Billing Procedures: Good Practices for Healthy Cash Flow with Randa Prendergast

I’m Melissa Shanahan, and this is The Law Firm Owner Podcast Episode #233.

Welcome to The Law Firm Owner Podcast, powered by Velocity Work, for owners who want to grow a firm that gives them the life they want. Get crystal clear on where you're going, take planning seriously, and honor your plan like a pro. This is the work that creates Velocity.


Melissa Shanahan: Welcome, everyone, to this week's episode of The Law Firm Owner Podcast. I am lucky to have Randa Prendergast on the podcast today. Hi, Randa.

Randa Prendergast: Hi, how are you, Melissa?

Melissa: I am excellent.

Randa: Thank you for having me.

Melissa: Oh, my gosh, thank you for being here. Thanks for taking time. I am really looking forward to talking through the few things we're going to talk through, because I think it is nuts and bolts stuff that people need to hear, law firm owners need to hear, that is probably going to be very helpful for them and make a big difference for them.

So, do you want to start with who you are, where you are, what you do, and we'll go from there?

Randa: Sure. I am the Attorney Whisperer at Mrs. June Legal. We provide expert services in law firm and case processes, including implementation and training. And we provide paralegal support and billing clerk services on a 1099 basis.

Melissa: Awesome. We were chatting before we started recording, there are two main things that we would love to dig into. So, we're going to split this up into episode one and episode two, because it'll keep it much cleaner.

The first thing that I'm excited to have you talk about is billing. Why is this an important topic for you? And, how do you address it for people?

Randa: Sure. So, to preface this conversation, most of our clients are solo and small firms. Billing and cashflow is essential for these law firms to survive. And a lot of times, especially if they are true solos, just a single attorney, billing goes by the wayside.

And so, we need to help these law firm owners recognize that billing is directly related to their cash flow and their law firm growth. So we talk a lot about, do you have A/R in your law firm? What does that look like? What are your current billing procedures?

Melissa: Yeah, okay. I know, for sure, most listeners of this podcast fall into the size of firm that you typically work with. It's funny, we just had a guest on, Brita Long, talk about flat fees. And now, it's funny, I said at the beginning of that we're fee agnostic, and here we are. 


I mean, basically, with billing, sure, flat fees can be considered with the things you have to share today. But it seems like one of the strengths that you offer people who bill hourly, is to get organized and make sure there's not a lot of outstandings. So, what percentage of the firms that you work with on billing are hourly versus another fee structure?

Randa: I would say 90% of our firms that we work with, because they're more litigation focused and that goes pretty much hand in hand with having a very specific case workflow in billing. We like to do both together.

Melissa: Okay, great. One of the things that comes up a lot in strategic planning is that people make a Rock. A key quarterly priority that they're going to get it together this quarter, especially early on when they come into Velocity Work, is around billing.

I even had a private client, when we first started working together, that couldn't give me the… well, they could give me their numbers, but their income was so low. I was like, “What is happening here?” They would say, “Well, we haven't sent out invoices yet.”

And so, more than a month has gone by, they haven't sent them out, I’m like, “Okay, whoa, this has to be fixed before we talk again, period.” Because if you don't have cash flow, everything becomes more stressful.

So, where should we start on the topic of billing? Because this is something I think everybody deals with. I think people tend to have a little shame around it, because they think they should be more on top of it than what they are. But they're running hard, you know?

Randa: Yeah. So, let's just talk about how you can set your law firm up for no A/R. We'll go over how you should do that, how frequently you should be billing, some good practices around that process in general, and just general things to think about outside of just the actual process.

So, there's two ways that we recommend law firm owners do their billing. One way is that traditional way of collecting that initial retainer from your client, and then billing towards that retainer. Kind of having that evergreen system.

However, what we want you to do is, if they start out at a $5,000 retainer, we want you to bill towards that retainer, and then have your clients replenish back up to the $5,000. A lot of law firms make the mistake of making the replenishment amount… We'll ask you to replenish at $1,500 or $2,000, way below that initial retainer.

When you ask your client to do that, you're asking them for a ton of money, to be collected. This is important too for, especially in family law, where you have your clients that are battling for finances, battling for child support. It's very difficult sometimes for them to come up with that big chunk of money throughout the life of their case.

