Legal Pitfall Which You Can Avoid

By Author: Mayank Kapur
Total Articles: 278
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We've put together a list of the top ten most prevalent billing and accounting mistakes that law firms make. The right legal time and billing software can help you steer clear of these mistakes—for good.
Pitfall #10: Lumping Matters Together
Your accountant may advise you, and also file your taxes. Similarly, your family doctor might write a prescription for your cough—and also answer questions about your indigestion. Chances are, you'd get a single invoice for any services rendered in the same month or other billing period.
Law firm billing is different. In a law firm, you're well advised to separate your clients' bills by matter. Not only does this help to resolve inquiries and disputes, it also sorts things out when the state bar comes knocking—and wants to perform an audit.
So you need software that will allow you to separate your billing and timekeeping—not just by client, but by case file, dispute, or other matter.
Pitfall #9: Not “Accounting” for Varied Billing Arrangements
Pardon the pun. But different types of accounting are extremely different—and if you ...
... vary your billing methods from matter to matter: you've got to “account” for all of them.
If you handle a variety of cases through an assortment of client billing arrangements, your billing system's got to be able to handle all of it. Whether you're using hourly, retainer-based hourly, fixed or flat fee, contingency basis, or some other method of billing, your law office billing software should take note—and process the numbers accordingly. Otherwise, you'll be calculating and manipulating your numbers manually—and your math will be ripe for error.
Pitfall #8: Not “Accounting” for Billing Rate Flexibility
Chances are, your law firm's timekeepers (lawyers, paralegals, subject matter experts, lobbyists, and other professionals) offer variable “standard hourly rates.” These rates vary—for different tasks. Some rates might be discounted, and others fully priced. You might grandfather a client in under last year's “old rate.” If you're attorney billing software doesn't account for this, then you're looking at complex and convoluted calculations—and again, a great potential for error.
Pitfall #7: Failing to Track and/or Allocate Expenses
Since hours are your law firm's main inventory, your focus is squarely on your billables.
But while not a profit basis, expenses are a potential source for loss. That's an area where a lot of law firms fall short—and carve into their profit base.
Regardless of how your expenses are paid (by check, credit cards and/or cash), your billing software should be able to track and allocate effectively and effortlessly.
Pitfall #6: Skimping on the Quality of Your Invoices (and/or Reminder Notices)
No matter what you learned in law school (or simply weren't taught): billing is branding. It presents a façade to your clients, creates an image, and sends a message with a crucial subtext. It's as vital a part of your client communication process as your website, brochure and other collateral materials, and any other marketing material you put into the world at large.
So it's always a puzzle to us how top-quality law firms think they can make do with sub-standard invoices and reminder notices. You can—but your image and credibility take a direct hit.
It's very simple. You've got to generate invoices on a fixed billing cycle—and create consistency. They've got to look professional—which means neat and uncluttered, clear and easy-to-understand.
Any less—and not only are client communication, timeliness, and crucial cash flow on the line, but so is your image and reputation.
Pitfall #5: Overlooking Software Collection Support
It happens quickly. Your unpaid bills pile up, and before you know it, you have a collection issue.
Don't wait another billing cycle to get paid. Take a proactive approach to debt collection. An efficient legal time and billing software provides built-in collection support that's easy and practically effortless.
Pitfall #4: Failing to Check for Client Conflict of Interest
It's a basic tenet of law office management. You've got to check all new matters for conflicts of interest. Fail to do so, and you can never be sure you're the right lawyer for your client (if you're not, then you're wasting your client's time).
While developing a fully bulletproof conflict checker is challenging, the right software already contains an integrated database you can use to spot issues and potential conflicts off the bat.
Pitfall #3: Mishandling Client Retainers
Retainers are the lifeblood of your business. They infuse your firm with much-needed cash flow—and signify a client's trust and commitment in you.
But here's the law firm difference. Client retainers require special treatment—which varies per matter. For one matter, you might need to make an initial deposit to a trust account, and transfer balances as fees are earned. This alone will complicate your back office operation if your billing system is not capable of systematically processing retainer transactions.
Apart from itemizing legal fees and expenses, a legal billing program must always display
“remaining retainer balances” on your client invoices.
Pitfall #2: Failing to Integrate your Trust Funds
Every law firm endeavors to keep its trust books clean and accurate. But they either fail, or spend significant time and resources trying to do so.
You win 90% of your trust fund tracking battle if your system provides integrated billing and trust bookkeeping . This can work to prevent common trust errors (e.g. ledger card overdraft), and provide a bank reconciliation tool and three-way reconciliation reports.
Pitfall #1: Failing to Protect the Integrity and Security of your Data—and Complicating your Life
The most common and dangerous of all legal billing pitfalls is choosing complicated software that fails to protect the integrity and security of your law firm data.
If your software is too complicated to learn or use, then you're not receiving the benefit of leverage. Technology isn't making your life easier…it's making it harder. Need an external consultant or trainer? Time to nix the software in question, and find something hassle-free.

Author Bio

Easy Soft specializes in helping law firm with legal billing and accounting software. Easy Soft has automated software solutions for virtually every practice area, from legal software to divorce financial software.