Don't Let Your Office Supplies Become Overhead
We are still talking about “tips” in the area of billing. You will remember there are five areas that make up every business in the world, they are as follows: “Clients” or “customers”; Administration”; Getting the Work Done”; “Billing”; and “Collecting.”
Last week we talked about “billing excess postage,” this week we are going to talk about “billing extraordinary office supplies.” The reason why I did not dump all of these “billing” of expenses in to one article is because the article would have simply been too long. Once you see the full concept of “billing” expenses to clients who incur the expense, it is pretty easy to carry these throughout each and every one of the expenses that your law firm normally incurs. I still think it is valuable that we talk about each one of these expenses separately so that we do not miss any part of why it is important to pass on as many expenses as possible to the clients who are actually incurring the expense.
I must admit, I am in love with clipboards. I have found that having expense billing sheets pu on clipboards where they can easily be written upon to bill a particular client on a particular matter for an expense that the client is uniquely incurring seems to be an incredibly good way to keep track of which client is using what expense on what matter and ultimately getting that on to the client’s bill so the client can pay the same.
At various times we have had a supply drawer in a file cabinet, a whole supply cabinet and even at one time, a whole supply closet. In each and every instances, we had two clipboards close by to not only keep track of what we were using and who to bill it to, but also a second clipboard to be sure that we wrote down what we needed that we were running out of with regard to supplies.
Why should the law firm eat the cost of expenses over and above those office supplies that would go in to a normal client file? If all you have is a simple manila folder with three to four backboards in it, that should be a normal overhead expense that is not passed on to a client. But if you incur multiple manila folders, multiple red ropers or multiple bankers boxes, why shouldn’t those extra costs be passed on to the client?
I have seen some firms that actually charge their client for opening a file. This charge would be an administrative cost that would cover the office supplies for opening the file and the office personnel time for being sure that the file is properly opened and that all of the administrative tasks are accomplished with regard to opening the file. I have seen these charges anywhere from $15.00 per file to $50.00 per file. I think this is a fairly good idea, but our office has not ever really utilized such a charge. We have always felt that it was important to eat whatever office supplies we put in to a normal file and then only charge the client for extraordinary office supplies over and above what would be in the typical client’s file. Yes, we charge for every extra manila folder, red roper and banker’s box. We also charge for three-ring binders and index sets. Under certain circumstances, we could also charge for binding costs on certain settlement brochures.
The most important thing to remember here is that you have to be sure to put each and every one of these potential charges in your engagement letter and then be sure to have your client sign the engagement letter. Then, once the charges are incurred, put on the appropriate backboard or input electronically, and show up on the client’s bill, the client will understand that it is part of the charges that they are being billed for and that need to be paid. If you can get your clients in a proper frame of mind to not only understand that they are to pay for fees but expenses as well, then you will have a very successful billing program that should work smoothly without very many issues being raised by the clients.
In almost thirty-five years of private practice, I have not had a single client ever question the charges for “extraordinary office supplies.” “Extraordinary office supplies” have always been part of our engagement letter and they have always been billed to the client and always show up as an expense on the client’s bill.
The most important thing with regard to billing expenses is to be sure that the expense is written down at the time it is incurred, it is transferred to the client’s bill, and that the client is billed for the same and expected to pay for the same. Once you establish such a philosophy in your office at billing for expenses, everybody simply gets in the habit of being sure that they write down the expense at the time it is incurred and that it ultimately ends up on the client’s bill.
Next week we are going to talk about billing “litigation and case expenses.” I am sure that all of you have a system for doing this and I think you will find our system of handling the same to be pretty simple, straightforward and very organized. I look forward to sharing with you some of my thoughts in this area.
Talk to you next week.
Jim Wirken is a civil trial attorney and the Chairman of the Board of The Wirken Law Group in Kansas City.