- Table of Contents
-
- Deciding to Enter the Business of Law
- Financial Planning and Budgeting
- Marketing and Client Development
- Form of Organization
- Office Space
- District of Columbia License and Tax Requirements
- Federal Tax Considerations
- Liability Insurance
- Office Technology, Equipment and Furniture
- Office Furniture and Supplies
- Lawyer Trust Accounts and IOLTA Program
- Financial Management
- Written Fee Agreements
- Using Nonengagement Letters
- Practice Management Systems and Procedures
- Client Communications
- Docket and Calendar System
- Reminder/Tickler System
- Conflicts Checking System
- Case File Management System
- Forms/Document Management and Retrieval System
- Timekeeping and Billing System
- Strategic Planning
- Bar Resources
- Additional Resources
Deciding to Enter the Business of Law
Opening a law practice can be both a rewarding and a frustrating endeavor. Most lawyers are trained in the art of the law, and not in the basics of business and management. The greatest difficulty in starting your own practice is not in providing substantive legal knowledge, but in organizing and managing your practice to provide ongoing legal services to your clients at a fair profit for yourself.
It is crucial to understand that although practicing law is an art, your law practice is a business. Sound business practices will allow you to continue to practice law and provide legal services to your clients. To make your practice a viable business, you must offer a service that will attract clients who will pay you to provide them with your services so that you can pay for your business expenses and support yourself, at a minimum, with a living wage. Along the way you will need to follow sound management practices in order to succeed in this business cycle. If you view your law practice as a business, then you will have a greater chance of succeeding as a solo or small firm practitioner. The thought of your practice as a business should not make the idea of practice of law less respectable. Good business practices will allow you to provide reasonable, efficient legal representation to the public—and isn’t that the standard in our profession?
Good business planning from the beginning will give you a good foundation for your practice. Below are the most important issues you should address as you commence building your practice. It is not an exhaustive list; each practice is different, so each practice has different needs. These are the most important issues to consider.
Financial Planning and Budgeting
Sound financial planning is highly desirable, but not always possible. A number of law management consultants recommend having a year’s worth of funds in the bank to pay your business overhead and personal expenses. Others advocate having your personal living expenses in your savings account, and a line of credit from your bank for your business expenses. In a perfect world, this is desirable. But in the present legal market, many lawyers choose to start their own practice without savings or a line-of-credit. In fact, many lawyers succeed in building their practice with little financial support.
At a minimum, you should investigate what your first-year expenses will be and draw up a budget. Budget items may include: rental of office space; staff compensation, including federal, state and local payroll taxes; professional liability insurance, and other insurance such as health, disability and personal liability; office equipment, such as computers, computer software, telephone, fax machine, scanner and copier; computer technical support to keep your hardware and software functioning; furniture and furnishings; office supplies, including stationery and business cards, license fees; telephone service and other utilities; banking fees; bookkeeping/accounting fees, and client development expenses. If the expense numbers scare you, then you may want to wait to open your practice until you feel more financially secure (No need to be totally stressed out from the beginning). On the other hand, if you believe you can attract enough business to exceed these expenses, then you have passed the first hurdle.
To determine what income you can expect during your first year or two, you need to analyze your current legal skills, clients, business contacts, and personal network of family and friends. (Much of your early business will come from family and friends.) You must have the personal commitment to "prospect and mine" these sources of business. You will also need to commit time to other client development activities, such as bar and civic activities.
Next, conservatively figure the number of billable hours you can realistically obtain from these existing and prospective sources. Remember, you will have a significant number of non-billable hours each month devoted to the management aspects of your practice.
Now that you have a budgeted estimate of your expenses and a conservative goal of billable hours, you will have a better sense of what you personally can expect to earn during your first year or two of practice. A negative cashflow is not unexpected, hence the need for financial assistance in the form of personal savings or loans.
