Iridium Technology business intelligence tools help firms to navigate changes in the legal billing model
The billing model for law firms has been changing over recent years. As clients want more transparency, law firms have been forced to modify their billing models to include fixed fees, capped fees, and other alternative fee arrangements (AFAs). This can be difficult, particularly for law firms that have relied almost exclusively on hourly billing for decades. Business intelligence (BI) tools can help law firms to navigate the changes in the legal billing model, enabling them to embrace AFA engagements.
The problem with the traditonal law firm business model
The hourly billing model has been the dominant model in law firms for more than a century. With this model, clients do not always know exactly what legal services are being provided and how much they will cost. They may provide their attorney with a retainer or be billed once their case is over. All they get in return for those hourly fees is a decision made on the case and, in the best of situations, a weekly update on the status of their case. Today, legal clients are demanding more, and law firms have no choice but to adapt and provide that transparency by adjusting their business models to include AFAs.
Negotiated fixed and flat rates
For years, when attorneys were approached by clients, those clients were told about the fees of the law firm, and what they would receive for those fees. Clients had no way of knowing if they really received the promised services. Was the attorney actually out investigating the case? Did it take the attorney as long as they said to draft that contract? There was simply no way to know the answer.
In today’s legal climate, savvy clients are no longer content to simply accept an hourly rate estimate; instead, they are asking that fixed and flat rate fees be negotiated. If an attorney or firm will not budge on their quoted fee, the client may go to a competitor who may be more willing to negotiate. Firms cannot ignore AFAs — they are here to stay and are expected to become increasingly common.
Another alternative fee arrangement that is becoming popular is the concept of task-based fees. With this model, an attorney will simply charge for each task, outlining the tasks they will complete and the associated fees for each task at the beginning of a case. Clients are demanding this billing model more and more because it provides the most transparency of all billing models. The client knows exactly what services will be delivered, and at what cost.
Business intelligence tools can help law firms change billing models
Changing billing models is essential for law firms if they want to keep bringing in new clients. Unfortunately, this can be a difficult task. These alternative law firm business models are a new and drastic shift from the way things have been done for so long. Business intelligence tools can help your firm to seamlessly transition to a new business model. You can build multiple pricing scenarios for an engagement, and then evaluate the expected profitability of each scenario. Once the work has been kicked off, you can track the actual costs versus the budgeted cost, and take proactive steps if a matter is not tracking to the expected profitability. At Iridium Technology, we are proud to offer business intelligence tools that will easily track expenses and revenue, making it easier for your firm to move to the alternative fee structures your clients want. Call us today at +44 203 5143771 or contact us online to learn more.