same survey, 72 percent of firms said that spending too much time on administrative tasks is a challenge.
Flexibility, accuracy and clarity
Don’t shy away from flexible pricing models, a pricing strategy with an open negotiation between attorney and client, and communicate up front with clients. If the pricing process is transparent, as well as reasonably simple and accurate from the beginning, no one, including your bottom line, gets surprised by the final bill. And with today’s legal technology, you can better estimate timelines to inform budgeting, resourcing, and fulfilling customer expectations. That avoids the risk of errors that come when such tasks are performed manually.
Today, avoiding modern pricing models is costing law firms money. According to the Thomson Reuters 2019 State of the Legal Market Report, the average lawyer, considering small, medium, and large law firms, is now billing 144 fewer hours per year than they did 11 years ago. At current average rates, this is costing firms an average of $70,416 per lawyer per year. With billable hours and average rates shrinking, it’s necessary to find a process that keeps clients coming back, but also keeps the lights on. The longer a law firm waits, the more painful a critical shift in pricing could be to attorneys.
Each small step can make a difference, and knowing the reasons for your billing practices is step one to creating a better system for yourself and for your clients.
“I find that billing hourly interferes with the type of relationship I want to have with clients,” says NiaLena Caravasos, a criminal defense attorney in Philadelphia. “I spend a lot of time getting to know them. I want to get to know everything about them. When I’m open to receiving information that way, I can stumble onto something that could be a gold mine of something to help them with.”
One simple way is to centralize the management of your firm with online practice management software. It gives you a more effective and efficient way to encompass your billing, pricing, and client work. By having time tracking and billing in one place, you can record time and fees from anywhere, create and track client invoices, run billing reports, and monitor business seamlessly, saving time and energy.
Take the next step in client satisfaction with this insightful white paper, “From one-star service to five-start opportunity: How law firms can create a competitive advantage through client experience"