Getting your firm on a firm footing

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With the economy in decline, it’s a good time to put your firm’s financial house in order.
That’s the word from Linda C. Shely, a Scottsdale, Ariz. solo attorney who provides ethics and risk management advice to lawyers and law firms.

In a recent ALI-ABA telephone seminar and audio webcast on legal fees and billing, Shely suggested that firms have two attorneys review bank statements for the firm’s trust accounts each month to counter the risk of internal theft.

“Internal theft from law firm trust accounts is becoming a huge issue,” she said. “Do not allow temptation and opportunity to collide.”

“People who are in dire straits will sometimes think, ‘I’ll just borrow a little from the trust account and then repay it,’” she commented.

Another issue of big concern to attorneys is getting paid by clients who are having financial problems. Here are Shely’s suggestions:

Have a written fee agreement even if your jurisdiction doesn’t require it. The agreement should specify the method by which fees will be charged, and identify the client and the scope of representation. Also, clarify whether you will charge for costs, such as postage and photocopying, and services such as reading e-mail, listening to voicemails and correspondence.

Send a monthly bill, even when there’s nothing to bill. Include “no charge” entries — clients love to see that they’re getting something for free.

Be careful about block billing. Some law firms routinely list all the client activities for one day, and put in a total amount of time for the entry, such as 15.4 hours. But Shely noted that the 9th Circuit has held that block billing can make it difficult to determine the reasonableness of the charges for a particular day. Welch v. Metropolitan Life, 480 F.3d 942 (2007).

A better way to bill is to spell out each activity, such as “office conference with co-counsel (30 minutes); conference with opposing counsel (1 hour),” etc.

Be proactive if a client starts falling behind on bills.

“It’s crucial to maintain your relationship with that client and say, ‘Let’s work out a payment structure,’” Shely said.

Only consider suing a client for fees when you’re certain there’s no counter-claim for malpractice. And terminate the attorney/client relationship so you are no longer counsel of record in any of their legal matters.