Andrew McDermott

Anatomy of an Invoice: Best Practices for Client Billing in the Legal Industry

April 7, 2020 By Andrew McDermott

Client billing bill4time feature image workplace desktop

Do your clients ignore your bill? Is it a hassle to get your invoices paid completely or on time? Maybe lost billables have been a problem for your firm? If so, your invoices may be to blame. Your invoice has a tremendous amount of power. In the right hands, it’s a tool you can use to boost realization rates and confirm or deny the image of your firm. It’s a helpful way to encourage loyalty and support or a surefire way to turn clients off. Here are some best practices for client billing.

Your clients won’t admit it, but they’re terrified

They’re nervous about working with attorneys.

Put yourself in their shoes. Imagine a professional tells you they’re going to help you at the discounted rate of $768 per hour. They’ll let you know when they’re finished working, and then they’ll send you a bill at the end of the month.

Pretty random, right?

As a client, you’re vulnerable and completely in the dark. Will they itemize absolutely everything (e.g., dry cleaning, phone calls, emails, text messages, lunch breaks)? Do they inflate billable hours?

It’s a reasonable question when you come across stories like these.

An attorney in West Virginia billed 24 hours in one day.
Another billed 900 hours of travel in one month (there are 730 hours in a month)
A partner at a prestigious Chicago law firm billed 6,022 hours per year for four consecutive years. She’d have to work 23.3 hours per day for 365 days a year to achieve this.

They have fear that they’ll be cheated somehow.

Read through these examples of overbilling and something interesting stands out. Of the 800 lawyers doing court appointed work in this story, only 100 were overbilling. The others were “billing scrupulously.” When it came to client billing, most lawyers were trustworthy.

Your firm’s image depends (partially) on your billing

In the legal industry, a bill that’s ignored is a missed opportunity.

Best practices for client billing suggest that you focus on the essential elements. That’s important because a missed opportunity on your invoice creates all kinds of little problems for your firm.

Clients who refuse to pay on time or at all
Fee disputes from unhappy clients who refuse to pay a cent more than they have to
Clients spend less time and money with the firm
The perception that invoices + follow-up is sleazy, offensive or rude
Losing billables to shrink
Clients threatening to file a bar complaint

Suddenly, these problems aren’t so little, are they?

Include the correct details on your invoice, and you’re far more likely to receive the payment you deserve. Your clients won’t feel like they’re being nickeled and dimed to death.

Obvious, right?

Only it’s not entirely obvious. The anatomy of an invoice isn’t as straightforward as it sounds. Sure, there are basic details you’ll need to include. There are also hidden details that move your client relationship forwards or backwards.

What’s worse, these details are cumulative.

They’re designed to work together, with the benefits slowly improving client trust over time.

Following best practices for client billing confirms trustworthiness

Your invoices give customers peace of mind. Best practices in client billing show clients you’re…

Clear. Clients know exactly what to expect. There are no hidden surprises, no gotcha moments where customers are blindsided by an unexpected bill, dollar amount or unfamiliar term. Clarity sets the tone for the relationship, determining whether clients are a fit for your firm, or not.
Transparent. Which line item is more trustworthy, “Prepare motion for summary judgment” or, “Divorce?” Which line item gives clients the impression that you’re working specifically on their behalf? Most people would list the first line item as more transparent.
Charitable. Unseen discounts, pro bono work, hidden write-downs and write-offs, they do nothing for you or your clients. If you’re giving customers a bonus, incentive or discount, make sure it’s listed on their invoice.
Setting boundaries. Are your payment terms net 30? What’s your late fee? Your invoice enables you to set subtle boundaries with clients.

Here’s the question though. What should be included in your invoice?

Sample invoice for client billing. Annotated with components that are addressed in the following paragraphs.

Your invoice should cover three categories.

1. The basics

The barebones data your client needs to actually pay your invoice. This data is the absolute minimum. If you’re using a tool like Bill4Time to track your time this is simple and straightforward.

Your invoice should clarify…

Who to pay
Who is responsible for payment
How much to pay
When to pay it
Acceptable payment methods.
Where to send their payment

If you’re in business and you’re getting paid, you understand the basics. We all understand the basics of client billing so that means we need to focus our attention on…

2. Obvious data

Your recent / previous payment. This is a form of positive reinforcement. It gives clients a running tally of their recent payments and it shows that their payments were posted to their account. Normally this isn’t something your clients will even look at. This is the first place they’re look if there’s a balance dispute or disagreement about the amount that’s drawn from their retainer.
Bill date and details. This shows your clients when the bill was printed. Here’s why this matters. Chronic late payers may be wondering why wasn’t my payment reflected on my invoice? This gives you the opening you need to have a conversation about due dates.
Hours/fees breakdown. This gives clients a sense of your performance and hourly rate. It’s a simple heuristic clients can use to see who did what and when. Is a junior associate taking twice as long to handle something a partner can finish in half the time? Are you accidentally billing paralegals out at senior attorney rates? It’s an easy mistake to make, but it’s also considered fraud.
Late fees and discounts for early payment. There are obvious and hidden aspects to this, but it’s an easy and straightforward way to set boundaries with clients.

3. Hidden data

Outlining what you did versus what you gave. An unseen discount is worthless to your client. It’s worthless to you. Even worse, bringing up a discount after the fact is far more likely to create resentment. Clients are more likely to assume that you’re using discounts circumstantially to gain leverage over them.
Listing work completion dates. This isn’t as common as you’d expect but it’s a helpful way to minimize payment disputes. A detailed breakdown communicates (a.) you’re working consistently on specific tasks (b.) the time spent on these tasks are reasonable and appropriate.
Payment arrangement details. On the one hand, you probably don’t want to advertise payment arrangements as it may encourage clients to pay late or pay less. On the other hand, it’s something that can be used to encourage delinquent clients to pay vs. dealing with write-downs or write-offs.
Arranging payment due dates are pretty basic. But there’s also a hidden element at play. When it comes to follow-up, attorneys are notoriously bad at it. It’s incredibly common for customers to ignore an invoice for legitimate or illegitimate reasons. The lack of follow-up is common, but it’s also devastating to your firm’s cash flow.

