How to Send Invoices that Clients are Happy to Pay
Introducing Guest Blogger Jeremie Fortenberry –
Jeramie Fortenberry is the founder of Fortenberry Legal, a law firm that helps clients from across the United States with estate planning and probate matters. He writes about trusts, estates, and tax planning at the Probate Lawyer blog.
Billing makes me uncomfortable. When I first started practicing law (at that time with a big firm), I felt sheepish to even broach the topic with clients. It seemed uncouth to start talking about money right when I was in the process of establishing what I hoped to be a lasting relationship. Because of my reluctance to discuss fees on the front end, I relied on my engagement letter to set expectations regarding pricing. My hourly rate was buried somewhere in the letter, along with information about how time was computed and how often I would invoice. That, I thought, should be enough to deal with the uncomfortable issue of how I would be paid for my services.
Those of you who have tried this know how the story often ends. A client expects a $700.00 invoice but gets a $2,500.00 invoice. In the best circumstances, the client would call to discuss the fees. More likely, the client would either (a) drop out of sight without paying the bill or (b) pay the bill, then drop out of sight. Either way, the relationship was over.
When I started my own practice, I knew that something had to change. I began experimenting with value pricing and alternative billing structures. But more importantly, I changed the way I communicate with clients regarding fees. Today, I never have complaints regarding my bills and have an almost 100 percent collection rate. Here are a few lessons I’ve learned:
Establish Clear Expectations on the Front End
The most important thing that you can do to ensure happy clients is to establish clear, up-front expectations regarding your fees. Whether the client raises the issue or not, you can bet that cost is on their mind. Both you and the client will be more at ease if you discuss fees early in the representation.
Instead of sidestepping the fee issue or deferring it to the engagement letter, I now raise the issue in the first consultation. I explain my pricing philosophy (and even have a webpage on the topic) and tell my clients how much they can expect to spend in various scenarios. This gives them the opportunity to ask questions and explore alternatives before any work is done.
Sometimes it is impossible to give an estimate of your total legal fees. In those situations, do the next best thing: estimate the minimum amount that the client can expect to pay and promise to keep the client informed as the representation develops. When estimating your minimum fees, don’t be afraid to give a realistic – or perhaps even a high – estimate. Some clients will fixate on that number, so it’s better to quote a realistic number that you are comfortable with.
Keep in mind that, as the service provider, you are in the best position to set expectations regarding fees. Don’t leave that up to the client.
Communicate Throughout the Representation
Once expectations are established, the client will rely on those expectations unless they hear otherwise. If something changes, talk to the client about it immediately, preferably before any additional work is done. Good communication keeps the client’s expectations steady throughout the representation.
In my case, fees are most volatile in my probate practice. For example, I know about how much it should cost to move a simple, uncontested estate through the probate process. This allows me to set a minimum expectation for how much a simple probate should cost. If the estate remains simple and uncontested, the client’s final bill will be in line with the expectations we established in our initial meeting.
But what if something unexpected happens? Say, for example, that a will contest develops. At that point, our initial assumption that this would involve a simple, uncontested probate did not hold true. In that situation, I immediately contact the client to explain that the scope of work has changed and, accordingly, my fees will increase. The client understands exactly what triggered the increase. This helps ensure that there are no unpleasant surprises when the client gets the bill.
Carefully Word Invoices to Show Value
When the time comes to generate an invoice, you must show the client everything that you have done during the representation. Always err on the side of including too much rather than too little. A well-worded invoice will convey value; a poorly-worded one will make the client feel overcharged.
Your invoices should list every document that the attorney prepared, revised, or reviewed. The more detail you can pack into the descriptions, the better. This is especially true in litigation, which can become very expensive very quickly.
It is important to show all services rendered during the representation, even if you don’t plan to actually bill for all of them. You can adjust the final invoice by applying discounts. This gives the client a better appreciation for the work involved in the representation.