The more detailed you are at this stage of your practice, the less surprised (and possibly frustrated) you will be later on. If you are more detail oriented, then craft a more formal business plan, especially if you are going to ask a bank for a loan or line of credit. It would be helpful to consult other solo or small firm practitioners similarly situated to find out the financial difficulties and benefits they have encountered. You may also consider consulting with an accountant familiar with small legal practices. A good accountant is almost as invaluable as a good lawyer!
Marketing and Client Development
Marketing your practice is a crucial component in your success: you need to have people learn who you are and what you do, so that if they need your services, they will call you. Here are some basic steps you should take to market your practice.
Your marketing efforts should be focused on two, possibly three, groups: any existing clients, potential clients, and persons who can refer clients to you, often called referral sources or key influencers. Potential clients are those persons who could use the services you provide in your practice. Because every practice is somewhat unique, your marketing should be tailored to your practice and your clients. Regardless, the basic rules are the same.
Take steps to put your name before those persons who are most likely to use your services—these are your prospective clients. This could include writing an article (or having an article written about you) for a newspaper, newsletter or magazine; appearing on a local radio program or television news program; or speaking before an audience on an issue of mutual interest. Many lawyers find long-term marketing success by joining a local civic organization. Over time, by volunteering your time and energy, you meet many people who may eventually need your professional services. A word to the wise, since this is not a guaranteed way to get business, you must enjoy doing this civic work apart from the business potential. Participation in professional association (including bar) activities can sometimes create opportunities, too. Increasingly, lawyers are generating business by having a web site on the Internet. The idea is to think of ways to get your name in front of those people who are most likely to need your services. Think of it as a long-term, ongoing adventure.
You also need to market yourself to persons who will refer potential clients to you. These "referral sources" can be former clients, present clients, other lawyers, law school classmates, neighbors, family, friends, your CPA, former colleagues, and the list goes on. If these people know what type of law you practice and what sort of experience you have, they may become a network for referring new clients to you. Often your most valuable source of new business is your existing client base. Staying in touch with family and friends can be a simple but powerful marketing tool. Sending holiday greeting cards or professional announcements, or forwarding articles of interest are other ways of keeping your name before people who can refer business to you.
You should take marketing seriously and devote some time each week to promoting your business. There are countless ways to market and opportunities arise every day. If you are truly serious about building your practice and succeeding, you should develop a marketing plan that will be implemented over time. Your plan should identify your target "audience" or clients and how your capabilities match those needs. It should outline steps for reaching out to this audience, building on each previous step. Implementation of that plan should begin before you open your office for business, because it can take months (or even years) to get your message into the right pipeline to result in new clients knocking at your door.
See also, The Fundamentals of Marketing A Solo Law Practice.
Form of Organization
The form of business organization you choose will depend on your situation and needs. If you are a solo practitioner, you may decide to be a sole proprietorship, or form a professional corporation. If you are starting a firm, you may want to form a partnership. You may also choose to form a limited liability partnership or corporation. Deciding which one may be right for you may not be simple. Common issues to consider include liability for debts, contracts, and malpractice; income and employment taxes; availability of health insurance and insurance premium tax deduction; availability of retirement plans; bankruptcy of entity or partner/colleague; and the cost of forming and maintaining the chosen entity. Unless this is your practice area, you should probably consult a colleague familiar with entity choice and formation before you make this decision. You may also want to consult books or articles on the topic, including the following list.