So why does this happen? There’s a variety of reasons – don’t want to appear needy or greedy. Attorneys don’t want to offend their clients. Here’s what this lack of follow-up really communicates to your client. You don’t need or care to be paid for your hard work.

Setting rules and boundaries, e.g., rewarding clients who pay early and penalizing clients who pay late. This gives customers a clear indication of where they stand and what’s expected by all. If the rules are clear, there should be no confusion about what you’re doing or what needs to be done. Just make sure it’s reflected in your initial agreements.

These details may not seem like much. But they’re crucial in your client billing if you’d like to avoid:

Clients who refuse to pay on time or at all
Fee disputes from unhappy clients who refuse to pay a cent more than they have to
Clients who spend less time and money with the firm
The perception that invoices + follow up is sleazy, rude or offensive
Losing billables to shrink
Clients threatening to file a bar complaint

It’s essential to include the right details in your invoice, but it’s only half the story. What’s the other half?

Transparency

Namely, what’s the level of transparency you should use for line items? If your firm bills clients hourly, your work is straightforward and simple. Make sure your invoice line items are specific and clear.

It’s never that simple though is it?

Along comes the alternative fee arrangements (AFAs). Options for flat fee and non-billable payments for clients. As it turns out clients like these AFAs; flat-fee options give clients clarity, predictability and peace of mind. These AFAs come with an unpleasant downside, though.

Shadow billing

You know how it works. Your legal billings are set at a flat rate, but you still track and report billable hours. It’s supposed to be helpful. You and your client get to see if the flat rate price you quoted them is in line with reality. They get a flat rate, you receive valuable data to adjust your price for next time.

Bill Josten at the Legal Executive Institute explains why shadow billing is a problem.

Imagine a … “law firm and client agree to undertake a given matter for a flat fee of $1 million. Everyone is happy with this rate and the client feels it represents a fair fee for the work to be performed.

Now the law firm happens to have a particularly innovative attorney who figures out a new way to complete the task at minimal cost. On a billable hour basis, the firm incurs only $50,000 in costs to quickly produce a top-quality result.

The client sees the work product and is thrilled. But when they see the shadow bill they become irate. How could the law firm bill them $1 million for something that took only $50,000 to complete?”

It all depends on your strategy: If you bill hourly, clients focus on minimizing the amount of work done on their behalf. If they need something done, cost becomes a motivating factor (instead of quality), if you bill at a flat rate, shadow billing becomes a problem.

It’s about transparency

When in doubt, obey the law. Be honest, open, and ethical. Give your clients a clear idea of what to expect, because that’s what your clients expect.

They want the right amount of data to maintain trust and openness. So what should you avoid? It’s actually pretty simple. Avoid anything in your invoice that deceives or overwhelms your clients.

Successful legal billing begins with consistent communication

What does communication have to do with realization rates or getting paid? According to the Legal Trends report, 44 percent of law firms list a client’s inability to pay all at once as the most common reason for nonpayment. Firms also state that 31 percent of clients pay late even when they have the funds.

What’s going on here?

Patrick Lamb, Partner at ElevateNext Law, shared his thoughts on the cause of client schizophrenia.

“Firms increased their rates and clients responded by paying less. This finding reflects a fundamental disconnect between firms and their clients. Clients obviously do not believe they are getting fair value for the fees charged. Increasing rates is not going to change that view: indeed, continued price increases will only exacerbate the problem.”

The real problem?

Neither party wants to communicate. Clients are either skeptical that communication will produce any meaningful change, or they’re embarrassed that they can’t pay. So they ignore their firm’s invoice and pay what they want. Firms continue to increase their rates to reduce the overwhelming pressure they face.

Want your clients to…

Pay your invoices early or on time?
Pay without demanding sizeable discounts, write-downs, and write-offs to keep their business?
Pay your invoice immediately without haggling or complaining?

Communication is the key to invoicing success.

If you’ve noticed that your invoice in a billing period will be way off course from your client’s expectations, don’t ambush them with a terrifying invoice.

Pick up the phone and call them.

Let your point-of-contact know exactly what’s going on. Deliver the bad news concisely, clarify the who, what, when, why, and how. Add that explanation to the invoice, so they don’t have to try to remember that you called them on the phone. Let everyone, decision-makers, your point of contact, and the billing department know what’s coming ahead of time.

Wait a minute.

Wasn’t this about avoiding discounts, write-downs, and write-offs? Why should you negotiate with your clients about your invoice?

Clients need to weigh-in before they can buy-in.

If you don’t give your clients a chance to weigh-in, the opportunity to sit with the bad news you’ve just delivered, and to express their dissatisfaction, you won’t get them to agree to pay your invoice. Most attorneys swing from one extreme to another.

They discount heavily to keep their client’s business (but they lose their respect in the process)
Or they refuse to discount and attempt to force clients to pay an invoice they don’t want to pay. They win the battle but lose the client.

Communicate with your clients, and you’ll find it’s easier to earn their acceptance.

Invoice acceptance begins with a checklist

A legal billing checklist is a helpful way to boost realization rates. A checklist gives you the upfront time you need to identify the strategy, tactics, tools, and resources required to produce the outcomes you want, even if clients are unwilling to pay what you ask.

