This week we are still talking about tips in the area of billing. Billing is one of the five areas that make up every business in the world.

Previously, we talked about engagement letters and each part of our engagement letter. One of the areas we discussed was finance charges. The paragraph that deals with finance charges in our engagement letter is as follows:

Monthly Bills

"Our monthly bills are itemized and must be paid within ten (10) days of the date of the bill unless other payment arrangements are agreed to in writing. Interest on past due accounts will accrue at the rate of 15% per annum on all accounts that are past due thirty (30) days. All bills for services rendered and expenses advanced are itemized and will reflect receipt of all payments received."

The specific wording is "interest on past due accounts will accrue at the rate of 15% per annum on all accounts that are past due thirty (30) days."

I am sure this looks like a fairly straight forward concept, but as always, the "devil is in the details."

Once you put in a provision for finance charges in your accounting system, you need to have those "finance charges" show up on a monthly basis automatically. One of the concepts I have always talked about with regard to "finance charges" is you can write them off just as easily as the computer puts them in. It is impossible to add "finance charges" after the fact if you do not have it in your engagement letter, unless you are taking the position that your bill is a liquidated amount and therefore, you are entitled to statutory interest. It is a lot simpler to be sure you have something mentioned in your engagement letter that your client has signed and agreed to as part of their employment contract with you as their lawyer.

Interestingly enough, I hardly ever have a conversation with clients about these finance charges. Most of the clients seem to pay them as part of their regular course of payments.

Last year our firm showed $5,936.35 brought in as finance charges. Not too shabby for a dinky little law firm!

I remember many years ago, we never put a finance charge on our bills because, if I remember correctly, it was not technically permissible. I remember the debate we had in our law firm when the bar association said we could actually charge interest on unpaid accounts. There was a big discussion as to whether or not this should ever actually go on our bills and whether or not our clients would pay it. Well, we finally put it on our bills, and our clients have now been paying it for a long time.

I have sometimes used the finance charge as a helpful fulcrum in the collection process. I am always looking for an opportunity to treat my clients as special people. I am always trying to make my clients feel like they are getting some kind of a "good deal." I quite often will discount my hourly rates from my number one rate in order to make my clients feel like they are getting treated special. I have found that being willing to write off part or all of your finance charge is oftentimes a very quick way to get an otherwise, uncollectible bill paid. If someone agrees to pay me all, or substantially all of my outstanding bill for fees or expenses, I will gladly write off the finance charge in order to get the bill paid. This is another one of those win-win situations where the clients win and the firm wins. It is really quite simple to write off the finance charge and simply get the client to pay everything but the finance charge.

I must admit that we look at finance charges in our office as "gravy." One of the comments I made to many clients over the years is: "Our firm is always going to be an advocate for our clients as opposed to an advocate for our firm." Obviously, you have to be careful with regard to this comment because if you are not somewhat of an advocate for yourself, even if you are putting your client first, you can very quickly be out of business. What this comment really means is, when in doubt, I am always going to resolve every dispute and every request in favor of the client. I have been living by this philosophy for 35 years and it has served me well.

If a client has a question about a bill I resolve that question in favor of the client. If a client has a question about finance charges, I resolve that question in favor of the client. If a client wants to pay their bill, I will gladly give the client a reasonable discount on the bill if it is paid in full.

Oftentimes, I will discount my hourly rate in order to accommodate a client. I previously had a partner who said: "if you take care of the pennies, the dollars take care of themselves." Candidly, that has never been my philosophy! My philosophy is closer to: "don't be penny-wise and pound foolish." I have discussed this in earlier articles but it has always seemed silly to me to spend an inordinate amount of time anguishing over the money you did not collect verses celebrating about the money you did collect. I have had partners who were so concerned about losing a dollar they lost hundreds and thousands of dollars in business and good will.

Having an agreement with your client with regard to "finance charges" in this day in age is absolutely indispensable. Remember I said last week, we are law firms, not banks!

Next week I am going to talk about the use of "credit card payments." This is another one of those concepts that for a long time was not acceptable but has now become routine. I think you will see some of the ways we handle "credit card payments" to be very helpful to you in your practice.

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.