As a paralegal, you provide extremely valuable services to your employer or client. Not only do you perform case-related tasks, but you may also handle the extremely important task of client billing and invoices. If this accurately describes your job duties, you need to know concepts and terms that are commonly utilized for law firm billing. Whether you work as an in-house paralegal or provide services as a contract paralegal, the following is legal billing language you need to know.
Block billing and detailed descriptions
These terms are in relation to invoices and how they should look upon presentation to the client. First, avoid block billing. This is the practice of listing numerous tasks under one single block of time. For example, a block billed invoice may state:
“Drafted pleadings, Telephone Conference with Opposing Counsel, Review of Medical Records: 6.5 hours”.
Billing statements should include single time entries, where each task is listed separately, along with the amount of time the task took to complete. Clients do not like block billing. It lacks adequate information about what work has been done on the case and is sometimes seen as a method of padding the bill.
In addition to listing tasks separately, you should also include detailed task descriptions. Now, please don’t confuse detailed with long and wordy paragraphs. It’s important to walk the fine line between detail and brevity. There is no need to give the client a blow by blow account of the attorney’s every step, but your task descriptions should be longer than two or three words. So, instead of simply listing a telephone conference, the task description might say:
“Telephone conference with expert witness in preparation for trial.”
Can you see the difference there? The entry provides enough detail for the client to immediately know what service they are being billed for, but it is also straight and to the point.
Hourly billing is only the tip of the iceberg when it comes to creating invoices. Billing increments are the smallest amount of time that a lawyer or law firm uses to bill clients. While attorneys can use various billing increments, the most common are:
- 1/10th of an hour or 6 minutes – Tasks are billed in 6-minute increments. If a task takes less time than this, it is rounded up to 6 minutes for billing purposes. For example, a 3-minute telephone call is billed for 6 minutes. This is the most common billing increment utilized within the legal profession.
- 1/6th of an hour or 10 minutes – Tasks are billed in 10-minute increments. If a task takes less than 10 minutes, it is rounded up to 10 minutes for billing purposes. For example, an 8-minute review of documents is billed for 10 minutes.
- 1/4th of an hour or 15 minutes – Tasks are billed in 15-minute increments. If a task takes less than 15 minutes, it is rounded up to 15 minutes for billing services. This level of billing increment is somewhat controversial, and clients sometimes resist it. Some people question the ethics of billing 15 minutes for a 3-minute task. Yet state courts have routinely upheld the reasonableness of the 15-minute billing increment.
When working for an attorney or firm, it’s important to know which billing increment to use for invoicing. Inaccurate billing can lead to trouble for the firm, including inadequate payment for tasks or padded bills and ethical dilemmas.
While the reputation of the legal industry may suggest otherwise, not every task undertaken by a lawyer is billed to the client. There are plenty of duties that go unbilled within a law office and you need to be able to identify them. Some firms differentiate between billable and non-billable items based on who performs the task. Those undertaken by lawyers are billable, while those undertaken by support staff are not. But, this can become tricky because paralegals routinely perform billable duties.
Another possible distinction may differentiate between legal and administrative work. Under this rationale, some examples of nonbillable tasks include:
- Making copies
- Creating invoices
- Speaking with potential clients
So, you may be asking why attorneys feel the need to track tasks that aren’t billed to the client. All tasks are important to the firm’s success, whether billed or not. Non-billable tasks contribute to the overhead costs of the firm, so they need to be tracked and accounted for when evaluating overall efficiency and profit.
Fixed fee billing
Some law firms have traded in the billable hour for fixed fee billing. This type of arrangement sets a specific price for attorney matters, cases, and/or tasks. For example, instead of billing at $200 an hour to handle an uncontested divorce, the attorney may charge $2000 to complete the entire matter.
It’s important for you to understand this type of billing arrangement because it’s becoming increasingly popular within the legal profession. Clients tend to prefer a fixed fee billing method because it gives them upfront notice of the cost without the worry of unexpected expenses on the backend.
Lawyers tend to like this type of billing arrangement because it is less time-consuming and more efficient when handled correctly. However, many attorneys still prefer to track their time under fixed fee arrangements. This is so they can ensure that they are adequately charging for the current matters, as well as future flat fee arrangements.
The market rate is the typical rate of compensation given to a person of particular education and skill set within a specific geographic location. An in-house paralegal can use this information to negotiate salary and gauge an appropriate level of pay. For contract paralegals, the market rate provides guidance for how much you should charge for your services. It also helps ensure that a reasonable rate is being charged to the client for the tasks you complete.
If you are a paralegal who performs client billing for an attorney or law firm, make sure you know and understand these legal billing terms in order to provide the best possible service to the practice and its clients.
About Erika Winston:
Erika Winston is a freelance writer with a passion for law. Through her business, The Legal Writing Studio, she helps legal professionals deliver effective written messages. Erika is a regular contributor to TimeSolv and a variety of other publications.