They want to know.
Should you tell them? When it comes to money, clients want a full accounting of the fees and expenses associated with their matter. It’s no secret that communication is an important part of a healthy client relationship.
That’s not the problem.
The problem is how. How much do you tell them? How often do you tell them? In what way do you tell them?
It’s not as easy as it sounds.
If it’s handled well, your clients experience the needed closure and relief they need to trust your firm explicitly.
Do clients trust your firm explicitly?
A recent Gallup poll found 21 percent of Americans say attorneys have very high standards of honesty and ethics. 45 percent were listed as average.
It’s not ideal.
It should be set at 80 or 90 percent. But it’s sobering when you realize Americans stated 61 percent of congressmen have low or very low standards of honesty and ethics.
You’re the exception, right?
There’s a simple way to show you’re the exception to the rule. I’ll bet you already know what I’m going to say, don’t you? Thaaat’s right.
Clients need open and honest communication from their firm. Their looking for clear answers to specific questions (e.g. are you an expert, do you care about your clients, are you a good fit for me?). But there’s one question in particular that really holds your client’s attention.
Are your fees reasonable?
Your clients are looking for a reasonable answer. They want to see that you communicate pertinent information on fees and expenses clearly. They’re looking for complete information that’s delivered at the right time.
Why is it so important that you answer questions about fees/expenses correctly?
Your clients have a hidden, unspoken, non-negotiable desire
Which most won’t share with you.
It’s a pop quiz. They’re using it as a way to verify/demonstrate that you already know the answer to their hidden question. Know what it is?
Are you giving me more than I’m paying you?
There’s only one correct answer to this pop quiz. When clients ask this question they’re testing you to see if you can demonstrate that you know the answer to this implicit question.
If you want to win new clients easily and consistently, the answer to this question is always yes.
How do you convey that?
You follow communication best practices. You outline your fees and expenses – clearly and completely. You give your clients a clear sense of what they’re getting into.
You ensure that your fee breakdowns meet four distinct criteria.
- Your clients want to see that your financial interests are aligned with theirs. Are clients willing to pay for relevant research fees or do they view this as unreasonable?
- Surprising clients with a significant variance, relying on block billing and other dishonest practices create ambiguity, increasing distrust.
- Are clients looking for an hourly, fixed fee, or retainer arrangement? Are their expectations realistic, fuzzy, implicit or unrealistic? You’ll need to make each of these expectations explicit before they can be calibrated.
- This is what the vast majority of attorneys think of when clients ask about price. They see that clients are looking for a value breakdown, a demonstration of your firm’s exceptional ability. Are you giving me more than I’m paying you?
Any fee breakdown you provide should meet these four criteria. Your prospects/clients will verify that your communication provides all four of these details at all times.
How do you do that?
How do you discuss fees and expenses with clients at this level all the time?
It starts with habits.
- Track everything. All timekeeping employees should track their time regardless of your firm’s fee arrangement. Retainer, hourly, fixed fee – it doesn’t really matter. Track your expenses, track productivity, write-offs, write-downs and Track anything and everything that affects your firm’s financial position.
- Contemporary time tracking. Imagine making 50 to 70 percent more by simply recording your time as-it-happens. It’s an easy way for law firms to boost their realization rates yet most are unwilling to do so. Here’s the problem. Reconstructive building erodes client trust significantly as it creates an environment that encourages underbilling or overbilling.
- Set policies and procedures. Create a list of fee and expense types. Implement a “cost capture” policy in your firm. Will your clients will be billed for soft costs (g. copies, scans, postage, etc.), hard costs (e.g. travel, lodging, meals, etc.). How does your firm handle an unexpected variance? Do you offer discounts and write-downs? Under what conditions? What’s your firm’s policies regarding client billing guidelines?
- Share fees and expenses. Provide clients with a list of your fee and expense types. Give them a concise breakdown of your fee arrangements, fees, expenses and Share the answers to your client’s most common questions. Let them know that you’re willing and able to provide them with additional answers to any questions they may have. Be prepared to answer questions on any of the data you track, at any time.
- Share your policies and procedures. Share the policies and procedures collected in step two. You’ll want to feel your clients out and follow their lead. If they’re highly engaged and full of questions, provide them with the comprehensive responses they need. If they’re less engaged, answer the important/common questions. Then ping them from time to time with relevant answers to contextually relevant questions (e.g. here’s our firm’s cost capture policy). Once you’ve discussed these details you’ll want to…
- Add fees, expenses, policies, etc. to a signed agreement. Your written retainer/fee agreement outlines the limits of the attorney/client relationship. This is crucial in the unlikely event that something goes wrong during the course of your work with clients. It’s an obvious piece of advice yet you’d be surprised at the number of attorneys who know better but choose to ignore this
- Follow client billing guidelines. Client billing guidelines are often a jumbled mess. They’re incomplete, missing rules and/or unclear. Often times these billing guidelines have a hidden set of rules your clients aren’t willing to explain. Create a summarized set of billing guidelines. Once you’ve taken a careful inventory of the rules your clients expect you to follow, obey them. Repeat these details back to clients, showing them that you understand and will follow their billing guidelines.
- Deliver unexpected news preemptively. Have you deviated significantly from a pre-established budget? Are you planning on adding an unexpected item, expense or fee to your invoice? Pick up the phone and reach out to your point of contact. Reach out to the billing department. Let them know what’s going on. Explain the who, what and why of the situation. Then, add that explanation to the invoice. Let decision-makers, your point of contact and the billing department know what’s coming ahead of time. Then send your invoice.
- Include the right details on your invoice. You’ll need to include a mix of obvious (who to pay, how much, due dates, detailed descriptions, an hours/fees breakdown, etc.) and hidden data (what you did vs. what you gave, listing completion dates, payment arrangement details, etc.) on your invoice.
- Remind clients about the financial details you’ve shared when it’s contextually relevant to do so. If you have a meeting (i.e. a weekly follow-up) share important financial details with clients. Consistently work to be transparent with clients.
- Keep detailed records of your client’s funds. It’s an easy mistake to make. Some attorneys don’t keep detailed records of their client’s trust account transactions. Attorneys should note the client’s name or check number to track who paid what and when. If you need to reconstruct your firm’s trust account records this may be difficult unless it’s clear (from your records) whose money was used where and when. You’ll want to balance the individual trust accounts at the end of the month.
Did you catch that?
The best practices for communicating fees and expenses to clients? It’s based on good habits. The idea here is simple. You consistently communicate financial details with clients in a way that aligns with their interest, is transparent, sets expectations and provides value.
Consistency is the core practice.
This is what clients are looking for. Not a simple set of dos and don’ts but a consistent effort to be open and honest with your clients.
This is the best practice.
Communicating fees to earn your client’s trust
When it comes to money, clients want a full accounting of the fees and expenses associated with their matter. It’s no secret that communication is an important part of a healthy client relationship.
Are your fees reasonable?
Your clients want an answer. They want you to be open and honest. They want you to outline your fees and expenses clearly. They’re looking for complete information that’s delivered at the right time. Your clients have a hidden, unspoken, non-negotiable desire.
Are you giving me more than I’m paying you?
There’s only one correct answer to this pop quiz. If you want to win new clients easily and consistently the answer to this question is always yes.
Communicate openly and honestly with clients and you’ll find clients receive the closure and relief they need to trust your firm explicitly.