Billing disputes are the bane of any law firm. Staying solvent relies on the smooth resolution of accounts receivable. You calculate your available revenue based on the billable hours provided to your firm’s active client list. So, when a client objects to their bill, naturally, you want to resolve this as quickly as possible.
However, smoothly handling billing disputes requires the ability to see the situation from your client’s perspective. Many clients are astounded when they first see the cost of their regular consultations and requested legal tasks. Most people – and businesses – don’t realize how much actual time goes into legal work. They often want to check the records just to make sure that the unexpectedly high invoice is completely above-board.
The key to handling billing disputes is to provide clear policies and transparent accounting for all billed hours. Clarity can help you and your client see eye-to-eye on billing disputes before anyone accuses anyone else of malpractice and billing fraud. Follow these strategies to help your clients understand where every billable hour comes from and the value, they have already received from your law firm’s dedicated work.
What is a Billing Dispute?
A billing dispute is when a client refuses to pay the bill because they disagree with how much they have been charged. The client may suddenly dislike the billing terms they agreed to, or they may go so far as to accuse your law firm or lawyers of billing fraud. In a worst-case scenario, clients have been known to file a malpractice suit against lawyers, especially if you try to collect while a billing dispute is ongoing.
Fortunately, you don’t need legal action to resolve most billing disputes. Clients simply need reassurance and proof that the hours they have been charged for have been honestly worked and to see the benefit your law firm’s billed hours have already provided to the client.
Clearly Define Your Billing Policies in a Signed Agreement
The first and most important factor of a billing dispute is the service agreement signed by your client. If you always bill in 15-minute chunks, if ongoing cases receive a base number of hours per week, or if there is a flat fee added to the billable hours rate, your client should fully understand before they request further legal assistance.
Clients who did not closely read their agreement may not realize exactly the policies that apply to their legal invoices. Not only should you write these agreements with reasonable and easy-to-understand billing statements, but you should also take the time to walk clients through the billing policies. When a billing dispute comes up, offer to help clients understand the policy they agreed to.
Provide Billing Transparency
The second essential step is billing transparency. Many clients experiencing legal sticker shock will want to “check the tapes” on just how many hours of legal work they are really receiving. After all, cumulative hours can sneak up on them. Billing transparency, both through invoices and a live report of their accounts’ billable hours, can really help clients to see that the work they have been billed for is all legitimate.
Billing transparency can be achieved in several ways, but it must begin with a proper accounting of your time, sorted individually by billable minutes and hours dedicated to each client.
Time Tracking Your Billable Hours
The first and most essential step to billing transparency is time tracking. Lawyers and legal teams must be able to clearly account for all the time they spend working on a client’s case. Every minute or 5–30-minute segment (depending on your billing terms) must be accounted for. Fortunately, this is easy to do with modern technology.
With the right software your legal team can not only track their time through digital time records and stopwatch features. They can automatically attribute the tracked time to each selected client account. and create a time-tracking record that can automatically be used both to inform your invoices and to prove how time was spent if clients want to see a record of the time they were billed for.
Itemized Legal Invoices
Next, provide invoices that minimize the desire to dispute. This has long been the purpose of the itemized invoice style. Each client’s invoice should receive not just a number of hours and a final financial amount, but a clear record of how those hours were reached including dates and times.
Clients can line up the records on their itemized legal invoice with their own phone records, emailed requests, meeting dates, and reports received as a result of your legal work. Clients will often check the facts before they raise a formal billing dispute with your law firm.
Live Client Portal
Of course, once you are tracking your time through integrated legal billing software, why not take it one step further? You can satisfy client curiosity and keep them in the loop through their monthly use of billable hours through a client portal.
Any time clients are curious about the work you are doing and the amount they will be billed for, they can look at the ongoing time-keeping records provided in their personal online accounts.
Present the Benefits Gained from Billed Work
When a billing dispute arises, it can also be useful to provide your clients with clear evidence of the benefit offered by those billed hours. Law firm productivity is often a matter that must be clearly addressed, both internally and externally. Help clients see that the hours in their invoice have provided proven value. Show them the evidence of your work and the benefits that have been provided.
Provide an Alternative Billing Structure
Lastly, if clients are truly unhappy with how they are being billed, you can offer them an alternative billing structure. Perhaps a client with a tight budget would appreciate paying a flat fee service with a finite amount of work you can provide each month. Or perhaps they would like an automated alert system to help them keep track of the legal hours as they reach certain hour-based or financially based milestones.
Being able to renegotiate a client’s agreement can help you keep clients who did not, at first, realize the billing structure they truly needed.
Unlock Integrated Transparent Billing with LawBillity
If your law firm needs an easy way to track time and create transparency in client billing, LawBillity provides an integrated software solution designed for law firm operations. Stop billing disputes before they happen by providing transparent billing records from the start. Start your free trial and discover how LawBillity can reduce billing disputes in your law firm.
