Law Firm Costs and Other Considerations
Law Firm Pricing
4 min read
Part of the ‘Lawyerist Healthy Law Firm’Learn more
Besides charging a price for your services, you also need to consider how you will handle client expenses and other law firm costs. Again, how you answer these questions may depend on your pricing philosophy and how you want to be known in the marketplace.
Court filing fees
Expert witness fees
Court reporter expenses
Medical record expenses
Deposition or hearing transcript costs
Many law firms will pay for these costs on the client’s behalf and then add the item to the client’s next bill. Some firms will ask clients to pay for these costs directly. It is often more convenient for the firm to pay for the costs on the client’s behalf, but it does put some risk on the firm to ensure the client actually reimburses the firm for the expenses. One option is to ask clients to include an additional retainer deposit for anticipated expenses that the firm holds in its trust account.
Support expenses or soft costs are costs that could be considered overhead expenses, but some firms choose to bill clients for the expense if the cost attributes directly to the client’s matter. They might include:
Online research expenses
Express mail or postage fees
Copying or faxing costs
Electronic data storage
There was a time when every time a law firm employee used the copy machine, he had to input a client matter number so that the firm could attribute a per page copy expense to the client’s matter. Many firms recognize that clients don’t want to feel “nickel-and-dimed” by seeing $1 and $2 charges for items that feel like the cost of doing business. Clients will also be more likely to push back against these charges.
As a result, most firms have changed their pricing philosophy to move away from charging for expenses that feel more like overhead expenses (like photocopying or faxing). For example, a firm may decide to only charge for postage if it exceeds a threshold dollar amount. Some firms adjust their fees to include these costs. Another option could be to charge a one-time administrative fee that reasonably estimates these costs. If you choose this option, check your local ethics rules to ensure it is allowed and whether you must follow any additional requirements.
All firms should make it easy and convenient for clients to pay. In today’s world, this means you should accept online payments. Accepting electronic payments is not only easier for clients, but typically means clients will pay you faster. Getting paid faster is always better.
Because firms have to pay third-party processing fees when they accept online payments, firm owners often ask whether they should shift this fee to their clients. Before we answer whether you should do this, let’s cover how you could do it.
Clients can shift fees through cash discounting or surcharging for the fee. Cash discounting is when you offer a discount to clients who pay by cash or check. For example, gas stations throughout the US often advertise one price for clients who pay with cash and a higher price for clients who pay with a credit card. The other option is to add a fee to the transaction.
When deciding whether the law firm should shift these fees to the client, a firm should check to ensure it is legally and ethically allowed. Firms should consult three sets of rules: state laws, the rules of professional conduct for your jurisdiction, and the credit card brand regulations (both Visa and Mastercard have specific rules firms must follow).
If you determine that it is legally and ethically permissible to shift these fees to your client, you still must decide whether you should do it. Many firms have decided that the fee is simply the cost of doing business.
As you make decisions about electronic payments, ask yourself:
What is your pricing philosophy, and how does this fit with that structure?
How will my clients react to this practice?
Is there an easy free option that still allows the clients the convenience of paying online (for example, the firm could accept e-checks and cover the nominal fee for doing so)?
Is the firm accepting relatively few large-dollar transactions where the goal of reducing costs might outweigh the potential client friction?
Is the firm accepting a large amount of low-dollar transactions where the benefit of collecting money easily and quickly is important?
Whatever you decide, don’t let this keep you from offering an electronic payment option.