Fee Agreements: Bill As If Your Firm Means It
October 27, 2016
You say you want to get paid. But are you sure your clients know that? If your firm struggles with a low collected-to-billed rate, some of the fault may be yours.
Particularly in hard economic times, companies and individuals prioritize their bills. They pay the most urgent invoices and the most insistent service providers first and get around to the rest when they’re able. You can help make your firm’s bills a priority by being clear about your expectations. This starts with a comprehensive fee agreement.
In Black and White
The American Bar Association doesn’t require written fee agreements, except for contingency cases (although your state or local rules may require them). But if you’re serious about collecting from clients, formalize your relationship with a fee agreement, contract or retainer letter.
The complexity of this document depends on many factors, including services to be provided and fee structures. For example, specify whether you’ll bill:
- By the hour;
- Against an advance or general retainer;
- A flat fee;
- A contingent fee; or
- A combination of fee types.
Explain how each fee is calculated and specify dollar amounts, including variable hourly rates for team members such as experienced partners, newer associates and paralegals.
If you plan to pass actual costs on to clients, list them. Costs related to such items as travel and meals, photocopying, electronic research and customized software (such as database programs) can add up. Finally, be sure to state whether you charge late fees and interest on past-due accounts.
Make Collecting Easier
Specify in your fee agreement when you expect clients to pay invoices — typically within 30 to 60 days — and whether you’ll withdraw representation of delinquent clients (keeping in mind the ABA’s and your state bar’s Codes of Professional Conduct). The agreement should also list acceptable methods of payment. Law firms that accept credit cards or have online payment systems generally have an easier time getting paid.
And don’t forget to discuss your collections policy — including how you track and handle delinquent or unpaid accounts and when you turn them over to collection agencies.
Keep Them Current
Even when you make detailed fee agreements, there will always be a certain percentage of clients that pay late or never pay at all. But when you put your expectations in writing, you know you’re doing your part to avoid misunderstandings, and your firm should begin to see the rate of accounts that are current rise.