So, asking them to pay the $5,000, then billing against it, and then replenishing back up to that original amount every time that you do billing. But to keep that amount smaller for your clients, I recommend that you bill your clients twice per month.

So, some weeks or some billing periods, which is for the two weeks prior, maybe they're only replenishing to $500, we'll take them back to $5,000. Maybe some weeks, because you had a hearing, it's $1,500. But always keeping them at that $5,000 mark, number one, when you bill your clients twice a month, it's just better customer service.

It's a natural client touch point. It tells your client what's going on in their case just by looking at their bill. And you're saying, “We're consistent enough. You know what to expect, and when to expect it.” A lot of these law firms, when they're not billing or they're just billing whenever they remember, that's not good customer service.

You would be furious if you went and you've worked with another company, and they're like, “Oh, we just remembered to bill you,” and it's been 45 days, so you get this huge bill and you're expected to pay it upon receipt. So, the first way, a lot of traditional… is using that retainer system, but making sure that you replenish back up.

In addition to that, you need to make sure that you're using your billing software is either able to send reminders, in between sending out invoices, and/or you need to have a process of ‘well, what happens if they don't replenish the retainer?’

And so, we help you identify those steps. Is it a call by a support person? Is it an email, also? What's that cadence? How many days goes by, and then you follow up again? At what point does the attorney make the phone call? At what point do you consider withdrawing from their case? 



Billing is not just about getting the bills out; you need to recognize what you're going to do if your client doesn't pay, and already have that process written out so everyone's following it.

Melissa: That's great. So basically, replenish backup, and have the software that can send reminders, and have a process for when they don't replenish. Like, what does that look like inside of your firm? 

I totally see what you're saying by better customer service.

You're right, it is a way for them to see progress, if any progress has indeed been made or time has been spent on their case, and you get your money when you should be getting your money. Both things are happening.

Randa: It is. And if you take it a step further, it also cuts back on interruptions from the client. Them calling and saying, “What's going on with my case?” They already know, because they're getting that communication from you in a form of a bill.

In addition to that, when we talk about, in part two, building in those client touch points, if you're doing both, your clients get to know exactly what's going on, what you guys are doing, and what to expect.

Melissa: Yes, yes. I mean, that is invaluable, the result of everything you just said. Oh my gosh, everything's running smoothly, people aren't getting upset, they don't feel out of the loop, your team is abiding by processes that work for everyone involved. Everything's just so much more smooth.

By the way, for listeners, the two topics we're going to talk about, Randa really felt strongly about talking about billing first. Because when you can get your cashflow in a much healthier state then it can be easier to focus on some of the internal processes that we're going to talk about next.

Randa: The second way we like to do billing, which is our preferred way, but some attorneys have a hard time to get on board, some don't want to transition their clients to it, I get it. And then also, I just want to make the disclaimer, always check with your Bar to see what you can and cannot do.

But it's essentially the same of taking that, let's say, $5,000 retainer, when they sign your fee agreement, but instead of billing towards the retainer, you just bill them for the time that you've spent on their case. And so, what happens when you do it that way, you're not billing against the retainer. So that decreases having to transfer trust funds into your operating. It makes your trust account a lot cleaner. You don't bill against the retainer, you send them a bill.

Then, when they pay you, that goes straight into your operating, because it's already earned. Then, you just hold the $5,000. Or if they don't pay their bill, and you need to withdrawal from their case, you pay their last bill that they didn't pay. And then, you return whatever funds you still have. Or if it's at the end of the case, you just want to pay and then return.

So, you still want to build them twice a month, so they have those smaller, more manageable bills; you're keeping up that communication. But this decreases having to move trust funds, and pull trust reporting frequently. Because every time you do billing, if you do it the other way, you have to physically move funds from trust to operating. And you should have reports surrounding what you move for which case. So, it's a lot of document keeping for that purpose.

But the second way, you don't have as much of that, because you're just holding the retainer until the end of the case essentially, until you bill against it.

Melissa: It sounds like everything you're saying, and I don't remember if you use this word specifically or not, but what hit my brain is this is a simpler way behind the scenes. The reason this stuck out to me as you're describing this, is because I'm really focused right now in my business, and I've been asking this question to clients, where is there complexity in your business? And how can you reduce complexity in your business?

