Nina Lee

Managing billing can be a cumbersome process and take up a large portion of a law firm’s productivity on tasks that don’t directly bring in money — like invoicing. 

Most lawyers get into the legal profession to practice law, not to be overloaded with billing, invoicing, and other administrative tasks. One way to streamline this process is with legal billing software to automate tasks such as invoicing, payments, or retainers.

Both retainers and standard invoices have their purposes in a law firm. Regardless of which you choose, both can be standardized to make your day easier and get your firm paid faster.

What Is a Retainer?

A retainer is a payment agreement between the law firm and the client. In this contract, the client agrees to pay the law firm a predetermined amount for a certain number of hours or specific tasks.

Retainers can be various lengths, but the retainer itself is usually open-ended. Retainer invoices are usually paid on a monthly basis with the agreement that the law firm will complete the agreed-upon work within that period.

What Is on a Retainer Invoice?

A retainer invoice is a bill that’s drawn up for the services rendered by the law firm. It’s sent from the law firm to the client and contains all the details about the work, fees, and transactions. The client knows exactly what they’re paying for and has all the information to settle the bill, including;

• Contact information for the payee (law firm) and payer (client), including the name, address, email, and phone numbers.
• Contact information for the payee as well as the name, address, and contact numbers of the business, person, or department that will be handling the invoice.
• Invoice number for documentation.
• Relevant dates, including the date of the invoice and the due date for the payment.
• Details about the specific services to be provided.
• The amount owed, including past-due balanced or any applicable taxes.
• Accepted forms of payment, including online payment methods.

What Is a Standard Legal Invoice?

A standard legal invoice is a document that law firms issue to customers to request payment for legal services. The billing processes may look different depending on the client and practice areas, but all standard legal invoices should have the following information:

• Law firm details: Identifying details, including the firm name, phone number, email address, and physical address.
• Client details: This may vary according to the client, but the invoice is usually addressed to the point of contact. Some clients may provide a billing contact, however.
• Date of issue: The date you’re sending the invoice.
• Itemized list of services: A breakdown of the services the law firm provided to the client.
• Billing rate for each service: The rate for each service line item the law firm provided.
• Total due for each service: The total amount owed based on the itemized list and billing rate for the services provided.
• Subtotal for all services with taxes: The total amount the client owes for each service, including the percentage of services tax.
• Payment due date: The deadline for payment.
• Late payment consequences: The penalties if the client pays late.

What Is the Difference Between a Retainer Invoice and a Standard Invoice?

Retainer invoices can be used by the law firm to ask for payment before the services are rendered. Essentially, it’s a form of deposit or prepayment.

This is a method for the client to secure legal services as needed and for the law firm to get paid in advance for services. Law firms can also choose to bill based on billable hours or a fixed fee for a retainer, depending on the nature of the case.

Retainers also set up clear expectations for the ongoing arrangement, including the retainer amount, excess hour charges, and more. There’s a sense of security and predictable recurring revenue for the firm as well.

A standard legal invoice is broader and may include any invoice for legal services rendered, including billable hours, subscription services, sliding scale fees, unbundled services, payment plans, flat fees, and contingency fees.

The key difference between a standard and retainer invoice is that the client is paying for services in advance instead of in arrears. There are benefits and drawbacks to both, depending on your law firm, client, and practice area.

How to Manage Law Firm Invoices

Billing and invoicing take up a lot of time in your law firm. Depending on the type of law you practice and the cases you take on, it can waste a lot of non-billable time.

It’s necessary for a law firm to stay profitable. A defined billing process determines how efficiently your firm gets paid which includes implementing a streamlined invoice process.

Traditional invoicing is a manual process that’s vulnerable to human error and hinders productivity. When a lot of time is spent on invoicing, it can advertently also cost you money.

Law practice management software, such as Bill4Time, is a simple way to standardize your billing and invoicing process. Features like time tracking, built-in payment processing, and custom invoice templates reduce the time spent on these administrative tasks and get your firm paid faster.

With Bill4Time’s legal billing software, you can create, print, or email custom invoices in a matter of minutes, complete with detailed services, payment terms, and late fees. These invoices seamlessly link to the online payment options to make paying quick and convenient for the client.

There are also tools to maximize efficiency. You can batch invoices, apply LEDES format, allocate payments to current invoices, create summaries, and track expenses to keep your firm moving toward long-term growth.