A legal billing checklist helps your law firm:

Identify (and reset) client expectations ahead of time
Provide you with the intel and leverage you need to keep clients happy and realization rates high
Troubleshoot billing and realization problems ahead of time
Spot legal billing headaches and issues before they metastasize into delinquent payments

Solve these problems ahead of time, and you increase your realization rates naturally.

Let’s take a look at the various items in this 16 point checklist.

Task/to-do	Why it’s important
Client screening protocols	Some clients won’t be interested in paying for your services at any cost. These protocols identify and sort your ideal and dysfunctional clients. This simple step is taken for granted, but it’s an easy way to boost your firm’s realization rates.
Set billing point of contact(s)	You’ll need to identify key decision-makers, influencers, and promoters who can get things done in your client’s organization.
Identify relationship builders	The more you invest in a relationship with your clients (and key people in their organization), the easier it will be to address billing problems and improve your realization rates.
Identify billing expectations	Your clients have a hidden set of fuzzy, implicit, and unrealistic expectations. Identifying these expectations gives you the leverage you need to ensure they’re happy. Why do expectations matter? Missed expectations are the root of all unhappiness.
Reset/update billing expectations	An awareness of your client’s expectations provides you an opportunity to reset/update them (via your fee agreement), so they’re in-line with reality. This reset prevents the relationship from going sour due to financial misunderstandings.
Create AFA matching protocols	If you’re consistently discounting your fees, a fixed fee arrangement may help restore profitability in your firm. Client misbehavior is often an indication of an AFA mismatch. AFAs can be used creatively to boost client responsiveness, boost firm realization rates, and increase profit per partner/employee.
Set unexpected billing protocols	Sending clients a large bill with an unexpected dollar amount is a surefire way to trigger a billing dispute. Unexpected billing protocols outline how you go about making the unexpected easier for clients to handle.
Create a discount reduction plan	Discounts erode law firm profits. The reason is simple. Clients want your services. They don’t want your bill. A discount reduction plan provides you with helpful tools you can use to increase realization rates across your firm.
Add nonfinancial payment incentives	If you’re looking for ways to motivate clients to pay on time, nonfinancial incentives (e.g., bonuses, events, workshops, connections, luncheons, favors, etc.) are a great place to start. These incentives provide you with the precious income your firm needs by addressing non-monetary wants.
Set communication intervals	How often should you communicate with your clients regarding their matter? Regarding your bill? (hint: a 5:1 positive/negative ratio is ideal) However, you’ll need to identify the communication interval that works best for your firm.
Contemporaneous tracking tools	Your timesheets should be treated as inventory. Every line item is a unit of revenue for your firm. You’ll need to identify the time tracking tools that enable timekeepers in your firm to track their time as-it-happens.
Verify timekeeper entries [daily]	Are your timekeepers following best practices? Which timekeepers are tracking their time (billable and non-billable) daily? Are their time entries descriptive and accurate? Are they adding time entries as-it-happens or at the end of the day? Accurate time tracking is crucial for a variety of reasons – it’s how most firms are paid, it helps firms measure their utilization rates
Outline billing confirmation/compliance	Complying with your client’s billing guidelines is an easy way to ensure your invoices are paid fully and on time. Client billing guidelines are historically terrible. This means you’ll need to supplement client billing guidelines with your own. You’ll want to track actions that are required or forbidden. You’ll also want to identify stop words that flag your invoices for review.
Create billing follow-up systems	When are clients reminded about your invoice? How many reminders are sent? Are they sent via phone, email, text, or IM? You’ll want to outline the follow-up systems needed for your invoices. It’s also a good idea to identify the point of contact responsible for reaching out to each client. The attorney handling their account is ideal, but you’ll need to determine what’s best for you.
Set client termination protocols	When should you terminate your relationship with a client? How many payments can be missed? What are the conditions or criteria that need to be met before termination takes place? You’ll need to identify key deal breakers ahead of time.
Set collection activity protocols	When and how do you initiate collections activity? What specific steps should be taken? How do you notify your client? Determining the when and how of collections activity removes much of the emotion from your client relationships – especially if you provide clients with written, upfront communication.

Invoicing best practices includes good client communication. The better your client communication, the easier it will be to boost your realization rates. Proper client billing, consistent client communication, these are the hidden keys to invoicing success.

When it comes to client billing, one size doesn’t fit all

Billing in the legal industry – it doesn’t have to be complicated.

Your invoice has a tremendous amount of power. In the right hands it’s a tool you can use to confirm or deny the image of your firm. It’s a helpful way to encourage loyalty and support or, a surefire way to turn your clients off.

Your invoice is the key

Your clients don’t have to be terrified. They don’t have to be nervous when working with you. Put yourself in their shoes. Work to become an attorney who’s open and transparent. Imagine sending out a bill your clients are pleased to pay. It’s possible, if you rely on best practices for client billing.

Do that and you’ll find your invoices help to generate the client loyalty and support you need.

Why local SEO is important for lawyers and law firms

March 30, 2020 By Andrew McDermott

There’s been a 500 percent increase in “near me” mobile searches. We’re in the middle of a local search explosion. According to Google, nearly one-third of all mobile searches, 1.1 billion+ searches per day, are location-specific search queries.

These searches continue to climb.

The numbers from Google’s report shows a staggering change taking place, one that lawyers and law firms may not be prepared for.

Why Local SEO is essential for your law firm

Local search is a way of life for your clients. More and more, your clients are conditioned to search for the specific things they want, regardless of what it is. Research from Think with Google shows:

A 500 percent increase in “near me” mobile searches (e.g., real estate attorney near me, tax attorney near me)
150+ percent growth in mobile searches for “___ near me now.”
Search volume for local places, without the qualifier “near me,” has grown by 150 percent
26 percent of searcher clicks go-to brands that appear first in Google (ads not included).
3 in 4 smartphone owners turn to search first to address their immediate needs (e.g., DUI attorney, gun rights lawyers Chicago)

This is why local SEO is so essential. Most lawyers are familiar with SEO; a savvy few are even familiar with the ins and outs of local SEO. Most do it badly.