Some is inevitable, but being conscious about where you're choosing that instead of just stacking systems, or stacking a way of doing things, that does create complexity on the back end. That will, in some way, shape, or form, reduce your profit margin.

So, I was going to ask you, why do you prefer this way? But that, of course, makes a ton of sense. That there's just less dealing with the back and forth with the trust accounts. And that's a pain point for a lot of people, with managing that well.

Randa: Absolutely. Yeah, I would say so. It’s just always nice when someone pays you and it goes straight into your operating account. That's like instant cash flow, right? That you send out a link to pay your invoice, they click on it, and then it shows up in your bank, in your operating, the next day. It's just so much simpler for law firms.

And I would agree, I work with a lot of CPA firms too, they would appreciate that approach too, just for keeping your books. Because you should always be doing three-way reconciliation between your software and your bank and your accounting software. And so, that really cuts their time down too, and what you're paying your CPA or bookkeeper.

Melissa: I don't know, it probably depends state to state what's legal, but do you ever see someone who bills for the time, that's how they do it, but they don't ever ask for retainer?

Randa: Yeah, I mean, I do get clients or law firm owners that say, “Oh, my clients always pay me.” Which is probably true, until they don't, right? It only takes one. I've had a couple say that. But also, you want to think for the future. You're not talking about your current clients, right? You always want to plan of what could happen in the future. And just setting up a process to make sure you are getting paid makes more sense than just relying on people paying you.

Melissa: Yeah, if we think planning for the future is really meant to make sure you're taking care of the health of the business, then why wouldn't you do that? There's an instance in my head I'm thinking of, that a client has dealt with. They're not going to get that money, and if they do, it's going to be a long time and it's going to be a fraction of what was owed. If they had had this, maybe that would have changed something for them.

They've instituted changes in their policies because of that. But you don't think that someone's not going to pay their bill. And in this instance, the person that didn't pay the bill, it was a big bill. So, it wasn't someone that was easy to just brush to the side and write off.

Randa: Well, that's part of the problem of not having a billing procedure, too, if you're only remembering to bill when you remember or have time. You don't realize how much someone owes you until you sit down and do it, and sometimes that's too late. That ship sailed, and it's very difficult to recover that.

So, in addition to how are you going to do your billing, how frequently are you going to do it, you need to address what you're going to do if someone doesn't pay you.

We talk about a lot of things. We go over your fee agreement. We make sure that you're telling your client how fees work, in three different ways; at your consultation, through your fee agreement, and then through a welcome letter of some sort. Just reiterating how you do billing so they're getting that information in three different spots.

Then, we talk about what is that cadence for firing your client, essentially. We will put together letters of non-payment for current and past clients, and try to give you a workflow. Essentially a collections, to try to recover as much as you can.

We also talk about, if you do have a past client that owes you money, what's your bottom line? If it's this amount, are you willing to put them on a payment plan that you automatically charge? Can your system do that? But essentially, we go through like a 90-day collections process. Then we talk about, okay, are you willing to settle? What is the percentage if someone wants to pay you in full? Are you willing to do a payment plan at that rate?

We talk more about how do we recover ‘something’ by that point? So, we don't just do, “This is how you should do billing.” We hash out all of those questions so there's no question or guesses as to, when that happens, what you should be doing.

One other thing that we definitely suggest, we do provide billing clerks, but you should really have someone do the billing that is not part of your case. So, the attorney or the paralegal that is working on the case should not be doing the billing. You need to take the emotion out of it.

Attorneys tend to either cut their time, or cut their bills, or don't bill clients like they should, because they have a personal relationship with them. And they feel bad because they know of their situation. So, when you take that emotion out of it, and you just have so much look at names and numbers, then it's so much easier to collect that from people.

Melissa: Okay, so the second way of billing, it's still twice a month, but bill them directly. Receive the payment, it goes straight into your operating account, and trust is there if they don't pay their bills, basically.

Randa: If they don't pay their bill, and you have to utilize the retainer, it's probably the time to be firing them. Because they're probably going to continuously do that, and that just causes more work for you.

Melissa: Yeah, absolutely. Okay, that's fantastic. Anything else you want to say on the topic of billing? I feel like these are good nuts and bolts. Maybe there's a fraction of listeners that do it exactly one way or exactly the other, but a lot of people probably could make some tweaks to get more in line with what you have to say. And I think it's important, your perspective on this is important, because you've seen hundreds of law firms.

