Better Billing for Law Firms (Revisited)

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Better Billing for Law Firms (Revisited)Joshua Lenon – Clio

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Instructors

Joshua Lenon

• Attorney, admitted in New York• Lawyer in Residence at Clio

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1. Billing Woes (5 minutes)2. Tap into Billing Data (10 minutes)3. Bill Processes (10 minutes)4. Payment Methods (15 minutes)5. Best Billing Practices (10 minutes)6. Conclusions (5 minutes)7. Questions (5 minutes)

Agenda

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BILLING WOES

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Billing Woes

• 73% of small law firms surveyed say they experience past due client accounts

• Firms with past due bills affect 10- 39% of client accounts.• 45.6% say collecting on invoices 90 days past due “unlikely” or “very

unlikely.”• 71.2% offer discounts prior to invoicing

Source:“39%ofClientAccountsArePastDue,”LawPracticeAdvisor,09/10/2014.

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Time Does Not = Money

• Most small law firms (61%) reported spending about eight hours per month on their billing process

• Average number of hours worked in a day were 8.9 and average hours billed = 6.9.

• 39% of time worked is not being billed in the solo and two-attorney firm segment.

Source:LexisNexisLawFirmBillableHoursSurveyReport

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Billed vs Unbilled Time

60% 60%76% 74%

92%

73%

40% 40%24% 26%

8%

27%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1 2 3to5 6to10 11to20 20+

Unbilled

Billed

Source:LexisNexisLawFirmBillableHoursSurveyReport

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43%

43%

14%

Yes,undocumented

Yes,documented

No

Source:“LawFirmBillingSurvey,”BusinessofLawBlog,08/28/2014.

Does Your Firm Have a Billing Process

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72%

18%10%

No

Yes

Unsure

Source:“LawFirmBillingSurvey,”BusinessofLawBlog,08/28/2014.

Does Your Firm Analyze Client Billing Trends?

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TAPPING INTO BILLING DATA

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Lock-Up

Unbilled work in progress plus debtor days

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Lock-Up Data

- 1/3 UK law firms had lock-up in excess of 150 days

- Average number of lock-up days of 109 on average days

Source:“Unlockinglock-updays,”TheLawSocietyGazette,02/09/2012,andNatWest2015FinancialBenchmarkingReport– LawFirms

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What Data Do Lawyers Track?

• Hours• Rates• Types of Cases• Lengths of Cases• Case Resolution Outcomes• Clients’ Legal Histories• Amounts Billed• Payments Received

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Ways to Generate Data

• Bills Sent

• Bills Paid

• Payment Methods

• Tracking Time

• Custom Fields

• Expenses

• Consistency

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What Can Lawyers Determine?

• Financial Health of Firm• Profitability of Clients Over Time• Average Earnings Per Case by Practice Area• Profitability of Practice Areas Per Effort• Productivity of Associates• Projected Workload by Case Type

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Clio.com

4,500,000 matters

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Monthly Billing Data

• ~115,000 bills generated in the first 3 months of 2015

• 36.5% of those bills were marked as paid on the SAME DAY– Trust Accounts Advanced Fee

Deposits– Flat Fees Upfront– Credit Card Payments

Unpaid63%

SameDayPaid37%

Q12015Bills

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Bills not paid on the same day took 22 days to close

on average.

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Billing Data Conclusions

• Billing problems start months BEFORE issuing a bill.• Law firms generate lots a data around billing.– Work in Progress Reports– Accounts Receivable

• Lawyers CAN get paid quickly, but need a process.• Lack of process leads to further delays

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BILLING PROCESSES

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Traditional Billing Process

1. Hourly Billing2. Generate Invoice at Matter’s End3. Mail the Bill4. Sticker Shock5. Wait

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Modern Billing Options

Source:PatrickJohansen,CLM,CPP,“PatrickonPricing,”http://www.patrickonpricing.com/continuum

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Alternative Fee Arrangements

• Flat Fees for entire matters– 20% of GCs require flat fees in ACC CLO 2015 Survey

• Unbundled Legal Service– 47% of solo practitioners and 43% of those in firms of 2 to 9

lawyers report providing unbundled services. 2014 ABA Legal Technology Survey Report, at IV-xii.

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Client Preferred Pricing Strategies

• Transparent pricing - 37%• Guaranteed pricing - 27%• Value-based pricing - 26%• Lowest price - 10%

Source:AltmanWeil2014ChiefLegalOfficerSurvey

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Big Law Approach to Billing

• Regular time input• Digital bills and payment options• Frequent billing• Staff for accounting and collections• Discouraging write-offs

Source:“FirmsTurntoSpecialiststoBoostCollections,”NewYorkLawJournal,12/08/2014

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Discounting

Discounts & write-offs rewards good and bad clients alike.

<10%

10-19%

20-20%

30-39%

LateBills&Discounts

Often NeverSource:“LawFirmBillingSurvey,”BusinessofLawBlog,08/28/2014.

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Discounting

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PAYMENT METHODS

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Powered by LawPay

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Clio Payments Setup

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Share Bills via Email

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BILLING BEST PRACTICES

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Billing Best Practice #1

Walk clients through their first bill

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Don’t wait to send a bill.

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Source:HowtoStartandBuildaLawPractice,JayFoonberg

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Send Detailed Bills

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Re: F/UJohnDoe the clientJ.Doe john doe

Source:Aluvion LawFirm

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Make it easy to get paid

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Get paid first

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Don’t skip trust accounting & regulatory duties

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Don’t let unpaid bills sit

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Manage Advances Against Invoices

http://gocl.io/fundbox

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Don’t Wait for Collections to Collect

InvoiceSherpa.com

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Custom Scheduling & Reminders

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Automated Invoice Reminders

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Recurring Payments

InvoiceSherpa.com

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CONCLUSIONS

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Conclusions

1. Billing currently troubles many firms.2. Better billing starts before you send the bill.3. Client are seeking transparent bills; not lower bills.4. Timing matters with billing. Bill consistently & frequently.5. Use alternative fee arrangements to avoid collections.

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QUESTIONS

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Legal Artificial Intelligence: Replacing or Helping Lawyers?

A Clio Webinarwith special guest ROSS Intelligence

February 23, 2016 at 11 AMhttp://gocl.io/legalai

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Thank You

Joshua Lenon

[email protected]

@JoshuaLenon

Linkedin.com/in/joshualenon