If you’d drive like a reliable stream of eager clients to your law firm, you’ll need to focus your attention on local SEO.

What exactly is Local SEO?

Local SEO is a subset of Search Engine Optimization that focuses on local intent.

Lawyers near me
Real estate attorney in Chicago Loop
DUI lawyer in Milwaukee
Affordable Small business lawyer in NYC

Those results can be displayed in a special table known as the local pack or their usual results.

Google uses signals called local search ranking factors to determine which law firms are displayed first/prominently in its search engine. The better your local search ranking factors, the better your rank in Google’s local search results.

Here’s a list of these signals:

Google My Business (GMB) Profile: A free profile that helps you to drive engagement via Google Maps, Google Reviews, and other services on Google. A GMB profile is a must-have for strong local SEO performance.
Link Signals: Who links to you, the number of sites that link to you, the words they use to link to you, etc. Each link functions like a vote. The more votes you receive from high trust or high profile sites, the easier it is to rank for your desired keywords.
Review Signals: The number of online reviews you have, review recency (recent reviews are more valuable), review diversity (i.e., reviews on a variety of other sites), review velocity (how fast do you accumulate reviews?). The stronger your review portfolio, the easier it is to attract new clients at a lower cost.
On-Page Signals: Your website’s reputation, your name, address, and phone numbers are consistent with information available online. The amount of traffic coming to your site and more.
Behavior Signals: Do visitors click on your links/listings? What’s your click-through rate? These behavior signals tell Google a lot about the relevance of your page and whether it’s something searchers are looking for.
Citation signals: Consistent name, address, and phone numbers across the internet, on each of your profiles. Listings on a variety of relevant, local sites and directories.
Social signals: Engagement on social media platforms (e.g., likes, hearts, shares, etc.) also function as votes. They’re challenging to game and provide Google with a helpful measure of a lawyer’s brand reputation and credibility. If you’re consistently trending on Facebook or Twitter, you’re worthy of more attention.

Optimize your law firm around these local search ranking factors, and you improve the volume of traffic and leads you receive from Google.

Try MyReviews to improve your local SEO visibility

Why Local SEO is a problem for lawyers

Savvy lawyers are aware of these concepts, that isn’t the problem. It’s merely a good understanding of marketing.

This isn’t your fault. Several barriers make it challenging to draw clients to your law firm successfully. I’m talking about cultural programming, perceptions, and myths that shape how lawyers promote their firm.

Let’s take a look at a few of these.

It’s unprofessional to sell. This is a bit of a paradox — rainmakers are revered in law firms, but selling is often viewed as a sin. This discomfort with selling has a lot to do with the social and political class requirements of the profession. That’s a tough position to be in because, like it or not, selling is a necessity in the legal industry.
My law firm isn’t a business; it’s a calling. This is true, but you can’t help clients with your calling if they don’t know you exist.
Clients hate being sold. In reality, clients hate being pushed, bullied, or manipulated into something they don’t want. They want to be treated fairly and to be given a choice. Doing this the right way is what selling is.
My time is best spent focused on client matters. No problem, find someone to handle the business development and marketing concerns for you. Get someone else to solve this problem for your law firm.
I want to practice law, not run a business. You can’t have one without the other. At some point, you’ll be expected to attract clients, whether you’re a solo lawyer or a hungry lawyer who’s looking to make partner.
We get clients through referrals. This is good news, but it’s also irrelevant because your competitors are overtaking your firm on Google, Facebook, Yelp, and other platforms as we speak. Eventually, you’ll be forced out of the client conversation.
We already have rainmakers. You have rainmakers until you don’t. It’s common for law firms to depend on rainmakers; what these firms don’t realize is the fact that these rainmakers hold their firms hostage. They use their ability to generate business as a bargaining tool to make unreasonable demands. What happens when their firm fails to meet their needs? They take the clients they brought in elsewhere, leaving your firm exposed and unprotected.

Here’s the good news.

These issues are relatively easy to overcome. With a little bit of preparation and the right strategy, you can use Local SEO to attract clients to your law firm, with minimal, direct, one-on-one selling required.

Local SEO isn’t an optional add-on, it’s a must-have

It’s an essential requirement if you want to stay in the game. Google says the demand for local search is growing. Your clients are spending more time on Google to find the services and providers they need.

Can they find you?

Local search is a way of life for your clients. Your clients know what they want, more and more, they’re turning to Google to get it. In my next post, I’ll show you how to build a strong local SEO campaign that produces traffic, generates leads and boosts

Billing mistakes that cost attorneys 50% of their revenue

March 30, 2020 By Andrew McDermott

The average attorney loses half of their money.

Most aren’t being paid well for their time. Research shows the average utilization rate for law firms is 31 percent — this means attorneys are only spending 2.5 hours on billable work each day. Attorneys spend an average of 5.5 hours per day on nonbillable work. There are other mistakes at play here.

These mistakes sap the profitability of your law firm

It makes long-term growth more difficult over time.
Here’s the good news: These problems can be resolved.

With a little bit of awareness and consistent practice, your firm will be one of the few to overcome these mistakes. Let’s take a look at three common problems that costs law firms 50 percent (or more) of their revenue.

Mistake #1: A strong resistance to change

A 2019 Altman Weil report found partners resist change in their organization. This change trickles from the top down, creating firm-wide challenges that compound over time.

“In 69% of firms, partners resistance to change is an embedded drag on progress, and recent economic successes may obscure any clouds on the horizon – at least for the shortsighted.”

What does this have to do with billing?