I mean, you didn't just come to these two at the end of the day for any other reason other than you've seen what's most reliable, and what works. Anything else you want to offer here, on the topic of billing, for firms?

Randa: Sure, just make sure your matters are set up correctly. You would be surprised how many law firms don't have their billing set up correctly on each matter. So, they're always having to remember how that person is billed, or if they're giving an exception to someone. So, minimize exceptions, and make sure the matters are set up properly in your case management or your billing software.

Melissa: Can you give an example of what it looks like when it's not? Like, how you can tell that something's not set up properly?

Randa: Sure. So, if you're using trust, there should be a minimum threshold of how much money should be in their trust at all times. Because if not, it's hard to identify if their trust is low and it needs to be replenished, or some case management software's only alert you want to get to a certain amount. So, if it's zero, then it's too late.

Making sure that everyone's hourly rate is correct. So, if you have an old client that you're charging a lower rate, making sure that is correct and set on the matter. That will just minimize having to update your invoices in draft form, when you go to build them.

So, all the things that you can do on the front end, when setting up the matter, is going to benefit you on the back end when you're doing your billing. And also cut time down, which is important. That's why you're not doing your billing anyway, because it takes a lot of time. So, the more organized that you are with it, the quicker it is.

Melissa: So good. We focused on the nuts and bolts, which I think is good and important, and giving people an outline of how they should think about this. But the result of getting this under control, and abiding by a system like this, creates so much more ease in the business. Because there's consistently cash coming in. Not just once a month or every 35 days, because that's when you got to it. It eliminates a source of stress.

I would say, some people don't necessarily feel an unhealthy level of stress around it, but they're certainly crossing their fingers that payroll is going through, where everything's going to happen. It's like, “I've never missed it before, it's going to be good, right? I always just slide in at the last second and get it taken care of.” That's just for the birds. That soaks up a bunch of bandwidth you can't give to your business, in the ways that you should be giving to your business.

Randa: If you don't utilize a billing clerk or an outside person, then just make sure that you're putting them on your calendar, those block times to do billing. They're non-negotiable. Obviously, court, you can bump it. But pretty much anything else, that should be your time to do your billing.

So, for instance, in my business we bill twice a month, and so my team knows they have to have their time in by the end of the business day on the 15th, and I'm billing on the 16th. In the morning, it's going out. And if it's the holiday or the weekend, it's the next business day.

If you can't have your team on that process, or that cadence, it's going to be really hard. So, that's why you have to have a whole billing procedure. And set the tone for your team, like, “This is how we're going to do it. This is why we're going to do it. And these are the requirements.”

Also, rope them into the importance of cash flow and growth, billing their clients, customer service, and cutting down on client communication. It all goes together, and with a solid written process I think it's easier to get everyone on board.

Melissa: That's great. Thank you. If people want to reach out to you on this topic, or just to learn more about your company, where can they go?

Randa: You can look at all socials. Just look up Attorney Whisperer and you will find me. And then, you can also go to MrsJuneLegal.com. You can learn more about what we do, you can schedule a discovery call, or if you want to network with me there's a way to schedule that too. We are active pretty much on our Facebook business page and on LinkedIn. Go ahead and send me a link on LinkedIn, I like to learn more about you.

And just hopping on a discovery call, just to learn more about your law firm, how we can help, get into more of my experience, and give you some tips and tricks that you can probably walk away with doing right then and there.

Melissa: Mrs. June Legal, how did you come up with that name?

Randa: I’m a really big fan of the 1950s, 1960s housewife. I just think that they're stunning, they're put together, they’re posed, they’re kind and graceful but strict. June is from June Cleaver, from Leave It to Beaver. It's kind of in how she runs her household. She gives in, she asks a lot of questions, and she's supportive but she's a little strict.

That's how we run our business. We are very kind and gracious, but we're going to tell you how it is. We will listen to you and give you guidance, just like June Cleaver did.

Melissa: Oh my gosh, I'm glad I asked. All right, good deal. We'll be back with part two, talking about workflows and delegation. Yes, really excited for that. Okay. Thank you.

Randa: Thank you.

Melissa: See you on the next one.

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