“Pay me!” These are the words attorneys scream in their mind, when the work is done, the client’s life goes back to normal, and suddenly they dodge their calls and contest their invoice.
Service related fields like law contend with a client perception of ease when swift, but favorable resolutions are reached. Rather than seeing the positive result as a reflection of hard work and skill of the practitioner, many clients feel that somehow they were swindled and the service isn’t as valuable as they thought when they agreed to pay.Poverty in the wake of COVID has only complicated matters, because many clients truly can’t pay. The deficit permeates all fields. Unemployment stipends, both a blessing and a curse - have dissuaded many from returning to the workforce, leaving businesses perpetually short staffed and impacting the quality of their service.
For this reason, many law firms favor minimum advance retainers to ensure payment. Walking the line between securing payment and avoiding sticker shock is challenging.
Retainer fees range at the low end for 18-B and other low-income services at $75 per hour, $200-$400 per hour in rural and suburban areas, and in city or high cost of living areas fees can reach as high as $500-$700 per hour.
Based upon these hourly fees attorney have to estimate how long the case will take to resolve, and calculate a retainer amount in advance. Unfortunately, the reality of how much a case will cost to resolve is often off-putting so attorneys tend to underestimate and then have to collect on overages - this always a mistake.
If a client isn’t willing to pay your worth upfront, they aren’t going to be willing to pay you later. Attorneys must know their value. Fear of lost business during COVID has caused panic in the industry, but undervaluing yourself, is difficult to recover from because if you can perform the service for $500 today, no one will accept you charging $2000 tomorrow.
Best practice is always to give an honest and detailed estimate. Clients also tend to feel better when they understand that their retainer is held in a safe IOLTA account, and does not become an attorney’s fee until the attorney has billed sufficient work to earn that fee.
Detailed regular invoicing, with accurate real time accounting of hours, will always assist in client comfort and acceptance of payment, unless the client is unreasonable.
No matter how desperate a firm is for work, if I client appears unstable, has recently fired another attorney you know to be competent, or generally appears aggressive - do not take the client. There is no value that can be placed on peace of mind, and unstable clients will bring nothing but chaos to the firm.
Even with cooperative clients, IOLTA accounting is vitally important. Clients want to know what their money is spent on, and cases that drag out are going to be carefully scrutinized.
Beyond that, IOLTA accounts have their own set of ethical rules governing their operations so any allegation of mishandling becomes an issue of your livelihood being on the line.
It is never a waste of time to know the rules, and to make sure that adequate safeguards are in place to ensure that no errors are made.
M&T Bank actually developed an entire freeware accounting program specifically for their attorney clients’ accounting called Nota.
The easiest place for error with IOLTA accounting is attributing a deposit or withdrawal to the wrong client, such that the clients funds are misappropriated. Apart from being upsetting to the client, such an error could have disciplinary consequences for the attorney.
Nota allows for deposits to be annotated and attributed to specific clients to avoid this sort of error. As an additional safeguard, Nota is connected directly to the bank records, so the amounts against which you are reconciling, are always accurate.
Accuracy is particularly important should a client challenge any particular billing. It is vitally important that the records of all client deposits, or withdrawals for payment, or disbursements of escrowed funds all are clear and properly documented.
Client’s may not like how much a bill is, but they cannot successfully challenge work that is well document and recorded and charged at a rate agreed upon in a written retainer agreement. Unlike other fields, the ethics of sending clients into “collections,” is questionable and even prohibited in some states.
Attorneys must not take any action adverse to their client. Thus, financial conflict over payment often forms a conflict of interest requiring an attorney to withdraw as counsel, and even then, many states have a requirement that if the sum in controversy is less than $50k the attorney must handle the matter through arbitration.
Unlike commodity-based fields where a good is only exchanged upon payment of money, somehow in service-based fields, some people are able to rationalize bases to delay or withhold payment for services they have been provided.
Overcoming this tendency requires two important steps. First, attorneys must carefully vet potential client’s and their ability to pay. This step is most easily accomplished with careful case assessment, review of the law, and honest estimation of whether the case is likely to settle or will proceed to trial. Clients should always be presented with the worst case scenario, and attorney should be careful to assess their response to that scenario.
