Even if firms charge a flat fee for certain services, should they still track the time spent performing the associated work?
In a flat fee arrangement, a law firm provides specific services to a client for a specified fee, no matter how many hours the attorneys spend performing those services. The legal fees are decided before the work is undertaken, making billing more manageable and reducing attorneys’ pressure to achieve billable targets.
Many firms have moved toward flat-fee arrangements with the belief that the less time attorneys and paralegals spend tracking their time and entering it into billing programs, the more time they will have to perform substantive legal work. This, in turn, will potentially increase firm profits. While this seems like a great idea, there may still be benefits to tracking your time.
One Potential Flat Fee Pitfall
Once the parties agree on a flat fee, clients will rightfully expect suitable work for their money. However, they often don’t appreciate the complexity of legal work, or the additional costs frequently associated with it. Suppose they believe that the services provided by the attorney were not worth the agreed-upon amount. In this case, a dispute may arise, and it may become an issue of questionable ethical conduct on the attorney’s part.
If a client is unsatisfied with an attorney, they may request to review the attorney’s work, including time logs and other data pertinent to the work performed. Should the client find the data presented unsatisfactory, they may terminate their relationship with the attorney or file an ethical complaint. Attorneys in this position will have to prove that they performed the work they charged for, which is never a good situation.
This begs the question: Even if firms charge a flat fee for certain services, should they still track the time spent performing the associated work? Although many law firms resist spending resources on tracking attorney time on flat-fee matters, there are some reasons it may make sense to do so.
Here’s Why Flat-Fee Attorneys Should Still Track Time
Even if a law firm is not obligated to issue bills to clients showing the time spent working on a flat-fee matter, there are several reasons why legal professionals should still track their time:
- Fee awards. A prevailing client may have a right to seek attorney’s fees from an opposing party. However, courts require that counsel submit invoices outlining the time and costs to justify an attorney fee award. If an attorney cannot provide such records, the court may not issue the award without documentation.
- Defensibility. Many legal malpractice claims are based on the allegation that a firm or attorney did not spend adequate time working on a case. If timesheets had been kept showing what work was performed, this evidence could be helpful when mounting a defense against the claim.
- Refundability. In many states, flat fees are only refundable to clients if an attorney provided no services or only part of the agreed-upon services. Courts consider the time spent on the actual services when determining the flat fee amount that a firm can reasonably keep. If a firm does not track time, it will likely be difficult to justify keeping even a small portion of a flat fee.
- Transparency. Providing detailed timesheets or invoices to clients that show the time spent on their matter is an excellent way to update them regarding the status of their claim and build trust.
- Efficiency. Time tracking prevents overworking a case unnecessarily. Generally, staff and associate attorneys should be required to track what they are working on, and the time spent on it.
- Accountability. For some firms, one bad fee projection could mean the end of flat-fee billing. Tracking attorney and paralegal time in some meaningful way allows a law firm to determine whether its flat fees are too low or too high and whether to make adjustments.
A law firm is a business and needs to remain solvent, meaning that all work that’s not accounted for can have a real and immediate impact on the bottom line. That’s why no matter whether the firm charges on a flat fee, contingency, or hourly basis, billable hours need to be tracked and recorded accurately.
Time tracking will outline the amount of work the attorney has performed. In a fixed-fee arrangement where clients cannot see the task or item-based billing to compare the work completed against the cost of the services, tracking time and expenses will justify the fee charged. Another benefit of tracking time is that it enables firms to review their attorneys’ productivity and efficiency while they work cases.
Are You Thinking of Rehauling Your Firm’s Flat-Fee or Time Billing Strategy?
Putting a time billing software solution in place to efficiently track time at your firm can reduce your exposure to risk and help the flat fee model thrive. To learn more about how CARET Legal’s cloud-based financial management system will streamline your billing operation, schedule your personal demo today.