Week 5: Smart Billing, Stronger Cash Flow

Billing Is More Than Just Getting Paid

In the legal world, pricing and billing don’t just affect your revenue—they shape your reputation, your client experience, your operational flow, and your ability to scale. Poor billing systems lead to unpaid invoices, cash flow bottlenecks, client distrust, and burned-out staff. But strategic, client-aligned pricing paired with clear billing practices can build stability, confidence, and even competitive advantage.

This week’s focus will equip you to:

• Understand common legal pricing models and their practical implications

• Identify where billing breakdowns happen in law firms

• Align your billing systems with your operational and client realities

• Build billing practices that promote clarity, compliance, and collection

Section 1: Law Firm Pricing Models – Pros, Cons, and What Works When

Law firms use a variety of pricing models depending on the service, jurisdiction, and client base. Understanding how each works—and when it works best—is key to building a sustainable revenue system.

1. Hourly Billing

How It Works: Clients are billed for time spent, often tracked in six- or fifteen-minute increments. 

Pros:

• Easy to understand internally

• Aligns with actual work performed

• Easier to justify increases

  
  

Cons:

• Clients dislike unpredictability

• Incentivizes inefficiency

• Requires rigorous time tracking

  
  

Best For: Litigation, long-term defense cases, complex legal research

Behavioral Cue: If attorneys avoid tracking time or are inconsistent in their logs, hourly billing loses accuracy and can lead to revenue leakage.

2. Flat Fees

How It Works: One fixed amount is charged for a defined scope of work. 

Pros:

• Clients appreciate transparency

• Easier to sell and budget

• Reduces administrative tracking

  
  

Cons:

• Risk of undercharging

• Scope creep if boundaries aren't enforced

  
  

Best For: Estate planning, LLC formation, immigration filings, uncontested divorces

Tip: Always pair flat fees with clear scope documents. Define how many revisions or meetings are included, and what counts as extra.

3. Contingency Fees

How It Works: The firm is paid a percentage of the award or settlement (commonly 25%–40%). 

Pros:

• No upfront cost to client

• High upside for firm on successful cases

  
  

Cons:

• Irregular cash flow

• Risk of not getting paid at all

• Requires strong case screening

  
  

Best For: Personal injury, civil rights, class actions

Implementation Prompt: Set up trust accounts to hold contingency proceeds until proper disbursement procedures are followed. Always confirm bar compliance.

4. Subscription or Retainer-Based Pricing

How It Works: Clients pay a set monthly fee for access to ongoing legal support.

Pros:

• Predictable revenue

• Builds long-term client relationships

  
  

Cons:

• Requires tight scope management

• May lead to overuse by clients

  
  

Best For: Business clients needing ongoing counsel (e.g., employment, contracts, compliance)

Tip: Build in review checkpoints every 90 days to adjust scope or price based on usage.

Section 2: The Billing Lifecycle – Where Most Firms Struggle

Common Billing Bottlenecks:

• Delayed time entry (or none at all)

• Invoices sent only once a month (or worse, quarterly)

• Inconsistent invoice formats or unclear descriptions

• No follow-up process on unpaid invoices

• Collections left to attorneys with no formal protocol

  
  

“Billing isn’t just about invoicing—it’s about telling the financial story of the work you’ve done in a way that builds trust and ensures payment.”

Healthy Billing Cycle:

1. Time Tracking: Done daily or in real-time using software like Clio, MyCase, or TimeSolv.

2. Invoice Drafting: Reviewed internally for accuracy, tone, and clarity.

3. Delivery: Sent consistently (weekly, biweekly, or monthly) via preferred client channel (email, portal, mail).

4. Follow-Up: Friendly reminder within 7 days, firm reminder by 15 days, escalation by 30 days.

5. Collections Workflow: Non-attorney staff sends outreach, and potential third-party referral by 60+ days overdue.

   
   

Behavioral Cue: If lawyers avoid or delay entering time, this indicates a need for coaching, automation tools, or better alignment between billing models and work performed.

Section 3: Billing Tools and Systems – Streamlining for Accuracy and Speed

Practice Management vs. Accounting Tools

Tool Type	Examples	Purpose
Practice Management	Clio, PracticePanther, MyCase	Time tracking, case-related billing, client portals
Accounting	QuickBooks, Xero	Invoice posting, payment processing, financial reporting

Best Practice: Sync the two systems to avoid dual entry and reconciliation headaches.

Key Features to Look For:

• LEDES billing compatibility (for insurance or government cases)

• Custom invoice templates (with firm branding)

• Client portals for easy online payment

• Built-in late payment reminders

• Payment integrations (LawPay, Stripe, ACH)

  
  

Implementation Prompt: Audit your current system. Does it take longer than 5 minutes to generate a standard invoice? If yes, it’s time to streamline.

Section 4: Collections Without Conflict – How to Get Paid Without Burning Bridges

Many firms struggle with accounts receivable because they fear damaging client relationships. But collections don’t have to be adversarial—when you set expectations early and communicate professionally, payment becomes part of your firm’s trusted routine.

Setting the Stage

• Include payment terms in every engagement letter (e.g., “Due upon receipt” or “Net 15”).

• Use welcome emails to explain your billing schedule and expectations.

• Remind clients when their retainer is running low before they hit zero.

Friendly but Firm Collections Process

• Day 1: Invoice sent with automated confirmation receipt

• Day 7: Reminder email with polite nudge and link to pay

• Day 14–21: Phone call or direct follow-up from staff member

• Day 30+: Send formal letter or begin process for third-party collections (if applicable)

  
  

“Clients don’t mind paying for value. They mind paying when they’re confused, surprised, or don’t hear from you until something is late.”

Pro Tip: Separate the “legal work” from the “collections work.” It’s less awkward when a non-lawyer staff member handles payment discussions.

Section 5: Metrics That Matter – Using AR Reports to Guide Strategy

Beyond just sending invoices, it’s important to track and act on billing KPIs (Key Performance Indicators). These help you understand whether your billing process is working—and where cash might be stuck.

Key Billing Metrics:

• Time to Bill: Average days between work completion and invoice sent

• Time to Collect: Average days between invoice sent and payment received

• AR Aging: % of receivables that are 30/60/90+ days past due

• Collection Rate: Invoiced vs. collected per attorney or practice area

  
  

Use Reports to:

• Identify which clients pay late consistently

• Spot practice areas with inefficient billing

• Coach attorneys on improving time entry and matter budgeting

Reflective Questions for Study and Discussion

1. How often are invoices sent in your firm? Is it consistent across departments?

2. Which pricing model is currently used most—and is it aligned with your practice type?

3. Where do billing errors or client complaints tend to arise?

4. What happens at your firm when an invoice goes unpaid for more than 30 days?

5. Could a non-attorney staff member improve your collections process?

Implementation Exercises

Pick one of these to work on this week:

Pricing Evaluation:

Review the last 10 matters. Which model was used (hourly, flat, contingency)? How profitable were they? Where did scope creep occur?

Billing Flow Audit:

Map your current billing workflow. Where are the bottlenecks? Who owns each part?

AR Report Review:

1. Run an AR aging report.

2. Identify the top 3 overdue accounts.

3. What’s your next step for each?