How to invoice intelligently for improved revenues from your legal work…

Happy Easter to all readers…and special thanks to the 2273 of you who are current subscribers…

It’s a fact of life that sometimes the simplest solutions to a problem are right before your eyes…they just need to be recognised and implemented.

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Traditionally in the last 3 or 4 decades most law firms have adopted a posture of being “happy” with a Realisation Rate average on invoicing Work In Progress well below 100%.

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85% is pretty common…much lower is not uncommon.

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Think about how often members of your team write down recorded WIP in matters for no good reason whatsoever…a seriously pernicious habit!

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Even if your firm is not already engaged in a serious value billing mission, there are ways to improve revenues for the work you do, using existing tools available to you, which will have immediate impacts on the profitability of the work, and of course your firm’s revenue, cashflow, and liquidity.

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The 1, 2, 3 of what to do…

1.???? Communicate well…

2.???? Disclose fully, well…

3.???? Invoice confidently using the factors you have disclosed (more below)…

4.???? A bonus…collect additional revenue in full on time because you communicate well, provide excellent services, and do what you say you will do!

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How you charge for your services, even if (or especially because) you say you charge by the hour, and have provided an estimated fee…

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Communicate clearly and confidently, prior to engagement, these factors in how you charge:

·????? The skill, specialised knowledge and responsibility required to perform the work properly;

·????? The complexity of the work, and the difficulty or novelty of the questions involved;

·????? Your experience, reputation and ability;

·????? The urgency and circumstances in which the matter is undertaken and any time limitations imposed, including those imposed by the client;

·????? The importance of the matter to the client and the results achieved;

·????? The degree of risk assumed by you in undertaking the work including the amount of value of any property involved;

·????? The fee customarily charged in the market and locally for similar legal services;

·????? The possibility that the acceptance of the particular retainer will preclude engagement of you by other clients;

·????? Your reasonable costs of running a practice;

·????? Your time and labour expended.

Tell clients: You should note particularly that time spent on your work is only one of the factors we consider in assessing the fair and reasonable fee for your work.

There may be occasions when it will be appropriate for us to charge for more than one lawyer who will be doing your work at the same time or consulting with each other in relation to the work.?

Without fail: Consider a loading or a deduction for each of these factors at invoicing time, and of course again communicate fully.

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This approach, on its own, will often lift your Realisation Rate on WIP recorded above 100%, on average across all matters! Anywhere in the range 105% to 115% is quite common, and above 120% very achievable in certain areas of work.

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When coupled with other pricing factors (for another day) this simple use of existing pricing tools will dramatically affect your profitability.

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Do the maths…

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Use your firm’s numbers…

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My example…A lawyer with a charge rate of $385/hr recording target WIP over twelve months for 6 hours a day would record around $520,000.

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Invoicing at 85% average will lose 15% of that…nearly $78,000!

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Invoicing at just 105% average will recoup the $78,000, plus another $26,000…improvement over $100,000 in revenues with no extra files or increases to standard charge rates.

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A game-changer, and the tools are already there ready to be used.

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Get extra work that your team has capacity to service and lift the outcomes even further.

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The financial resources to compete hard with other (and bigger) firms to attract new team members and keep your existing ones longer are at hand!

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Robservation…

This is not theoretical, savvy firms have been using these tools for many, many, years!

?Outcomes?

More quality time with family and friends and more, better quality, Easter eggs!

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