Why the firm that bills by time, bills at the end of each month

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Ever wondered why, notwithstanding the terms of agreement a law firm has with their clients, many bill their clients at the end of each month? On the last day of a recent month I met with some young lawyers from different law firms when one of them had to excuse themselves to get back to the office "to do the bills". This led onto an interesting discussion about what it was like working in a traditional law firm (one that leverages the people x time x hourly rate business model) in the 21st century on the last couple of days of any month.

Some of the comments made by this group included:

  • "its a madhouse,the usual emails from the MP imploring us to complete our timesheets and prepare draft bills by COB",
  • "alot of timesheet entries get done on the last few days of the month",
  • "you can tell the partners who are under budget-they are running around like headless chooks trying to find some "time"",
  • "timesheet narrations are always getting changed,added or deleted by partners before the final bill goes out",
  • "my partner rarely posts bills out to client on the last day of the month, he just makes sure the bills "get into the system" and then "reviews" the bills over next few days before sending to his clients".
  • "everyone is stressed out on the last day of the month-the partners, the lawyers, the p.a.'s, the accounts department.We all hold our breath to see if we have made budget for the month.If we have its "good job" all round.If we haven't it is like losing a game of football you should have won-we are all made to work harder and stay longer on the training track the next month!"
  • "I would hate to be a client of my firm on the last day of the month-everything is focussed on billings and not much else".

Most of these comments are probably not surprising to any reader who has had much to do with a traditional law firm. To avoid "months end" I have seen numerous incentives (and disincentives) tried in order to get partners to bill;

  • in accordance with the actual terms agreed with their clients (shock horror I know),
  • at staggered times during the month, or
  • as soon as a matter is completed ( again shock horror),

most with little, temporary or no success.

This group then got talking about what could be done to stop or diminish the deleterious effects of this dreaded "end of the month mayhem".

After all very few of the Costs Agreements I have seen actually state that the law firm will bill their client at the end of each calendar month. Most of the Costs Agreements use words like "we will interim bill you", "bill you monthly", "bill you every 30 days",but I don't come across many that say:

"whatever work we do for you and whenever we do it during a calendar month, we will always bill you on the last day of the that month"!

I asked this group why they thought bills are mostly left to the last 24 hours of the month?

Their responses included:

  • "our firm has always done it that way",
  • "that is what all firms do",
  • "my partner said that is what his clients want",
  • "we are too busy doing legal work and meeting our billables during the month to do non billable billing".

There was one response however that I thought was particularly enlightening.

One lawyer told me that in their firm that,even if a matter finishes early in the month, it wont get billed until the end of the month and that even if draft bills are prepared they sit on the partners' desk until end of the month.When I asked why they thought this happened the lawyer said this:

"If bills are sent out at various times during the month the partner has no idea if they are going to reach their monthly billable hour targets.However if all the draft time entries and draft bills are lined up together at the end of the month, the partner is able to calculate what the totality of all those bills are and is able to make any appropriate "adjustments" to ensure monthly targets are met or exceeded".

So there you have it. It seems some partners in some law firms calculate bills at the end of each month,not based on any contractual agreement with their clients, not based on their clients perception of value and not even billed based on the partners own perception of the value created on individual matters. Rather these bills are more reflective of an individuals performance against their firms internal measurement-in this case their monthly budgets.

"What gets measured gets managed" is a quote often (erroneously) attributed to the late management guru Peter Drucker. Behavioral economist Dan Ariely however said, “You are what you measure.

The things that any organization track are the things everyone in the firm pays attention to so be very careful if you measure the wrong things-you will get the results you ask for.Track time you will get time-one way or another.

In a previous post I gave some advice to clients who are silly enough to still use a law firm that bills them by time.Here is some more advice to such clients.Instruct your law firm early in the month as, notwithstanding whatever your actual agreement is with your law firm, you are more likely than not to have longer time to pay your legal bill as you won't receive a bill until the beginning of the following month.Go and see them however in the last week of the month and you are likely to get a bill in a few days time!

For the law firms that don't bill by time and don't rely on time as the expression of value to their clients most of this is not an issue. They instead commit to behaviours and processes that accord with the agreements they have in place with each client and measure what matters most to their clients-not those that simply accord with some outmoded and irrelevant internal measurement and reward system.

 

 

@gapingvoid.

 

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