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How to Avoid Getting Stiffed by Clients at the End of a Representation

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Clients are less likely to pay their lawyers toward the end of a representation. This is especially true for hourly work and those situations where the client has already paid enough to feel justified in stopping payment. For attorneys, the risks of non-payment are especially pronounced when a representation approaches a game-changing event, such as a hearing on a dispositive motion or a closing date for a transaction. In these scenarios, the law firm is likely to send out a final bill after it has completed the lion’s share of its work if the matter suddenly ends. As consultants to lawyers and law firms, we have seen that these bills are especially difficult to collect in full because, at this point, the law firm has lost its leverage over the client.

Fortunately, there are ways to minimize the risks of non-payment which are consistent with the firm’s ethical responsibility not to withdraw from the representation when doing so could prejudice the client. The best strategy is to alter the billing cycle to avoid sending out a bill after the major event in the case has already taken place. Ideally, you want as much of the bill paid off before the hearing, closing, or other key event as possible.

Too many attorneys treat the billing cycle as fixed and as something that they need to serve rather than the other way around. It is generally advisable to maintain a monthly billing cycle – but not always. There are times when bills should be sent out off-cycle.

If you work at a firm where billing off-cycle is likely to be met with resistance, the best approach is to begin raising this issue more than one billing cycle in advance. We have advised lawyers to raise this issue in writing about 45 days before the date of the hearing, closing, or other event that could end the representation. If you anticipate pushback from the people who handle your invoices, provide a written estimate of how much money will be at risk for non-payment if the firm adheres to its normal billing cycle. This is especially effective for non-equity partners, Of Counsel, and associates who often don’t play a large role in sending out client bills.

In addition to changing the timing of the invoice, it can be helpful to change who provides the last significant bill to the client. Specifically, when the risk of non-payment is predictably high and the amount at stake is considerable, the client is more likely to pay attention to the bill if it is transmitted by the lawyer leading the representation. One way to do this would be for the lawyer to add the handling of the fee as an agenda item to a meeting or call with the client.

If the prospect of talking to your staff about making an isolated and fully justified exception to the monthly invoicing cycle causes heartburn, that may be a symptom of a larger problem. At too many firms, the billing cycle is run for the convenience of the staff. There are many aspects of creating an efficient cash flow system that justify making lawyers adhere to deadlines. Requiring attorneys and other timekeepers to submit their time by a set deadline, for instance, is perfectly sensible. But your invoicing system should be flexible enough to accommodate lawyers who request that bills be sent out at a specific time because of their knowledge of a particular client or matter.

Train Your Lawyers to Discuss Fees

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Managing partners and other law firm leaders can be reluctant to allow junior lawyers to discuss fees with potential clients. One of the recurring concerns is that the associate might commit the firm to fees that are too low. And some firms are gun shy about discussing hourly rates because of what those figures might reflect about associates’ compensation.

As consultants to law firms, we have seen firsthand that keeping lawyers in the dark has its own disadvantages. Notably, questions about fees routinely come up in discussions with potential clients. Thus, firms who seek to improve the rainmaking abilities of their more junior lawyers should strongly consider providing more training on how to talk to potential clients about fees.

Specifically, the training should address the following five questions:

 

1) What can associates tell potential clients about basic rates?

For firms that charge by the hour or on a flat fee basis, the best practice is to train associates to mention a fairly broad range rather than quote a single number.

2) What can they say about the firm’s position on alternative fee arrangements?

When asked about their firms’ openness to alternative fee arrangements, most junior lawyers answer with an “I don’t know.” This can leave a bad impression on potential clients and referral sources. Advise mid-level associates to instead communicate to clients that the firm evaluates fees on a case-by-case basis and would consider an alternative fee arrangement. It might be appropriate to provide associates with a sense of the firm’s willingness to charge blended rates, as well as some guidance around RFPs, contingency fee cases, and other special circumstances.

3) What should they convey about the process of providing quotes?

At every level, lawyers should know enough to tell their potential clients how fee decisions are made (by committee, by the head of the practice area, etc.) and when (an approximate timeline). This may seem simple, but firms often fail to offer this kind of guidance, thereby leaving the potential client in the dark about when they can expect to receive a specific quote or fee agreement.

4) To whom should associates mention a lead?

If a junior associate meets a potential client, what’s their next step? Do they report this to the billing partner, the head of the practice area, the managing partner? Make this clear. You don’t want to lose out on a valuable matter because one of your lawyers didn’t know whom to tell so that the firm could follow up.

5) What has happened with other matters the firm was pursuing?

Share success stories with mid-level associates (and special counsel and non-equity partners) so that they can incorporate the same strategies into their own interactions and learn to bring in new business.

 

This training shouldn’t just be about what to do but also about why those methods work. Well-designed training should provide lawyers with the confidence to communicate effectively about the firm’s fees.

What Law Firms Need to Know About Crisis Communications

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Boies Schiller Flexner has been the subject of a steady stream of articles over the past year which suggest the firm might be facing some cash flow issues. Bloomberg reported in July that the firm was the only one in the Am Law 100 to receive funding from the Small Business Administration’s Paycheck Protection Program, although it was accompanied by several in the Second Hundred. In April, the American Lawyer broke news of fifteen partners in Los Angeles and San Francisco departing for King & Spalding. And when two Washington, D.C. partners left the firm to join Paul, Weiss, Rifkind, Wharton & Garrison in June, their contributions combined with those of the lost West Coast partners were estimated at “as much as $100 million.”

Following a delay in pay raises last month, Boies Schiller denied that cash flow had anything to do with it, responding with a statement that such an implication would be “absurd and flat-out wrong.” The raises were reportedly meant to take effect in June, being postponed several times before ultimately being implemented Nov. 6. While that kind of response may be effective in writing a brief on behalf of a client, it’s not the best strategy for combatting perceptions in the media or the marketplace.

After losing high-performing partners, it would be surprising if lawyers at the firm without sizeable books of business weren’t worrying about cash flow. Whether at one of the country’s biggest firms or a small boutique, law firm leadership has to offer a lot more than a flat-out denial to calm fears of a shaky business.

What’s missing from Boies Schiller’s statements is any sense of the firm’s strategy or priorities in the face of the departure of major rainmakers. In crisis PR, it’s critical to explain how these pieces of news, including the firm’s acceptance of PPP funding and its delayed pay raises, fit into a larger narrative. Explaining a strategy and announcing new hires would help. Likewise, some sense of contrition, regret, or other evidence of being sensitive to the human implications of the story could make it more likely that the intended audiences—clients, referral sources, attorneys at the firm, staff, alumni, and the media—will be ready to engage in a non-antagonistic way. Here, Boies Schiller seems to have a valid point. The number of employees who may have been impacted by any delayed compensation is too small to be financially material. But that doesn’t mean that a blanket and seemingly defensive denial in the press is the best approach.

In today’s media environment, law firms, regardless of size, can’t rely on the market giving them the benefit of the doubt. Crisis communication is a real expertise, and more firms would benefit from determining how they will address the next PR issue before it hits crisis proportions.