This is the most important driver in your organization. Your partner’s willingness to adapt or comply with change means all of the other mistakes covered below are either a short-term or long-term problem. If partners function as mercenaries, change will be messy, difficult, and temporary.

What does this mean?

It means law firm leadership needs to find a way to get everyone on the same page. You do that by giving everyone a chance to weigh-in so you can earn their buy-in. Patrick Lencioni, management consultant and best-selling author of The Five Dysfunctions of a Team, explains:

“If people do not weigh in on a decision, I fundamentally believe that they’re not going to buy-in to that decision. People who don’t weigh-in cannot buy-in. Don’t mistake this for consensus though; they don’t have to agree, they don’t all have to arrive at a consensus.”

The most important requirement here is that firm leadership give their partners a chance to weigh-in. Doing so enables the firm to earn its partners’ buy-in. Your organization cannot make progress without buy-in.

Mistake #2: Poor systems and procedures

Benjamin Lieber, a Managing Partner at the Potomac Law Firm, described accepting attorney timesheets.

“Lawyers would send me their time every month by email, and it would come in all different formats and all different conventions and levels of granularity. And even the units would vary somewhat. Some would use a tenth of an hour, or some would use quarter hours. Some would use a third of an hour. It was a mess…”

Next, Lieber would “take all that, put it into spreadsheets, and then put it into invoices. That worked okay for the first 10 or 12 clients…”

This simple problem creates a tremendous amount of billable leakage.

His attorneys sent their time entries at the end of the month. His attorneys were both undercharging and overbilling clients, immediately leaking revenue and damaging client relationships. The losses are even higher if clients choose to walk away due to the firm’s inconsistent or poor billing habits.
All of his attorneys were reconstructing their time entries. The research on this is detailed; you lose 10 percent of your revenue if you record time entries the same day. You lose 25 percent if you wait 24 hours, and 50 to 70 percent if you wait one week. Wait 30 days, and the losses may be as high as 200 to 280 percent of the revenue they should have.
These attorneys used a variety of unhelpful formats and billing conventions. This created more leakage as associates spent a significant amount of time on nonbillable tasks (filling out timesheets) and less time on nonbillable work. Managing partners lose more time working in the business instead of working on firm business
His attorneys relied on Excel spreadsheets, costing their firm an estimated $86,294 to $106,294 per person, per year. This figure doesn’t even include the financial fallout from the billable leakage/overbilling I mentioned above.

These are expensive mistakes.

But they all boil down to one specific problem, inadequate systems and procedures. This is why your firm needs a good minder. Minders are focused on managing the firm well, optimizing its policies and procedures, and ensuring everyone — partners, attorneys, and support teams are all on the same page. It’s a minder’s job to work on the business, not in the business.

Your systems and procedures are crucial.

Healthy timekeeping habits come from sound systems and procedures. The better your policies and procedures, the more revenue your firm will bring in. Here’s a detailed guide outlining the policies and procedures in a healthy law firm.

Mistake #3: Poor delegation and automation

This doesn’t sound like a billing problem, but it is. Attorneys generally have one of four roles in their law firm.

Finders are rainmakers; they bring new clients, business, and revenue to their firm.
Binders are connectors. They’re sophisticated networks that can build relationships that provide extraordinary value.
Minders are managers and executives. They manage the firm’s activities and are responsible for helping the firm to grow consistently over time.
Grinders do the work. These are the workhorses of the law firm. They’re the associates who complete client matters, handle cases and complete projects. The firm’s revenues come from their labor.

Here’s the problem.

Many law firms expect attorneys to perform well in all four roles. This is an unreasonable expectation that sets your team up for failure. Associates work best when they’re assigned a specific role that meshes well with their personalities. If an attorney wants to add a role, there should be sufficient evidence to justify that.

How does this affect billing?

Whenever possible, provide attorneys with the help and assistance they need for tasks that are outside of their role.

Give grinders the tools and resources they need to focus exclusively on racking up billable hours.
Provide minders with the assistance needed to handle firm minutia so they can work on growing the firm.
Provide finders the financial incentives (i.e., origination credit) they need to focus on rainmaking.

Whenever possible, use freelancers, third party support, personal, and virtual assistants to pick up the slack. A client billing liaison can provide attorneys with the breathing room they need to excel in their role. A client billing liaison can help you:

Review attorney timekeeping throughout the day, ensuring billing is contemporaneous and consistent.
Follow up with attorneys and management if improvements in the billing cycle are required.
Verify invoices are meeting specific client billing guidelines and emailing requirements to reduce invoice rejections.
Provide research assistance and tracking to minimize potential write-offs of unbilled time.
Identify sources of billable leakage, poor utilization, and poor realization throughout the firm.
Reconcile client payment history and presenting findings to clients and management.
Assist with sending/distributing client invoices on an as-needed basis.

This seems obvious until you realize many attorneys are handling multiple roles daily. They work on client matters, act as client liaison, attempt to function as rainmakers and struggle to perform adequately in each role.

It’s too much to handle.

A 50 percent loss in revenue is a symptom

The average attorney loses half of their money.

These billing mistakes cost law firms 50 percent of the revenue (or more). This loss of income and the poor habits that produce them — they’re symptoms of a deeper problem: A strong resistance to change, inadequate systems and procedures, and poor delegation and automation.

These are the hidden drivers, the root causes of the problems plaguing most law firms today. These problems aren’t easy to fix, but the solution is simple.

Eliminate these mistakes, and you’ll find long-term growth becomes automatic over time.

Law firm billing tips that will double your revenue

March 26, 2020 By Andrew McDermott Leave a Comment

Doubling your revenue sounds impossible.

How can these billing tips double your law firm’s revenue at a time when many firms are experiencing a decline in demand for legal services? According to the 2019 State of the Legal Market, law firm realization rates have dropped significantly and continued to decline since the Great Recession. This has harmed firm revenues.

