Case

HK – Ryan oversees the firm’s billing and collections

In 1 on December 28, 2008 at 8:45 pm
 

Automation hasn't solved old-school problem: billing; Paper chase: Law firms still wrestle with in-house records, deadbeat clients.

Publication: Crain's Chicago Business
Publication Date: 13-SEP-04
Format: Online – approximately 756 words
Full Article Title: Automation hasn't solved old-school problem: billing; Paper chase: Law firms still wrestle with in-house records, deadbeat clients.(Technology)

Full Article
Byline: CHRISTINA LE BEAU

The marketing expert was hired because the law firm's income stream had slowed to a trickle. Surely lack of business was to blame. But a month later, the expert told the partners their caseload was plenty big, so the cash crunch must be caused by something else….

…That's when Ed Poll was brought in.

Mr. Poll, a former lawyer and now a legal management consultant based in Venice, Calif., reviewed the firm's financial records and came to a startling conclusion: For every $1 billed, the firm was collecting only 68 cents. "If you're not getting 95% plus, there is something you need to do to recognize why not,'' says Mr. Poll.

Sixty-eight cents might be an extreme example, but every law firm can relate in some way to collection woes. "We deal with overdue accounts very frequently,'' says John Ropiequet, who chairs the billing committee for Chicago's Arnstein & Lehr LLP, which, even so, generally collects 90% to 95% of its fees. "I may have one or two clients a day that I have to talk to.''

Many firms have installed legal billing software to speed the process and reduce one controllable impediment to bill collection: getting in-house staffers to submit records so their time can be billed to the client. Still, getting the client to cut a check-and quickly-remains a challenge in some cases.

In a time when everyone from contractors to doctors require some payment upfront, whether deposits or insurance co-pays, the legal profession remains one of the last to bill largely on faith. Most lawyers do seek retainers, particularly for new clients, but these are quickly depleted and not easily replenished. Often, then, it's bill as you go.

Naturally, this creates cash-flow problems, but not for the reasons one might imagine. Sure, some clients skip out on bills purposely. And others fall behind because of financial difficulties. Firms themselves contribute by not properly managing the billing cycle and failing to chase down delinquent accounts. But, by far, the biggest problem is a disconnect in expectations.

"We are very careful . . . when we take in a matter, to have an open discussion with clients,'' says Ed Ryan, a partner with Chicago's Holland & Knight LLP. That includes drawing up an engagement letter that details fee structure, billing schedule, scope of work and how conflicts are handled.

Mr. Ryan, who oversees the firm's billing and collections, tells of one case where the firm was handling civil litigation for a client, but not a related government investigation. When the client hired a new in-house counsel, who wondered why Holland & Knight hadn't been pursuing the government matter, the firm was able to use its engagement letter to show that it had fulfilled the original expectations.

Another situation didn't turn out as well. In that case, there was confusion about who would pay for expert witnesses, and because that hadn't been spelled out upfront, Holland ended up eating the costs, "which were very heavy.''

Mr. Ropiequet, the Arnstein & Lehr partner, has seen problems when a client asks for an estimate and is told the bill could run, say, $10,000 to $20,000. "Now what does the client hear? They hear `$10,000.' So as soon as it goes past that . . . they might not want to pay.''

Other times the cues are more subtle. Mr. Poll, the legal consultant, worked with one lawyer whose client-a woman going through a messy divorce-switched to another lawyer (still owing money to the first) after a settlement was reached but before the papers were signed. The first lawyer couldn't figure out what went wrong. After all, it was a heck of a financial settlement, and the client never even set foot in a courtroom. Turns out the client wanted to vent publicly at her soon-to-be ex-husband-even if it meant getting less money.

Sometimes it just comes down to a big bill that a client doesn't want to pay. Mr. Ropiequet has renegotiated fees after the fact-for instance, after a client company loses a case it expected to win. "Then all the bills you were sent and had paid suddenly look a lot larger than they did when you were winning,'' he says.

Posted via email from Case Investigation

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