MAKING THE SWITCH TO HOURLY BILLING

By Lauren Eagan

 

 image from arkadan.co.uk

image from arkadan.co.uk

Hourly fees are somewhat of a novelty in the immigration law field since most attorneys charge a flat fee. I charged a flat fee for years and thought it was the only way to go. But a few months ago, I started to have a nagging feeling that I needed to switch to hourly billing. With processing times taking years, the amount of time I spend on a case has become too unpredictable for a flat fee. I tried to ignore the thought of switching, making excuses for weeks until I couldn’t ignore it any longer. Finally, I made the decision to switch to hourly billing on a temporary basis, just to try it out. Now that I’ve made the switch, I have no intention to switch back.

 

What Are the Benefits of Hourly Fees?

The main benefit of charging an hourly fee is that you get paid for the work you do, which is fair to you and the client. If a case moves along quickly and the client is efficient in getting documents to you, you will do less work and the client will pay less money. It’s a win-win. And if a case drags out for years or the client refuses to cooperate, you will be compensated for the extra time you put into the case.

 

Additionally, charging on an hourly basis makes your revenue more consistent and predictable. For example, if you charge $250 per hour and your legal assistant charges $150 per hour, and you each work 20 billable hours per week, you know that you will earn $8,000 per week. This knowledge makes it much easier to prepare for expenses and regulate the flow of work.

 

 

What Are the Difficulties of Switching to Hourly Fees?

The most difficult thing for many attorneys to do is track their hours. Once you switch to hourly billing, you will need to track every minute you and your staff work on a case. You will also need to review your and your staff’s time entries to decide what work should be billed and what work shouldn’t. For example, I typically don’t bill for opening and setting up the initial case file, and I do not plan to bill for work done as a result of a mistake by me or my staff.

 

You will probably also face some financial difficulties when you first make the switch. When I worked on a flat-fee basis, I charged a retainer to begin work on the case. Per my contract, that retainer was non-refundable and property of the law firm upon receipt, which meant I could immediately move it to my operating account. Now that I have switched to hourly fees, I have to wait to move the retainer to my operating account until after I have done the work. If you have a similar fee structure, then you can expect the first few months of hourly billing to feel financially tight, as you build up you hourly client-base to the point that you have consistent hourly work.

 

 

 

How to Set Up Fee Payments

There are a few different ways to set up fee payments for clients. Some attorneys require a large retainer up front, work off that retainer, and then require another large retainer after the funds fall below a certain amount. In this scenario, the attorney repeats the process of requesting large retainers until the case is complete.

 

Other attorneys require a retainer upfront and then have their clients make monthly payments based on an estimated fee amount. In this scenario, the attorney does not request more than the agreed-upon monthly payment, even if she has completed more work than necessary to cover the funds.

 

Some attorneys do not require an upfront payment at all, but simply bill the client monthly or bi-monthly for the work they have done. This seems to work well for high-income clients, but it is more difficult for low-income clients. I worked for a firm years ago that used this method, and often the low-income clients never paid.

 

The method I use in my practice is to require a large retainer upfront plus indefinite monthly payments. I do not give my clients an estimate, but instead I have them pay the same amount monthly for the duration of the case, until I decide they have enough saved in their trust account that there is no way I will use up all the funds, or until their case has been paid off if they still owe money at the conclusion of the case. I prefer this method, because it makes it easy for the client to budget for their monthly payment.

 

 

Tips for Making the Switch

I have learned a lot in the last few months of hourly billing. I have made mistakes and improvements, and I now have some good tips for making the switch as easy as possible.

 

  • Get a case management software to track your time. I went with MyCase and love it.
  • Require clients to make a deposit before starting the case. This way, you will have funds to draw from as you begin work.
  • Explain to clients how trust accounting works. Many clients like the idea once they understand it.
  • Do not give your clients an estimated total cost. I learned watching a previous boss that clients get really angry if you go over the estimate. I don’t want to set expectations I might not meet, and I simply explain that to clients.
  • Tell clients if there is money left over in their account at the end of the case, you will return it to them. They love that.
  • Send clients a monthly invoice that includes all your time entries so they can see where their money is going.
  • As you are working, try to pace yourself so there is always some money left in the client’s trust account. This isn’t always possible, but it’s a good goal.

 

Hourly billing has changed my practice for the better. I feel like I am being fairly compensated when I work on hourly cases, which leaves me little room for complaints when working on a case. Should you decide to make the switch to hourly, follow my tips to make the process as easy as possible for you, your staff, and your clients. Good luck!