Is it possible in this economic climate for a firm to double its revenue?

Doubling your revenue: More about you, less about competition

These billing tips are more about your behavior than they are about your competitors and their actions. Boosting your income comes down to three best practices.

Minimizing errors and mistakes
Increasing your firm’s income
Layering your firm’s income

In my [previous post], I shared several strategies you can use to reduce billing mistakes. In this post, we’ll focus on the strategies you can use to double your firm’s revenues.

Let’s take a look.

Billing tips to increase your firm’s revenue

First, some important disclaimers:

The strategies I mention may require modification to work correctly.
Some of them may not work in your jurisdiction due to legal constraints.
For many of you, these strategies will work well, which may create a (different) set of problems.

I’ve written comprehensive guides on each of these topics; I recommend that you take a look at them.

You can increase your firm’s income in a variety of ways:

Boost your firm’s utilization rate with utilization optimization. Your utilization rate is a reflection of your firm’s productivity and billing efficiency. The higher your utilization rate, the more revenue (and profit) your firm can generate. Here’s how you calculate your utilization rate: Billable hours/total # of hours recorded in a particular period = utilization rate.
Offer online payments offer a simple solution to increase revenue flow by decreasing the time it takes to collect on client invoices. Clients are more likely to pay you faster if you offer a payment option they’re use to using in their everyday. Payment processors like Bill4Time Payments are built-in to your practice management software
Increase your firm’s productivity. Believe it or not, it is possible to 2x or even 4x your productivity. To boost your firm’s productivity, you’ll need to make the distinction between toil and productivity. Toil refers to tedious, exhausting, and repetitive busywork that’s never-ending. Productivity is work that rings the meter, taking you closer to your goals and objectives.
Educate to attract new clients. Education is the key to attracting a steady stream of clients. While many firms have a problem with selling, very few have a problem with educating prospective clients. As it turns out, education attracts clients consistently because it does two things well. First, it identifies a problem clients have, and second, it positions you as the solution to your prospective client’s problem. Once you’ve educated clients, they’ll approach you as a prospect. This is when you provide them with information. When I use the word information, I’m referring to details like your billing policies, available AFAs, client references, practice areas, years of experience, cases won, etc. Information turns prospects into clients.
Create win-win-win origination credit schemes. To quote Jim Cotterman, principal at Altman Weil, origination credit schemes are “the single most important determinative factor in partner compensation.” Origination plans are crucial to your firm’s survival. Research shows, when clients were served by three practice groups, revenues were 5.7 times higher than those served by one. Clients who were served by five practice groups generated fees that 17.6 times higher than those served by one. This also prevents poaching. When multiple practice groups serve clients, they remain loyal to the firm, rather than an individual attorney. This is the single, most effective way to boost employee morale, increase firm business, and keep clients.
Promote your firm with the right tools and resources. You can use State Bar referrals, CLE credits, Facebook, PR, and other channels to promote your law firm and amplify business development. Using the right tools and resources, you can attract a steady stream of prospects from a variety of sources who are all eager to work with your firm.

Each of these strategies can double your income on their own but that’s not the most efficient use of these strategies.

A better approach?

You double or triple up on these strategies; find the approach that works best for you, get it to a place where it’s working for your firm. Then you add another strategy from the list, then another. These are big problems, but they produce a disproportionately large amount of revenue for your firm when you get them right.

It isn’t hard. It just requires hard work.

The strategies I’ve shared above are conventional approaches you can use to double your firm’s revenue. In the next section, we’ll take a look at transformative results.

Here’s the difference.

Conventional results create trust. Conventional results = doing your job exceptionally well. Being a great attorney, going above and beyond for clients and your team. Exceptional day-to-day performance increases. If you’re a real estate attorney, your documents and agreements are above reproach; your work is pristine, you’re fast, efficient, helpful, productive, etc.
Transformative results build careers and firms. These are the extras, the above and beyond results that make things better for your firm, the industry, or clients as a whole. It’s doing what other attorneys or firms won’t or can’t do. Most real estate attorneys, for example, won’t take the time to run monthly webinars or workshops for real estate investors or corporate entities.

See what I mean?

Use these law firm billing tips to double your revenue

It’s not about them. It’s about you.

As we’ve seen, these billing tips are more about your behavior and the way your firm is structured than it is about your competitors. Boosting your income comes down to following and optimizing your firm around best practices.

Most firms don’t want to do the work.

It’s annoying, tedious, and occasionally difficult work. But this is also your opportunity. The research shows many firms are experiencing a decline in demand for legal services. Realization rates have dropped significantly and continued to decline since the Great Recession.

Law firms need to adapt to survive.

You have the blueprint; double or triple up on these strategies. Find the approach that works best for you then get it to a place where it’s working for your firm. Then, when you’re ready, add another strategy from the list.

Doubling your revenue isn’t impossible.

With a structured plan and clear steps to follow, you’ll find you have everything you need to double your firm’s revenue year-over-year.

Understand the difference between reputation and review management

February 19, 2020 By Andrew McDermott

Business development is a challenge for the vast majority of law firms.

According to an Altman Weil survey, 83.4 percent of firms listed “weak business development skills/efforts” as the main reason for chronic underperformance in their law firms.

But it’s an issue most attorneys are already aware of. An Intapp survey stated 64 percent of firms report that cross-selling to existing clients is their top priority. Attorneys are aware of the problem, and they’re also vaguely familiar with the solution to that problem.

These business development challenges present a secret dilemma

Most law firms focus on the wrong solution, placing the cart before the horse. These firms sink larger amounts of money into their marketing campaign. Many firms fail to achieve a pay off that’s worthwhile or reasonable.

Here’s the secret reason these initiatives fail.

