5 tips for ethical legal billing

Kristin Moye
Published: May 8, 2018

Ethical requirements, unique to the legal professional, make legal billing a skill in itself. Follow these tips to better understand your ethical duties, better manage your billing activity, and even improve your client rapport.

Fee agreements are the first step to ethical legal billing. A fee agreement lays out a framework and sets expectations. It also explains how fees are calculated. The guiding principle for fee agreements is that your fee must be reasonable in accordance with ABA Model Rule 1.5. The rule also requires that the scope of the representation and the basis for calculating fees and expenses be communicated to the client promptly.

Make sure that your fee agreement includes billing details – for instance, will the case be billed as a flat fee, hourly fee, contingent fee, or some sort of hybrid?

• For a flat fee, a fixed amount that your client pays for a specific task, indicate whether the fee is earned on receipt or will be deposited into the client’s trust account.
• For an hourly fee, explain if the client will pay an advance that you will bill against or if you’ll be sending them a bill each month. If you plan to bill monthly, indicate the specific day your client can expect it.
• For a contingent fee, establish a specific percentage that you’ll take from any recovery. The percentage may vary depending on whether certain milestones have been reached. For example, you might charge a lower percentage if you are able to obtain a recovery before a trial.

Regardless of what type of billing structure you choose, fees must be reasonable and your fee agreement must accurately describe the scope of the representation. Your fee agreement should also explain exactly what costs your clients will be responsible for paying.

• Will you incur costs on your client’s behalf and then bill them for it?
• Will your client be responsible for paying the cost directly to the vendor or third party?
• Will you get your client’s permission before you incur costs above a certain amount?

Lay out these expectations clearly in the written fee agreement so that the client is fully informed about your process and isn’t surprised when they receive their bill.

Regardless of how busy you are, schedule a specific day to take care of your billing responsibilities. Billing consistently on the same day each month will help your clients plan. It is difficult for most people to pay a bill that totals two months’ worth of work, if they are used to receiving a bill that includes only one month’s work.

If fees accrue because you haven’t adhered to a regular billing schedule, you could be violating ethical duties. ABA Model Rule 1.3 requires that lawyers are diligent. Staying organized by billing promptly and regularly will help you uphold this ethical standard.

Expert advice: The easiest way to ensure you bill promptly is to track your time in a law practice management system with built-in time and billing software. When it is time to create a bill, you can quickly select your unbilled time and generate a professional invoice that you can send to clients. What used to take hours can be done within minutes.

Look at billing as an opportunity to show your clients what you have done for them over the course of a month. General billing statements, such as “conduct research” or “draft interrogatories,” don’t convey value that clients can understand and fully appreciate. Instead, provide additional context that indicates what was being researched and/or why the research was necessary.

Provide clients a running list of all of the tasks that you’ve completed behind the scenes. Although a client may be aware of a mediation that you attended, they likely won’t understand the time and hard work that went into preparing for it.

Billing should not be the only communication that you have with your client in a given month; nonetheless, it is an excellent opportunity to show exactly what you’ve done for them and why it was important. Remember, communicating with your clients regularly is a requirement under the Model Rules of Professional Conduct Rule 1.4.

Your rate should be sufficient to pay for your overhead and administrative activities like making photocopies, assembling documents, or filing. Therefore, you should not include this cost on your bill. It’s not reasonable for your clients to pay a lawyer’s rate for these types of activities.

Keep in mind, your clients would be glad to see “no charge” on their bill sometimes. Every now and then, inform your client that you have completed a task without charging them. This will help generate good will, instill confidence, and ultimately make them appreciate you and your services much more.

Don’t overpay or underpay yourself. If you don’t regularly track your time, you will be much more likely to forget how you spent your time and as a result create an inaccurate bill. Even if you collect a flat fee, keeping contemporaneous time records, within legal billing software, will help ensure that your fee is reasonable and that you’re charging correctly. Many jurisdictions require you to do a “look back” at the end of representation to ensure that your fee was appropriate.

In the case of contingent fees, if there is an award of attorney’s fees, it is difficult to reconstruct your time after the case is over. You may vastly overstate your time in violation of the ethics rules, or understate your time and not be appropriately compensated.

Legal billing takes practice. Creating a system that addresses these considerations will help you fulfill your ethical obligations and help keep your clients happy.