'Fail-Safe' Tip For Separate Billing Folders

We are continuing to talk about the “fail-safe” nature management systems for handling the administration of the day-to-day work in your law firm. We started talking about “administration,” the second area that makes up every business in the world some weeks ago. You will remember that those five areas of business are:

1. Clients or customers;
2. Administration;
3. Getting the work done;
4. Billing; and
5. Getting paid.

In talking about these administrative systems, we have covered all the items that need to be put in place when opening up any new legal matter in your law firm. After talking about the systems themselves, it became clear that we have not spent enough time talking about the “fail-safe” aspects of each of these systems. So I have decided to spend some time talking about the “fail-safe” nature of each of these systems to be sure that you understand how many of these systems have a marketing, management, and economic aspect to them.

We are going to continue talking about the “fail-safe” nature of each of these systems over the following weeks. So far we have talked about six of these “fail-safe” systems:

1. Phone message system;
2. Prospective New Matter Reports;
3. Non-engagement letters;
4. New Matter Reports;
5. Two people signing off on each New Matter Report; and
6. A new file for each client matter.

This week I would like to talk about the “fail-safe tip” that makes it absolutely necessary to have a separate billing folder for each new matter that is being opened in your office.

I am sure you must be thinking, surely I can't spend a whole column talking about why you should open a billing folder on each separate new matter. Sure I can!

If you look at the organizational philosophy behind all of these tips, and in particular the “fail-safe” nature of these tips, I hope that you will see the “method in my madness.” I think there are a number of organizational concepts that need to be discussed in order to continue to drive home the philosophy behind these systems and the “tips” that I am giving you on a weekly basis.

The three organizational philosophies that I believe are most important with regard to these “tips,” and in particular their “fail-safe” nature, are as follows:

1. Set up your systems for the ordinary, not the extraordinary;
2. Set up your systems so that you cannot go to the next step without completing the prior step; and
3. Set up your systems for easy input and easy output.

Let's talk about each one of these organizational philosophies one at a time. First, all of your systems should be set up so they deal with the ordinary type of activity that goes on in your office. Don't make the system so complicated that it takes into account every extraordinary thing that might happen. I believe the most important concept in organization is the “KISS method” -”Keep It Simple Stupid.” Second, by instituting “organizational rules” in your office, you can be sure people become indoctrinated that they cannot move onto the second step of an administration system until the first step is completed. One of the best examples we have of this is the necessity of having two people sign off on every New Matter Report. The person in charge of assigning a client number to the file, and allowing for the input of time that will eventually be billed, cannot physically assign a number until such time as a New Matter Report is properly signed off on by two people. The staff is trained this way, the lawyers are trained this way, and it makes for a very efficient system to be sure that files are opened in a timely fashion. Lastly, if you set up your systems so that everything is kept in a particular way with regard to filing and separate file folders, whether they are electronic or paper, you will always be able to find what you need when you need it. There is nothing more frustrating than a client asking you a question, and having to fumble through a series of files and electronic screens in order to get your client a simple answer to their simple question. Remember the overriding concept here is as James Michener said - “when the space is ordered you are free to live creatively.”

This week's “fail-safe tip” is to have a separate billing folder for every new matter in your office. We have alluded to this concept before, but I want to be sure you understand why this is so important.

I have previously indicated that clients are always looking at a “cost benefit analysis” of their legal matter. You need to remember every decision that gets made every day has a “risk benefit analysis” or a “cost benefit analysis” connected to it. Often times both of these apply. Whether the client openly discusses this with you or not, trust me, this thought is not too far from every client's mind.

When you open up a separate billing folder for each matter, you automatically set up a set of circumstances where only those items that need to be billed to a particular matter are shown on the client's bill. Only those expenses that are particular to that client's matter end up on that bill. This system may end up with you having multiple bills sent to your client, but it immediately allows your client to make the analysis of “cost-benefit,” whether they do it consciously or unconsciously

Additionally, very few matters in a law office can be completed within a thirty day billing cycle. Accordingly, this separate system allows you to have a running total of the amount of fees and expenses that are expended on each matter.

If you have a computer system or a manual system that allows you to have individual client ledgers, you can have individual client ledgers for each individual client matter.

Sometimes you will have to justify your fees to someone other than your client. This can happen in family law, probate, and personal injury litigation. Having your records organized in such a fashion makes getting your attorney's fees approved and paid much easier because the information can be quickly pulled together and used as exhibits, shared with other counsel and the courts.

Clients and lawyers are increasingly more sophisticated in making provisions for attorney's fees to be provided for upon breach of certain documents and therefore being able to establish quickly the amount of attorney's fees that you have expended in your representation is very beneficial.

The long and the short of it is, there is no good reason not to have a separate billing folder for each billing matter in your office. I have found having individual billing files for each matter is not only efficient and convenient, it also provides for better cash flow. How can you beat that?
Next week we are going to go back and revisit the “thank you for referral” letter as a condition precedent for opening any file. I want to revisit this concept from the “fail-safe” point of view, to again drive home the nature of marketing and administrative concepts.

Believe me, when you begin to implement these systems, your office operates with greater ease, greater efficiency, and ultimately with more professionalism.

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.