Simplify Law Firm Billing and Invoicing with Law Practice Management Software

Whether you bill on retainer or with standard invoices, manual billing and invoicing processes foster human error, decrease client satisfaction, and cost valuable time and money. By standardizing your billing, you can offer more transparency into your billing and improve bottlenecks within your billing cycle.

For attorneys, time is money. Most attorneys rely on billable hours for their income, and many firms expect attorneys to achieve a minimum billable hour requirement of 1,700 to 2,300 per year.

To meet this requirement – and get paid – attorneys must track their billable hours efficiently and accurately. “Padding” errors hurt the attorney and the firm’s reputation but missing out on valuable time in the time tracking process leaves money on the table.

Plenty of resources are available to help attorneys easily and efficiently calculate and log billable hours, including an attorney billing increment chart and time tracking software for attorneys.

What Is an Attorney Billing Increments Chart?

A billing increment chart is a standardized chart or template that helps you calculate how many increments of an hour to charge based on the time you spent working. With a billing increment chart, most attorneys stick to a 1/10^th of an hour rule, or 6-minute increments.

This means if an attorney works for 15 minutes at a rate of $100 per hour, the chart will show that the time increment is 0.3. This is multiplied by the hourly rate ($100/hour) for a sum of $30.

Here’s a sample billing increment chart:

Why Do Attorneys Bill in Increments?

Billing in increments is standard practice for practical reasons. Billing by the minute or just a few minutes is difficult to track and time-consuming, not to mention calculating it by hand. This can lead to a lot of wasted time in the tracking process and plenty of errors, which create doubt in the clients.

Similarly, billing in large increments, such as by the half-hour increment, pad the bills. Attorneys either mention one task in that time or combine multiple, unrelated tasks, casting doubt on how much time they actually spent on casework.

Billing in 6-minute increments is easy to calculate and allows for reasonable increments without too much padding or lost time.

Do Attorneys Have to Bill in Increments?

Law firms can structure their billing as they choose. The standard increments used by most firms are 1/10 of an hour (6 min), 1/6 of an hour (10 min), and 1/4 of an hour (15 min). This is a matter of convenience rather than necessity. Attorneys choose the increments they intend to bill in and then round up to the nearest billing increment of their choice.

Billing increments can present problems for the firm and the client, no matter what they are. Smaller increments look better to the client, but billing in 6-minute increments is inefficient and puts attorneys in a position to “beat the clock.”

Larger increments aren’t much better, as they can look unsavory to the client. Larger increments suggest – even if untrue – that the attorneys are billing for more time than they’re actually putting in. This can have a detrimental effect on the firm’s reputation, especially if the other firms in the area rely on small increments.

What Is Time Tracking Software?

Legal time tracking software is a cloud-based resource to log, categorize, and record the time spent on billable and non-billable tasks. This software tracks work in real time to reduce errors or missed time, ensuring efficiency in the tracking process and accurate billing for both the firm and the client.

Benefits of Time Tracking Software

Attorney increment charts are helpful for doing the quick calculations necessary to convert hour increments to billing rates, but that’s still not as efficient as it could be. Time tracking software takes it a step further with efficient, convenient, and accurate timekeeping.

• Automatic increment calculation: Rather than manually calculating time increments and billing rates with a chart, time tracking software uses pre-set rates to automatically round time entries to the nearest increment.
• Simplified time tracking processes: Time tracking software helps you log your billable hours when they happen, instead of trying to remember them later. You can add time entries to meetings, events, tasks, emails, and more.
• Real-time tracking: Time tracking software has automatic timers to record the time you spend on a task, so you don’t have to guess or risk forgetting your hours. 
• Multiple devices: Using a cloud-based format, time tracking software can track time entries on the mobile app to record your time while working remotely or taking client meetings in the field.

Best Practices for Managing Billable Hours

Law firms can bill efficiently and transparently when there are standards in place for billable hours.

Create Guidelines

There should be rules in place for billing increments. Use policies to explain your rates and billing practices to both clients and staff. These policies should include the rate, billing increments, billing intervals, and billing method. This helps manage client expectations for billing and ensures that attorneys understand the processes.

Itemize Your Billing

It may be faster to multitask and include several tasks in a block of time, but that doesn’t inspire faith in the client. Take the time to itemize tasks separately for better accuracy, transparency, and clarity. This can be made easier with custom invoice templates that can be pre-filled and stored for future, continuous use. 

