Why Are Clients Demanding More Transparency and Fixed Fees?

Daan Pruijssers

27 August 2018

For most firms, the days of block billing with a vague description of the work you accomplished are long gone. Today, legal consumers want specific information about the tasks you have completed and detailed data on the time spent on the project. They scrutinize every time entry. For some clients, it is to cut their own costs, but for others, it is to ensure that you are actually adding value to their overall business structure.
The marketplace dynamics that affect law firms are changing. Customers are demanding more transparency, value, price predictability, and instant access to information—in addition to favorable results. These concepts are more associated with high stake business ventures, but they are seeping into the legal profession, and attorneys need to meet these clients’ demands to remain profitable.

Competition in the legal industry is becoming fierce. Attorneys are no longer only pitted up against other attorneys. Those who are not legally trained are also providing corollary services that may not have been offered separately before. Technology, paraprofessionals, in-house counsel, and professionals in other fields are challenging what it means to practice law. Today, more so than ever, a law firm is more like a “business” instead of a traditional professional entity. Law firms need to adapt to stay relevant.

The Importance of Transparency in Your Services

Label Insight did a study in 2016 regarding customers’ feelings on transparency. While that study focused on product labeling, much of what they found can also be applied to the service industry—including law firms—as well. For example, 56 percent of those surveyed indicated that having more information about a product increases their trust in a brand. In addition, 39 percent of those surveyed stated that they would switch to a new brand if that brand offered more or better transparency. A staggering 94 percent of the consumers surveyed stated that they are more likely to be loyal to a specific brand if it commits to full transparency.

As clients’ desire to obtain information grows, communication about what you are doing on their case, and why, continues to increase in importance. A study done from HBR Consulting indicates that the top criteria for choosing outside counsel is their level of client engagement and service. Cost predictability is also high on the priority list. Both of these concepts are, at their core, tied to transparency.

Transparency and Billing Challenges for Law Firms

Client expectations are increasing. For example, expectations regarding data access are growing exponentially. Between 2007 and 2014, total internet traffic has increased by 800 percent. The internet provides access to a virtually unlimited library of information, including some legal resources that are available to the average consumer as well.
Many clients have grown to expect more information, and they want it immediately. Balancing clients’ needs for information and cost expectations is often very difficult.

To address concerns about overbilling and unpredictability of costs, some clients are requesting work based on a fixed fee or other alternative fee arrangements. Under this type of pricing model, attorneys provide complete services for a specific project or case for a flat fee. Although clients like the stability of this model, most law firms will tell you that there are serious concerns about taking on projects that end up costing more than expected, making them unprofitable.

Incorporating Transparency into Your Culture

For law firms, transparency is conveyed in two primary ways: through your initial consultation or retention discussion and through your periodic billing. These are both opportunities to set your firm apart from others who are offering similar services.

Direct and Up-Front Initial Communication
In your initial retention discussion, most clients will not only want to talk about your hourly rate, but they will also want to discuss specifics about a project. They ask questions like:
· How long will it take?
· What will the process look like?
· How involved can I (or do I have to) be?
· What will the total cost be?

They want to know that you are adding value. These questions are all really to get to the bottom line for clients: Will it be worth it for the client to retain you? Are you doing something that their in-house counsel or employees cannot? Or that they can’t do themselves? Ensuring transparency at this stage will not only increase your client’s trust, but it will also help you set realistic expectations at the outset of the relationship.

Complete and Accurate Billing
You can provide as many summaries of your activities as you would like to your clients via letter or email. However, none of these will be as comprehensive as what your bill can be. You can literally tell your client what you were doing for every .1 of an hour that you spent on their case. There is no better way to show your client that you are adding value than to describe in detail the actions you are taking to further their interests.

A “detailed” time entry means more than just stating “Continue work on brief.” It includes descriptions that might read something like: “Continue analysis on validity of non-compete portion of contract based on new legal developments.” Projecting your effort in your billing tells the client that you are adding value that they could not have not developed on their own—and it lets clients know exactly what services are being provided to them.

In fact, without detailed billing, the client may have very little idea of what you are actually doing for them. They may see you attend hearings or meetings, but it is harder to show how much time actually went into writing a brief, researching an issue, or doing analysis of similar cases. Providing a description of what you were doing on the case significantly increases the trust that a client has in your firm.

Getting the Right Tools to Communicate Effectively with Your Clients

Detailed billing takes time, but it is one of the most effective ways that you can show a client how you are adding value. Because of the additional time and effort that time tracking requires, firms are less inclined to use their monthly or quarterly invoices as a means of communication with their client. But, with tools like TIQ, time tracking becomes much easier. It transforms into a tool to encourage transparency and meet client expectations, rather than a burden or chore. Learn more about TIQ’s features and how it can increase client communication and transparency by clicking here.

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