Tips for Including Phone Expenses in Your Client's Bill
We have started to talk about "tips" in the fourth area of the five areas that make up every business in the world. That fourth area is "billing." As you know, the other four areas are: "Clients" or "customers"; "Administration"; "Getting the work done"; and "Collecting."
For the last couple of weeks, we have been talking about the concept of trying to bill all "expenses" that you possibly can to the clients in order to hold down your hourly rates and pass on expenses to clients who are using the law firm resources that can be billed as "expenses."
This week we are going to talk about another expense that can be passed onto the client, and that is "long distance telephone charges." It may seem obvious to most people that you should pass on long distance telephone expenses to your client and include them as an expense on your bill, but I think it would blow your mind how many people are out there do not keep track of long distance phone calls.
My impression is that the larger the law firm, the more the firm pays attention to capturing expense costs and passing them onto the clients. But, you do not need to be a "Goliath" in order to capture these costs, pass them on to your client, and thus hold your overhead down.
There are sophisticated systems for capturing long distance phone call costs, but you do not need an ultra sophisticated system if your office is relatively small. We have tried to not invest too much in technology to try to capture our long distance calls but rather have just resorted to each lawyer having a long distance log in their office and keeping track of phone calls that could be billed to clients by the client, the matter, and the telephone number called. These logs are collected when the phone bill comes in, and we simply have one of our staff members go through the logs, match up the long distance calls and immediately input it into our computer to be an expense billing. This system seems to have worked very well for us, and quite frankly we have never had any difficulty either with the system or with the clients with regard to passing this cost on to them.
Remember that our engagement letter has a paragraph in it that indicates we will be billing our client for expenses and included in that list is long distance phone calls.
More sophisticated systems of keeping track of long distance charges are available, but you need to determine whether or not the additional cost and maintenance of the system is worthwhile. I previously was with a firm where you could not make a long distance telephone call unless you put in an attorney code and a client number code. This system seemed to work quite well, and it appeared as though the call was automatically directed through the phone systems and was added to the bill.
I must admit that I have had a bias over the years with regard to client numbers. We number all of our matters in our office, but the truth of the matter is, we do not spend much time keeping track of client numbers other than as a way of differentiating one client from another in the bookkeeping office. I always found it to be monumentally slow to have to look up a client's number before you could bill them for copies, postage, long distance charges or any other matter that would normally be passed onto the client. Experience tells me that forcing lawyers to have to look up client numbers is just one more step in the annoyance factor that hits most attorneys with regard to the difficulty of having to "administratively" practice law. Most of the time, a client's name and a client's matter is on the tip of the tongue of the lawyer doing the work, so I always found the client's name and the particular matter for that particular client were always the easiest way to account for expenses to be billed to that client on that matter.
One of these days we are going to have a computerized system that has voice recognition and you will be able to speak the client's name and the name of the matter, and that system will automatically figure out what the proper client number is and bill that client appropriately for both time and expenses. You are probably sitting there telling me that there is already such a machine that exists. I know what you are thinking and that is, if you punch in the proper alphabetical characters or the proper numbers, that machine will do the job, but that is not the kind of machine I am talking about. I am talking about where you can literally say to a machine "bill this to ______ on the ______ matter" and it will listen to what you have said and act accordingly and get it billed accurately. Unfortunately, that machine does not exist, but boy I wish it did!
The actual bills for the long distance phone charges become backup data to verify that you have appropriately charged the right client on the right matter for the long distance expenses. Your bills then become compilations of that information that is contained on the actual phone bills. If you ever need to prove that your expenses were accurate, you could simply go back and produce copies of the phone bills to backup the entries that were on your clients' bills. Interestingly enough, in the whole time I have been in practice, now thirty-five years, not a single client has ever asked me to give them any backup data with regard to the billings they have had on their client bills for long distance phone call expenses. Also, it is important to understand that the actual percentage of clients in your office that will have long distance phone charges is not usually that large of a percentage unless you have a more regional or national practice. Remember, the systems in your office need to be set up for the "ordinary" and not the "extraordinary." Don't set up a system that is any more sophisticated than it needs to be in order to accomplish the task that you have set the system up for in the first place. In our office, the attorney long distance phone log, which is a paper system, seems to work very well. We simply told our phone company to install a code that needs to be put in the phone system in order to make a long distance phone call, and each of the people in the office has been given such a code. Since the code is only three digits, it is easy for the person to remember what their own code is and using the code alleviates the task of having to look up a client's number and that client's matter number every single time you want to make a long distance phone call.
Next week we are going to continue to talk about the billing of expenses. Next week's tip is to charge for outgoing and incoming faxes. I think when you see what I have to say about that subject, you will see that again, it is a very easy system that allows you to pass these expenses on to your clients and to be able to hold your hourly rate in a more competitive position.
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.