It’s a lack of understanding. Attorneys aren’t aware of the difference between review and reputation management. That’s a problem because both of these details determine whether your marketing will work (or not).

What am I talking about?

I’m talking about the difference between reputation and review management. Wait a minute; why does this question matter to attorneys and law firms? This question matters because it determines whether your marketing will attract and convert new clients.

Handled appropriately, your clients will:

Spend more money
Request additional help on new matters more often
Purchase at higher prices
Extend more loyalty to firms
Are more agreeable and willing to negotiate
Don’t require costly discounts, write-downs, and write-offs to keep their business
Are more forgiving if (or when) you fail
Will provide you with a steady stream of referrals and new clients

All the things you want, right?

These outcomes create a virtuous cycle, producing even more (quantifiable) benefits for your law firm.

Your conversion rate skyrockets
Advertising and marketing costs decrease dramatically
Return on ad spend grows rapidly
Clients spend more money without being asked

Your reviews and reputations matter.

Northwestern University’s Spiegel Research Center analyzed 57,000 reviews from anonymous consumers and 65,000 reviews from verified buyers of more than 13,500 unique products and services across diverse categories.

Here’s why.

Their findings mentioned reviews could increase conversion rates by 270 percent! The better your reviews, the easier it is for you to attract clients, leads, and sales. The better your reputation, the better your results. Does this mean reputation and reviews are the same things?

Not at all.

Okay then, what’s the difference between reputation and review management?

Reviews begin with outcomes; reputation begins with pain

Reputation management is reactive. Review management is proactive.

Reputation management	Review management
You respond *after* a (negative) event	Request feedback *before* a (positive/negative) event
Works to repair, hide or remove client feedback	Works to amplify, accept and appreciate feedback
Work/results are not scalable, is ongoing	Work/results are scalable and ongoing
(Negative) results compound rapidly in a short time	Results (positive/negative) compound over time
Focuses on tearing down	Focuses on building up
Relies on press, publicity and legal muscle	Relies on your clients, platforms and consistent effort

Can you see the difference?

Reputation management is designed to handle negative content. Reputation management relies on strategies like:

Legal takedown notices
Improving content displayed in target search results
Publishing original content and launching new sites to compete with or bury negative content
Acquiring media mentions and influencer reviews
Issuing press releases
Suppressing unwanted data and content
Contacting editors and publishers to remove misleading, incorrect or unsavory content

What about reviews?

Your online reviews amplify or nullify your prospective client’s trust before you even meet them. If your clients share a negative review about your business, you can respond to them directly, winning prospects over in spite of themselves.

Why does this matter?

An increase (or decrease) in revenue depends on your reviews and reputation

Research from Moz found businesses risk losing as many as…

21.9 percent of customers if you have just one negative review listed on page one of Google
44.1 percent of customers if you have two negative results
59.2 percent of customers with 3 negative results
69.9 percent of customers with 4 negative results

So we’ll use this data for our formula.

Y = X / (100 – X)
Y = How many more customers you could have had (as a percentage)
X = Average percent of lost customers for businesses like yours

Where are we going to get X? From the data provided by Moz! If you have one negative result X would be 21.9 percent. If it’s two 44.1 percent and so on. Let’s say you have just one aggregate rating in Google that’s negative.

What will that cost you?

Let’s run the numbers.

Y = 59.2 / (100 – 59.2) 40.8

Which means this law firm is losing 145 percent of their prospective clients. This makes sense, though, right? Looking at the search results, readers get the sense that something isn’t right about this business; this firm was disciplined by the Florida supreme court.

You’re nothing like this firm.

You run a reputable law firm; you and your attorneys are all above reproach.

Which is why this matters.

You have a reputation and clients to protect, right? If that’s true, you’ll need to focus your time and attention on managing both your reputation and your reviews.

Business development won’t work if you’re missing

… A strong review portfolio and carefully managed reputation; the majority of firms listed weak business development skills/efforts as the main reason for their chronic underperformance.

Reputation and reviews are the foundation.

Prioritize reputation management with a carefully crafted review management campaign. Work consistently, and you’ll amplify the amount of traffic, leads and clients your law firm attracts — scalable rainmaking at your fingertips.

How to protect your law firm from insider threats

February 3, 2020 By Andrew McDermott

He stole from their clients.

A law firm employee stole the identities of 20 clients. Working with several accomplices, this employee went on a “theft spree,” stealing $170,000 in cash, expensive clothing, jewelry and an additional $31,000 from a local Neiman Marcus.

Think about that for a moment.

A law firm employee had direct access to sensitive client information and he made off with it before anyone noticed there was a problem.

Who are these insider threats?

It’s your employees.

Intel found insiders were responsible for 43 percent of data breaches. In a separate report, Experian stated:

“66 percent of data protection leaders admit that employees are the weakest link in an enterprise’s security posture.“

This sounds harsh, doesn’t it?

It’s easy to state that these threats are simply “your employees.” It’s accurate, but it’s also incomplete. When it comes to insider threats, there are two kinds.

Malicious. These employees willfully cause harm, destruction and chaos in your firm.
Accidental. These are employees who gain access due to negligence, carelessness or poor systems and procedures.

Why would these employees harm your firm?

According to Gallup and Steve Rasmussen, former CEO of Nationwide, your employees fall into one of two camps, patriots or mercenaries. Not because they want to be but because they have to be.

Patriots: These employees are engaged. They’re true believers who love, admire and believe in your law firm. They protect their firm’s interests, and they expect their firm to do the same for them. Patriots give value first to receive value.
Mercenaries: They’re self-absorbed, corporate climbers who are focused primarily on themselves. At best, these employees are not engaged. At worst, they’re disengaged saboteurs who work to destroy your firm. Mercenaries demand value first and give value minimally; firms have to pay to play.