Use Detailed Descriptions

Detailed but concise descriptions are essential for transparent billing. These descriptions should include enough information for the clients to understand how you spent your time. If a dispute comes up, this can serve to jog your memory to help you account for the time you spent as well.

Track Time Accurately

Whether you choose a manual billing increment chart or efficient time tracking software, make sure your billable time is real-time and accurate. With the use of multiple timers, you won’t forget about the time spent on a case or estimate time either in the firm’s favor or the client’s.

Don’t Pad Your Bill

It may be tempting to round up to the nearest increment or hour when billing, but is not best practice. Padding your hours – intentionally or otherwise – is unethical, inaccurate, and potentially damaging to your firm’s reputation.

Replace Attorney Billing Increments with Legal Time Billing Software

An attorney billing increments chart was a useful resource when manual timekeeping was best practice. With the introduction of legal technology, law firms no longer need to spend hours counting their hours and doing the math for billing clients. By implementing legal time billing software, your law firm has access to an automated process that ensures accurate, convenient, and efficient time tracking and billing every time. 

Keeping track of the time spent on meetings, briefs, case research, the discovery process, and other billable hours is a fundamental part of a lawyer’s day. Every lawyer has their process for tracking their hours, but the important question is:

How accurate is the time tracking?

Losing track of time, forgetting to stop a timer, or otherwise “guessing” at an hour can lead to billing issues or even legal implications. Without reliable processes for timekeeping, law firms suffer from significant operational challenges.

What Is the Importance of Time Tracking for Lawyers?

Lawyers rely on billing by the hour almost exclusively. While some lawyers use a retainer or other billing structure, the majority of lawyers are tracking billable hours.

Errors in either direction are harmful to a lawyer and a firm’s reputation. If the billable hours are underestimated, the lawyer and firm lose money for the time spent on a client’s case. If the billable hours are overestimated, the client may question the accuracy. The last thing any lawyer wants in this competitive market is a bad reputation.

What Do Lawyers Use to Track Their Time?

Many lawyers use traditional methods of calculations where clients are charged on the billable hour in 10-15 minute increments. Lawyers often captured this time manually in a spreadsheet or on paper. However, this process of tracking time should be avoided as it is prone to human error and can be easy to lose track of time. 

Manual tracking is not only cumbersome in itself, but it has no accountability as a tracking method. The results aren’t as accurate as can be expected, and if there’s ever a dispute, the lawyer has no transparency to account for the time spent.

What Are the Risks of Lawyers Not Tracking Time?

Here are 3risks of not using time tracking software for lawyers.

1. Losing Billable – and Non-Billable – Hours

Billable hours are essential for a firm to operate, but they must be accurate. If a lawyer is manually logging billable hours, it’s a risk to overall profitability.

Worse yet, some lawyers don’t log time as they work, which inevitably leads to time being lost. Waiting until the end of the day can result in a 10% loss of time for lawyers. Longer than that and the loss jumps up to 25% or greater.

This doesn’t only apply to billable hours. Tracking non-billable hours helps lawyers accurately price legal services and identify processes that can be streamlined or outsourced to ensure the overall firm is profitable.

2. Discrepancies in Billing 

Billing processes can take up a lot of administrative time, especially with a manual time tracking process. The law firm’s staff has to sort through time records from individual attorneys, organize them, and enter them into a law firm’s billing system.

With efficient time tracking software, lawyers can track time on their own using the software, which is then consolidated for staff to generate accurate invoices. This not only ensures an easier billing process, but it reduces the time spent on administrative tasks that hinder productivity and cost money.

3. Impact on the Client Experience 

Clients may come to a law firm or lawyer for legal expertise, but the client experience is heavily relied on how easy it is to do business with a firm. This applies to all aspects of working with a firm but especially billing. 

It starts with having an efficient, automated time and billing process. With Bill4Time, a lawyer can easily jump between cases while timers capture time. This process allows lawyers to work freely without guessing about the time they spend on a specific case. Once this time is captured, the firm can create a detailed, custom invoice that accurately reflects the billed time. 

Showcasing your law firm’s use of legal technology and automated processes during intake is a simple way to set the stage for a transparent attorney-client relationship.  

Make the Switch to Time Tracking Software

Time is money, so lawyers need to adopt processes that are efficient and precise. With Bill4Time’s time tracking software, lawyers can gain better insight into where they spend the most time with custom reporting, and automated features to increase the accuracy of their billing. In and out of the courtroom, Bill4Time allows you to track and bill your time wherever you go.