Wednesday, December 19, 2012

Flat Fee Billing vs PCLaw Disbursements

First, what is flat fee billing. You quote the client an all inclusive price, and that is what the person pays. No extras, no disbursements. Many lawyers are already quoting flat fees for uncontested divorces, incorporations, wills, etc.

Why quote flat fees? Two reasons:
  • It is a great marketing tool. Clients really do want to know what a service is going to cost them. If you can offer them a set price right from the start, you are more likely land a new client.
  • It cuts down on your bookkeeping costs. Tracking disbursements and assigning them to the right client takes time. Just calculate your overhead and costs for everything, and give one price.
Other than the simplified services mentioned above, this is not something a novice lawyer should consider doing. You really do need to have a few years of practicing law to be able to establish your overhead and other costs. This billing practice also tends to be used only for simple uncontested matters.

A variation that can be used by almost any area of practice is block fee billing. For example:
  • One set price to prepare, issue, and serve a statement of claim, including the court costs and process server.
  • One set price for a full day of court, including travel, parking, etc.
  • One set price to prepare a motion, affidavit, court costs to issue, and service on opposing counsel.
Of course, you will want solid addresses for service, etc. before quoting a price. And, of course, the full day of court will cost the client more if it is in a different location. You might have one price for Toronto, another price for the GTA, and a substantially higher price for the attending the Supreme Court in Ottawa.

You may think that preparing claims, motions, and affidavits is too varied to quote a set price. But, you charge the same amount for boilerplate claims, motions, etc. The key is to make sure the pluses and minuses average out, to allow you to make approximately the same income. Therefore, you need to have the necessary experience in order to be able to predict these pluses and minuses.

From the bookkeeping side, you just pay your expenses as they are incurred, without any regard to whether it is a general office expense or a client expense. Your income in the form of these all inclusive flat fees will be considerably higher on your income statement. However, since you are no longer recovering any of your costs from clients, your expenses will also be higher. The goal is to reduce the amount of labour needed to 
complete your firm’s bookkeeping.

As always, I invite your comments and suggestions for future post topics. Next Posting – PCLaw Errors – Why they happen.