- Books and Articles
-
- Basics of Forming a Business in the D.C. Metro Area, written materials from the D.C. Bar Continuing Legal Education Office, 202-737-4700, ext. 287 (Approximate cost of $35.00)
- Greene, Arthur, Getting Started: Basics for a Successful Law Firm, ABA Law Practice Management Section (1996) 1-800-285-2221
- Karambelas, Nicholas G., "Shaping the LLC", Washington Lawyer magazine, (Nov./Dec. 1994)
- Web Sites
Office Space
Several options exist in this marketplace. Here are some of the positive and negative aspects of those options:
- Work Out of Your Home
This is often the least expensive way to start a practice, but it will also tend to limit the growth of your practice. Therefore, without other considerations, it is only a temporary option. The benefits of a home office include lower expenses, less stress commuting to your office, and more "quiet" time than in a busy, noisy law office. The primary problem with working from home is that it does not put forth a professional image. If you do work from home, have an arrangement with a firm to use its office or conference facilities when you meet with a client or take a deposition, etc. A less formal atmosphere in your home may lead to undesirable habits: wasted time doing household projects, and haphazard office procedures such as sloppy filing habits. If you do have a home office, make sure it is in a separate and secure location in your residence—confidentiality of client information is the key here. Using your home as your office can also have "unauthorized practice of law" implications if you live in a jurisdiction where you are not licensed to practice law. Even if you do not plan to meet with clients at your house, you should consult with the bar where you reside. Also, you may need to check local zoning ordinances to make sure you may operate a business from your residence. - Lease Your Own Space
This is the most expensive way to start, as it almost always obligates you to a large long-term lease. With your own space you can have it built-out to your specifications. Unless you have a good existing client base with significant cashflow, you should strongly consider other options. - Sublease Space From Another Lawyer
This arrangement is very common among the local legal community. Look in Legal Times, Daily Washington Law Reporter, Washington Lawyer and Washington Post classified ads to find space. If you have time, find an office building you like and consult with the law offices listed in the tenant directory in the lobby of the building. They may have some space available.
- A sublease arrangement can be solely for office space, or can
include other services such as telephone answering, library and
copier privileges, secretarial services, and reserved access to
a conference room. These extra services are often desirable and
less expensive than purchasing the office machines and hiring
a receptionist/secretary. If you choose a sublease with these
services, make sure that the lease/contract specifies how often
and when these services are available to you, and what happens
if they are unavailable (e.g., the secretary assigned to you quits)
or if you exceed the lease/contract limits (e.g., you need to
copy 10,000 pages of discovery).
- Your lease may call for your rent payments to be made by check, but it is also common to 9 provide legal services to the sublessor law firm in exchange for your monthly lease obligation. This can really help your cash flow situation, but can cause many unforeseen problems. If your lease requires you to provide 20 hours of services per month, which hours must you provide? What if you have an important case and are unavailable when your landlord needs you? Whose professional liability insurance covers your landlord’s client? What if the landlord does not like the quality of your work? What if the landlord is too demanding in the level of work required? What if your landlord asks you to work on a case that causes a conflict of interest? If you choose a rent-for-services arrangement, make sure you consider all foreseeable problems and conflicts.
- A sublease arrangement can be solely for office space, or can
include other services such as telephone answering, library and
copier privileges, secretarial services, and reserved access to
a conference room. These extra services are often desirable and
less expensive than purchasing the office machines and hiring
a receptionist/secretary. If you choose a sublease with these
services, make sure that the lease/contract specifies how often
and when these services are available to you, and what happens
if they are unavailable (e.g., the secretary assigned to you quits)
or if you exceed the lease/contract limits (e.g., you need to
copy 10,000 pages of discovery).
- Contract with a Professional Office Provider
Several companies in downtown Washington are in the business of providing office space and office services to small companies or practices in a large office suite environment. These professional suites are usually on a single floor of a large office building, and may look like a large law firm to outsiders, but the individual offices are leased to numerous small enterprises. The office suite usually provides a private answering service, receptionist, conference rooms, secretarial help and other services on a per usage basis. These professional suites can be a cost-effective alternative to doing it all yourself, and are popular with many sole practitioners. As with any leasing arrangement, thoroughly check it out before you sign. Ask a colleague, look in Legal Times classified ads, or check the Yellow Pages under "Office Space Rental"; there are a number of shared office environments catering to lawyers in the District and surrounding suburbs.
District of Columbia License and Tax Requirements
- As of publication in March 2003, the Master Business License Program
has not been finalized. Check with the D.C. Department of Consumer
and Regulatory Affairs for updated information.
- Lawyers in the District of Columbia are no longer required to pay
a professional license fee to the Department of Finance and Revenue.
However, each law firm must register for a D.C. Business Tax Identification
Number. If you are a solo practitioner, you will need to have one.
