Tech Talk on Legal Billing Software, Trust Accounting Software, Divorce Financials Software, HUD Settlement Statement, Case Information Statement and Family Law Software

Top 10 Legal Billing Pitfalls – Mistakes You Can Avoid

Top 10 Legal Billing Pitfalls – Mistakes You Can Avoid

Pitfall # 8 – Not Handling Client Advances Properly

In today’s difficult economic climate, cash flow and profitability for most law firms depend on a roster of clients who pre-pay (also known as client advances or retainers). However, from an accounting/bookkeeping perspective, law firm client advances (retainers) need special treatment and must be handled very carefully. While most other businesses deposit client advances in their business account, lawyers cannot do so that easily.

For attorneys, improper handling of retainers can result in disciplinary action. Time and again, attorneys are admonished for failing to handle funds properly. Client advances may need to be deposited in a trust account or in the firm operating account, a decision that must be made carefully because state rules vary and change from practice to practice.

Since client advances are debited as legal fees are earned, your legal billing software must track the remaining retainer balances at all times and invoices must correctly reflect balances.

The varied nature of client advances, an initial deposit to trust and/or operating account, and reducing balances as fees are earned can significantly complicate your back office operation if not handled systematically. Due to the uniqueness of client advances and the consequences of mishandling them, choose your legal billing software with this fundamental requirement in forefront rather than as an afterthought and you can avoid Pitfall # 8.

To see a more detailed presentation and learn how easy it is to account for advances if your billing system is set up properly, register for Easy Soft’s interactive webinar, How to Avoid Legal Billing Pitfalls. Learn how to evaluate systems that can streamline your back office operation for legal billing, trust account management and collections, and in turn, tighten state regulation compliance and improve your firm’s financial picture.

What’s The Best Way to Start Building a New Conflict Checker Database?

What’s The Best Way to Start Building a New Conflict Checker Database?

In my earlier post Reduce Professional Liability Risk, I outlined how an effective conflict checker mitigates professional liability risk and how modern computer programs automate this tedious, but very necessary task.

Since then, I received many enquires about how to actually get a conflict checking system in place. Most first time users of Easy TimeBill program face the same “how to” dilemma.

The core of a reliable conflict checking system is your database of names; names of clients, key witnesses, adversary (the spouse in a divorce case), opposing counsel, etc. To build a database, you will need to integrate your current client information and contacts from closed cases. Just how should you go about adding all the pertinent details from your inactive case files?

One obvious choice is to add prior client information as individual clients. It would seem to make sense that if ALL past and current clients are in the database, you would have a reliable means to check for conflicts of interest. However, I do not like this approach because it clutters your current client database with closed case files.

A better method to inventory inactive case related contacts is to:
1. Create one “fictitious client,” e.g. your own law firm.
2. Enter all prior clients and their related contacts in the address book as a type of “friend.”
3. Go back to the fictitious client and assign all the newly created “friends,” designating the relationship type as “former client.”

Using the above method allows you to add former client case related names and details to your new conflict checker database, without commingling old and current cases. You will see only current clients as active clients, yet you will have a robust conflict of interest checking system because your database will contain current and prior client contacts.

Conclusion

The prevailing common law doctrine holds that if one lawyer in a law firm is disqualified from representing a client because of the former client conflict of interest principle, every lawyer in that firm is also disqualified. Describing the varying practices of firms' conflict-checking procedures, and confirming that most firms rely on some computerized systems. Lawyers and Paralegals should use a conflict checking system to screen for conflicts. Developing “bulletproof” conflicts checking systems is a necessary function of good law firm management. Hopefully this article has given everyone some ideas on how to design or improve current conflict checking system. While this may seem to be trivial, one cannot overstate the possible negative consequences of learning that one has a direct conflict at a critical stage in the representation of the client.

Top 10 Legal Billing Pitfalls - Mistakes You Can Avoid

Top 10 Legal Billing Pitfalls - Mistakes You Can Avoid

Pitfall # 9 – Billing Systems Unable to Handle Varied Fee Arrangements

Most law firms handle a variety cases and use an assortment client billing arrangements, such as hourly, retainer based hourly, fixed and contingency. Even if you predominantly practice one type of law and bill hourly, you are likely to have cases where you want a client to advance funds (retainer) or prefer a fixed fee or a contingency basis arrangement.

Your legal billing software must be able to handle all types of billing arrangements and the intricacies that arise. For example, when it comes to client retainers, states generally have strict accounting rules that require depositing unbilled/unearned client funds in trust accounts. Thus, it is important that your billing system can identify client funds vs. firm operating funds and process them correctly to meet trust accounting requirements.

You do not want to run into a situation where your legal billing system cannot process a fee arrangement properly. For a complete and uniform legal billing solution and to avoid Pitfall # 9, choose a system that can handle every type of billing arrangement your firm uses or may use in the future. Stay tuned for Pitfall # 8.

Register for Easy Soft’s interactive webinar, How to Avoid Legal Billing Pitfalls. Learn how to evaluate systems that can streamline your back office operation for legal billing, trust account management and collections, and in turn, tighten state regulation compliance and improve your firm’s financial picture.

 

Top 10 Legal Billing Pitfalls - Mistakes You Can Avoid

Top 10 Legal Billing Pitfalls - Mistakes You Can Avoid

Pitfall #10 - Not Using Matter-Based Recordkeeping

The ABCs of billing and accounting practices at law firms start with keeping all transactions details at a matter level rather than at the client level. Many service businesses perform multiple types of jobs for a customer and generate one invoice that covers everything. The same billing process does not work for law offices.

Law firms are usually required to keep each task (called "matter") completely separate from other matters for the same client or other clients. For example, if client John Smith gives his attorney two assignments, one for a "divorce" and another for "will preparation," the law firm must track time and expenses separately for Mr. Smith’s two matters. The same concept extends to generating invoices, handling client advances, etc. For law firms, matter-based recordkeeping is critical because it allows them to produce proper records easily in case of client inquires, billing disputes or state audits.

Whether your firm uses a manual billing system or legal billing software, make sure your recordkeeping is matter-based and you can avoid Pitfall #10. Stay tuned for Pitfall #9.

Register for Easy Soft’s interactive webinar, How to Avoid Legal Billing Pitfalls. Learn how to evaluate systems that can streamline your back office operation for legal billing, trust account management and collections, and in turn tighten state regulation compliance and improve your firm’s financial picture.

Reduce Professional Liability Risk

Reduce Professional Liability Risk

For law firms, large and small, the first step in reducing professional liability risk involves completing a conflict of interest checklist BEFORE you enter into a new client retention agreement.

Checking for conflicts of interest is standard case management practice, but prior to the computer age, law firms used a wide assortment of complicated manual conflict checking systems.

Today, computer software makes it easy to build an integrated database that quickly identifies conflicts of interest. All you have to do is keep the database up to date with clients, former clients, relationships, witnesses, interested parties and transactions.

If your firm is still using a manual checklist to screen for conflict of interest, it’s time to have a look at what software can do for you. Easy to maintain and easy to use, a reliable conflict checker also reduces potential negligence and helps lower your professional liability insurance rates. The latest versions of Easy TimeBill and Easy Trust software programs now have a built in conflict checker. Find out more today.>>