Here’s why this is a problem.

Research from Gallup shows 34 percent of employees in the U.S. are engaged.

That’s good, right?

Absolutely, but it’s also hiding an unpleasant reality here; 53 percent of employees are “not engaged,” meaning, work is just a job. Another 13 percent are “actively disengaged” these are active saboteurs, seeking to punish or destroy their employers.

What does this have to do with insider threats?

It’s about risk. According to the Insider Threat Report, the biggest risk factor to businesses: too many users with excessive access privileges.

Is this true?

A recent study found 70 percent of IT managers surveyed “know or believe that users (employees) have business (client) data in their own personal file-sharing accounts.”

What a disaster!

Law firm employees have sensitive client data stored in their personal Dropbox accounts!

Yikes.

This data is accessible to both malicious and accidental insiders, meaning law firms are exposed and vulnerable by default. This is a situation that requires immediate attention.

Protecting your law firm from insider threats

There are a few straightforward methods you can use to minimize insider threats. It’s so obvious, so unoriginal, you may feel the urge to roll your eyes.

Use a proven hiring methodology like Topgrading to recruit, vet and retain all-star employees.
Take very good care of your employees (from their perspective).

This creates patriots.

Next, use a layered approach to guard against both internal and external threats.

Let’s take a look.

Layer #1: Encryption for all endpoints

What’s an endpoint? An endpoint, according to Webroot,

“An endpoint is any device that is physically an endpoint on a network. Laptops, desktops, mobile phones, tablets, servers, and virtual environments can all be considered endpoints.”

Encrypting endpoints helps to maintain compliance with data protection regulations. It also gives you control over data wherever the endpoint goes. If a disgruntled employee walks off with a laptop, you can remotely perform a crypto-erase on that laptop’s hard drive next time the employee connects to the internet. Hardware encryption also can’t be turned off locally, meaning that employees can’t bypass security measures you put in place.

Fully-managed encryption can be achieved in a couple of different ways.

Self-Encrypting Drives (SEDs) – a hardware solution that’s combined with remote administration is secure, easy-to-use and cost-effective. The SED automatically encrypts all data written to a hard drive, providing complete protection for your data. Encryption takes place on the drive itself, so there’s no performance loss.
Cloud-based Encryption Management – this is a software solution that requires no on-site server maintenance. It works with encryption tools native to the operating system (e.g., Microsoft’s BitLocker or FileVault). It’s also an inexpensive, fast and easy way for organizations to comply with regulations and maintain security.
Native Encryption Management – Think Microsoft’s native encryption feature, BitLocker. It stores encryption keys in hardware, so it’s a little bit more secure than software encryption alone, but not as complete as full hardware encryption like the SED. If your firm is looking for an inexpensive way to boost security, BitLocker is a great start. Combine it with remote administration for complete control over your data.

Layer #2: User rights and access management

According to the Ponemon Institute, 62 percent of business users report they’re able to access company data they probably should not see.

It gets worse.

The study also uncovered that when employees accessed files or emails they weren’t authorized to see, 43 percent of businesses didn’t detect the misbehavior for a month or longer. This means owners, partners, associates and support teams shouldn’t have the same user rights.

I’m talking about the principle of least privilege.

What does this mean?

Access is only allowed on a need to know basis.

There are a variety of user rights and access management tools. If you use cloud-based practice management tools like Bill4Time, you can use user rights management tools like LastPass Enterprise to manage who has access to what, when and under what conditions.

Here’s a demo that explains their service and how it works.

It’s simple and easy to use.

Layer #3: Data loss prevention tools

Effective endpoint protection can be an uphill battle. Protecting endpoints in your firm requires flexibility – comprehensive protection with no unnecessary restrictions or interruptions to your work. This is where data loss prevention tools (DLP tools) come into play.

Effective DLP Tools:

Locates and maps sensitive your data
Inspects, classifies, filters and blocks leakage of your sensitive content and data. It doesn’t matter if the channel is email, IM, Web, external storage or printers
Blocks or encrypts data transferred to external media and devices as well as block connections to unsecure wireless networks
Immediately recognize security risks, identifying any device that’s currently or historically connected to your endpoints
Generate regulatory compliance reports and security log summaries

The ideal DLP tool provides your law firm with complete protection, protecting sensitive data-in-use, data-at-rest and data-in-transit, without sacrificing productivity.

Layer #4: Consistent and testable backups

In my previous post, I mentioned that Matthew Perry’s law firm was attacked by cybercriminals twice. His law firm survived two ransomware attacks with no loss of data.

How did he do it?

He did it with consistent backups. Perry conducted regular backups of all files at pre-determined intervals. He made sure he had backups in several locations (e.g., offsite, onsite, archived, cold, etc.). Then, Perry tested his backups daily, verifying that:

The firm’s data was encrypted
Firm data was backed up successfully
That files were uncorrupted and accessible at a moment’s notice

It’s no secret, it just requires discipline.

Many firms don’t have backups in place; those that do, fail to test their backups as often as they should.

Layer #5: Employee training and education

Your employees are insiders; these insiders, under the right conditions, are threats to your firm.

How do you address that?

With consistent training. When combined with user rights and access management, employees can make good decisions regarding:

The attachments that should or should not be opened.
When to ask for help
How to spot phishing, spam and malware attacks
How to avoid common pitfalls

If your employees aren’t aware of your expectations, they’re obviously less likely to meet them.

Insiders threats create data breaches

Almost half of the data breaches firms experience come from insiders. Your employees are the weakest link in your firm’s security protocols.

They don’t have to be.

With a layered security plan and a bit of foresight, you can prevent accidental mishaps, corral malicious insiders and protect your data. You can reduce the risk your firm faces from the internal and external threats surrounding your law firm – no crime spree necessary.