If you practice with a firm, the firm will need one business tax number.
There is no fee for this license, but it identifies you as a business
entity for annual income tax purposes. To obtain this tax number you
may write to: Business Tax Registration Unit, D.C. Office of Tax and
Revenue, 941 North Capitol Street, NE, First Floor, Washington, D.C.
20002 Or call the Business Tax Registration Unit, 202/442-4430. Ask
for application form FR-500.
- The District also has a personal business property tax. This is a tax on the personal property such as computers, desks, tables, fax machines, etc. (Consult the tax forms sent to you for more complete requirements.) This tax is due by July 31 of each year. To have the personal business property tax form (FP31) sent to you each year, you will have to so designate on your form FR-500 (business tax number application). Be sure to mark your calendar in June as a reminder in case the tax reporting form is not sent to you as promised. For answers to your questions you may call Mr. Nirmail Dhaliwal in the Business Tax Office of the Finance and Revenue Department at 202-442-6632.
Federal Tax Considerations
- A. The IRS publishes the Tax Guide for Small Business that contains
information about federal tax laws that apply to businesses. The publication
includes information on the major forms of business organization,
accounting practices, the tax aspects of assets, income, expenses,
and employer tax obligations. Contact the IRS at 800/829-1040 or www.irs.gov
and request Publication 334.
- You should figure your estimated income taxes, and you may need
to file quarterly withholding. Contact the IRS and ask for Publication
505 and Form 1040-ES. You should also be familiar with the self-employment
tax, a social security and Medicare tax for individuals who work for
themselves. Request Publication 533 and Schedule SE to Form 1040.
- C. If you employ another person, you will need to obtain an employer identification number from the IRS. Order Form SS-4; also Publication 1635 "Understanding Your EIN" and Publication 15 "Employer’s Tax Guide (Circular E)" from www.irs.gov.
Liability Insurance
Plain and simple—Don’t leave home without it! Professional liability insurance is a must for every lawyer, although not mandated by the Bar. This is not a place to skimp and save money when starting your practice. More and more lawyers are being sued every day even when there was no legal malpractice committed. Malpractice claims are a fact of life in our profession today, and while you may never commit malpractice, you will probably need the coverage at least once in your career.
Make sure you understand the policy you are buying—not all policies cover the same occurrences or the same time periods. Take the time to read and understand the policy definitions, limitations and exclusions. This could save you a good bit of stress and money in the future.
Liability coverage is available through a number of different brokers, including the D.C. Bar’s own program. Capitol Professional Insurance Managers, Inc. administers the D.C. Bar’s Professional Liability Program. It will provide no-obligation quotes and help you to understand policy terms and coverage. The number is 301-913-5900. It also has a web site at www.cpim.com.
The ABA Standing Committee on Lawyers’ Professional Liability has published a very helpful workbook entitled "Selecting Legal Malpractice Insurance," with easy-to-understand information about malpractice insurance policies, a glossary of terms, insurance policy checklists, and a pull-out comparison chart to help you choose a policy. Available online or by calling the ABA at 1-800-285-2221.
Office Technology and Equipment
Every law practice should have at least one computer and you should be using the computer to handle various law office functions. The computer is a tool, not a panacea for a law practice but, if properly used, it can save considerable time and expense otherwise spent on non-legal staff and management procedures.
Computer technology is changing rapidly and costs continue to drop. It is recommended that you purchase or lease a current model computer and printer. As your practice grows, so do your computer data and your need for additional space and software applications. Rather than go through the expense and trouble of transferring data and programs to a new computer a year from now, it may be best to start with a system that will be workable for at least the next few years. Call the D.C. Bar Management Resource line at 202-737-4700, ext. 385 for recommendations on current configurations.
If you are very mobile, you may want to get a laptop computer. Newer laptops have screens which make laptop use more desirable. You will pay more for a laptop than you will for a desktop computer. Keep in mind that, because laptops can be bumped, dropped or stolen, they can cost much more to maintain. If you are not sure if you will need a portable computer, you probably don’t’ need one. If you are "on the road" most of your business day, then consider renting a laptop for a month or so to see if it is worth the investment. Important issues to consider with laptops include weight and battery length.
