Billing psychology and the better meeting of minds

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One of the things that used to annoy a lot of clients was sloppy billing practice from their advisers – it still does.

To your average professional, billing is often the humdrum (and, in some branches, embarrassing) bit that follows the interesting bit – doing the work.  To the client, it is the ever-important bit, by which a significant part of their job performance is evaluated (i.e. the efficient management of budgets).

Such perceptual disjoin is at the heart of much of the problem.  Allowed to build up over time, annoyance can turn to something much more damaging to the relationship, so here are three quick, practical things for you or your professionals to keep the client bill-happy.

Don’t delegate!  We spend quite a lot of time encouraging senior perofessionals to delegate more of their work appropriately – for good leverage’s sake.  However, one of the rule-breaking exceptions can be when preparing and issuing bills.  Why?

Because getting a bill from someone you don’t know (and who therefore looks like they might not know your transaction) can be interpreted as rude and uncaring by the recipient.  Staying with a matter from start to finish and devoting a sensible amount of time to the bill yourself will mean fewer problems and a smoother client relationship.

Be a flexible friend  Do you always present bills in the firm’s ‘house style’?  If you do, you may be creating a source of additional effort and trouble for some clients as they have to unpick the firm’s data and re-present it internally in ways that their organisations can better understand.

The smart relationship managers recognise this issue and ask clients up-front how they would like their bills to be presented.  Even if it requires a bit more effort on our part, it’s well worth it for the goodwill that is generated….. as is ensuring that other parts of the firm do likewise if they also work for the client.

Avoid the ‘sausage factory’ look  There is an interesting aspect of billing psychology that is well worth remembering.  Bills that look like they have come off a production line can tend to invite more scrutiny – and thus the greater risk of write-offs or delayed payment – because some clients say that they mistrust such systematic treatment.

To overcome this, find simple ways to personalise the invoice – e.g. by adding manuscript amendments or a signed personal note – so that they know you are still involved and in control.

Show Them The Money!

In the brave new and enduring post-crisis world, Jerry Maguire’s famously-hollered maxim must become a workaday reality for professional practices.

Just as in other businesses and sectors, professional service firms now have to adapt or become increasingly uncompetitive when it comes to addressing the financial realities of their client relationships. Why? Because that is what more and more clients are saying….

“A recent survey of more than 120 general counsel and in-house lawyers around the world found that 44% expect their company’s spend on external advisers to fall over the next two years…more than a third (38%) said they had already reduced their spend over the past two years”. Legal Week, April 2013

So what, in practice, must professionals in all sectors of the professions do when faced with clients who want reduced costs and alternative payment methods?

For many, the traditional professional stance on money conversations was that they were somehow rather impolite and to be avoided if at all possible. This is an outmoded nicety. Professionals must move as quickly as possible to the point where discussing money, the bill, fees incurred, performance vs. budget etc. is a frequent agenda item or topic for meetings, phone calls, and all other regular forms of communication.

It is time for fee earners to pucker up and embrace their profession as business people. And if they aren’t already, it’s also time to have these data compiled, reported and at each professional’s fingertips.

The unfettered hourly rate (“a licence to work as many unproductive hours as possible” as a client once lovingly put it) is dying. Explicitly, clients want their advisers to work more and be seen to work more in their interests by helping them to work smarter.

Traditional firms – but by no means all of them still – are beginning to come to terms with the concepts of re-engineering service delivery processes and continuous improvement: practices that have been current in business for decades. The new wave of firms in many branches of the professions are already there and have such a philosophy built into their DNA and best practice hard-wired into the way they work.

The practical, front-line issues here centre quite a lot on better team working and leadership. Fee earners have to be guided, empowered, encouraged, and rewarded for seeing their client relationships in this new light; to be the source of ideas that improve the client’s (and thus the firm’s) lot. It’s a whole different way of thinking and working for people conditioned to operate rather differently.

But it doesn’t need grand re-orientation projects to get going; just switched-on partners, directors and other client management personnel. Do you have them? If not, how quickly can you get them?

Finally, the advice above exemplifies a growing need for firms when managing their important clients – the need to get better and improve continuously the way they do this as well. Some firms (or teams within firms) are responding well to this issue. Others have barely scratched the surface. All firms now require their key client relationships to be rigorously and regularly reviewed and challenged. Are they doing the right things? Are they missing out on opportunities? How satisfied are their clients…really rather than assumptively?

Open book accounting for lawyers?

The hourly rate is fading slowly…so what next for law firms when it comes to their financial relationship with clients? The current “interesting times” for the profession may soon approach fascinating levels if some trends continue. As client buying power increases so has the need for newer pricing options: fixed, capped, blended, bonus, success-based etc.. But actually, all this is the “now”. So where is next?

Whisper it quietly, but a new phase may have already started. Projects where the client now asks for the law firm’s profitability target for a piece of work or by type of transaction. This demand for increased openness is a product of the increased commoditisation of legal services: a phenomenon that many non-professional sectors have lived with for some time. Indeed, its ultimate form is “open book accounting” where suppliers share all of their financial plans/assumptions with the client and agree a level of profitability for any work to be done.

Sacrilege this may seem to partners in private practice, but firms should expect more of this. The smart ones will prepare for it by speeding up development of their project planning/management systems (to create capability and increase efficiency); honing negotiation skills (an area of weakness for people who traditionally viewed money discussions as rather impolite); and benchmarking for the key lessons learnt from other sectors further along this particular experience curve.

In the short-term, some or more will refuse to play ball…but at their long-term peril?