For example, many clients come to an attorney seeking a divorce. They may present to the attorney that they expect the divorce to be uncontested. Uncontested divorces can be resolved relatively quickly, and comparatively inexpensively. However, it is foolish to assume that a divorce will remain uncontested if there are sizable assets and/or children involved. Hurt feelings, a broken heart, and the reality of no longer seeing a child every day, have a way of exacerbating conflict.
If there are any of these potential incendiary issues in a divorce, attorneys are wise to prepare and obtain a retainer assuming that a contested matter will result. This seems like a simple issue, however, the retainer for an uncontested divorce ranges from $2500 - $10k, whereas the retainer for a contested divorce ranges from $20K - $100k depending on the factors at issue.
Divorces with complex asset portfolio’s requiring forensic accounting to uncover hidden assets, will drive time, work, and cost up. Client’s hearing these large numbers often have “sticker shock,” and want to walk – let them.
One of the hardest lessons to learn in the practice of law is to let anyone walk who doesn’t see your value. If a client balks at you being paid for your time, even after carefully explaining the amount of work and time that goes into a contested divorce, and why their case is likely to proceed to a contested divorce, then they do not respect or value you, or your opinion, and if they don’t on day one, it is unlikely that they will when you come bill collecting later.
There is absolutely nothing to be gained from low-balling a retainer to get the client in the door, only to have them unhappy later when you tell them they owe $10K or $20. Be honest up front, and deal only with people ready willing and able to pay.
The alternative is having to sue your client later, and defend against their retaliatory grievance against you – none of which is anything anyone should want to deal with.
By dealing with money up front, it also helps to weed out the bottom feeders. The predatory people who use lawyers as a sword to gain power in their endeavors, but then who ghost your firm when they receive the bill.
Unpaid bills place the entire attorney client relationship in jeopardy, and cause precarious decision making. Routinely attorneys will seek from their opposing counsel, “Mr. Green adjournments,” which is ostensibly saying to opposing counsel, “I know we have a resolution of this matter ready, but my client hasn’t paid me, so please keep this case looming over their head until I get paid.”
The ethics of this common practice is questionable, but it is also understandable. No one wants to work for free. That said, attorneys can avoid being in such a situation by obtaining a full and fair retainer upfront.
Understandably, however, sometimes it isn’t foreseeable that an adverse ruling from a judge or an unexpected event will draw a case out longer than anticipated. Such occurrences are another common way in which retainers are exhausted, and clients are left owing an invoice.
In such circumstances, it is vitally important that a meeting is called with the client right away at first overage, and that the attorney conduct a new assessment as to how large an additional retainer is needed. Unused portions of supplemental retainers are refundable, a factor which usually softens the blow of additional funds being requested.
It is imperative that a supplemental retainer is obtained before additional work proceeds, and bills are accrued. Clients agree to hourly fees, but often fail to appreciate how quickly billable hours add up. Waiting and transitioning to an invoice-by-invoice system with any client is the fast track to contested fee litigation.
Beyond that, in many states, the law enjoins an attorney from deducting their fee from certain acquired funds, placing attorneys in the unenviable position of handing thousands of recovered dollars to a client, who then willfully will refuse to pay their bill.
The ethics of legal practice is always paramount, and attorneys must always conduct themselves in accordance with all ethical rules. Unfortunately, the rules favor the interests of the clients not the attorneys in this regard.
A difficult takeaway for attorneys is that if you haven’t been paid, short of repeatedly asking or withdrawing as counsel and suing your client there isn’t a lot of middle ground.
Trite as, “the best defense is a good offense,” may sound, it really is the case when it comes down to client fees: 1) Get all the money up front, 2) Retain for the true amount needed to cover your work, 3) If they can’t pay now, they won’t pay later, and 4) Never be scared to let a potential client walk if they don’t see your value.
With “Pay me,” as the beginning of your client relationship, the successful outcome you achieve, rather than bill collection can be the end of your relationship. It is always better to leave clients happy in the end, and the easiest way to do that is to have the tough money conversations in the beginning.
With this honest and open approach attorneys and clients can both feel confident moving forward that they are on the same page and are clear on what funds are necessary to resolve the case.
Most importantly, this leaves attorneys free to practice law without worry about their bills being paid or chasing clients like a bill collector. Clients also have the peace of mind of knowing exactly what their case will cost, any possible contingencies that might add expense, and they are prepared for it on day one. Net result: Happy-Client, Paid-Attorney, total win with one candid conversation about the cost of litigation upfront. Have the talk, and get paid.