Whatever you decide to purchase, be sure to factor in the availability of technical support and maintenance. You will want to deal with a computer manufacturer or reseller that will provide you with fast and reliable service. This may be the most important factor in deciding where to purchase your computer. If you do not want to expend the capital to purchase a computer, there are several resellers that lease well-configured computers.
You should make sure that any computer you acquire includes at least a 56KB data/fax modem card to send and receive faxes from your computer and also to access the internet. Internet access can provide you with email, office assistance, research, marketing and professional interest forums, among others. If you are not yet on the internet, you should be. The D.C. Bar offers an internet access program available through Member Benefits by calling 202/737-4700, ext. 373.
Telephones: Communication is the lifeblood of any successful law practice. Your telephone is your lifeline to your clients, potential clients, the courts, and opposing counsel (not to mention your family and friends). Make sure to take the time to consider your telephone needs.
One of the biggest client turn-offs is a busy signal. Make sure you have enough phone lines to support your clients. You will probably need two lines per lawyer, one per staff member, another for the fax, and another for each computer modem. Whatever you do, make sure it can expand to fit your needs. If phone service is part of your office lease, make certain that your phone needs are accommodated. Be sure to call Verizon in advance (at least two weeks before you plan to open or print 13 your letterhead) to reserve your phone number(s) and make sure that your phone will be working. The business service number at Verizon is 202-954-6275. The Bar has a reduced-rate long distance program with Sprint that provides very good rates. Call Sprint at 1-800-473-0898 and ask for its D.C. Bar program.
If you will not have a receptionist, you will need to engage an answering service or arrange for voice mail. An answering service may be more comforting for clients than voice mail, plus a service can be useful if someone claims to have left you an important message you did not receive. Voice mail is available through Verizon or obviously you can simply purchase a commercial answering machine. You will need to decide what is best for your situation.
Facsimile and Copiers: Fax and copying capability are a necessity for any office. You can have an inexpensive fax modem card installed in your computer to send documents by fax, and to print out incoming faxes on your laser printer. The one limitation is that this fax will not send documents not already in electronic form in your computer. An alternative may be to purchase a "multi-function" machine - a combination printer/fax/copier/scanner (but remember, when one crashes, they all crash). Kinko’s and others provide fax service for occasional use, but remember that information is less confidential, is more apt to get lost, and may not be received in a timely fashion.
If access to a copier is not included in your lease or sublease agreement, work out copy privileges on a per copy basis. If you do not have access to a copier, consider leasing or purchasing a small one or a "multi-function" machine. Whatever you decide to buy or lease, make sure a service agreement for fast, on-site service is included. In addition, identify alternate means for faxing and copying, just in case.
Other Forward-Thinking Equipment: In addition to a basic computer, printer, fax, and copier (or multi-function machine), you may want to consider purchasing a separate scanner (either black and white or color, depending upon your needs), and/or a faster laser printer(perhaps with color and black and white capability). Palmtop computers are another, related technology to consider. It may be that a workstation combined with a palmtop gives you more flexibility than a laptop.
If you expect to be out of the office a fair amount of time, consider purchasing a cell phone. It will save money and probably pay for itself over a short time period (if you remember to bill your clients the time you spend on the calls). The D.C. Bar has negotiated low member rates for several cell phone systems. Check the Bar web site for the details on cellular programs. However, the cell phone market is competitive and fast-changing so you should shop around.
Office Furniture and Supplies
Furniture: To one degree or another, you will need to obtain office furniture and equipment. If you sublease an office or rent in a professional office suite, basic office furniture is often included. You can supplement with additional furniture of your own. If you need to purchase several large pieces, check out estate sales or used furniture resellers—you can save some hard-earned money and still get quality furniture. At a minimum, you will need a 30" x 72" desk, a computer stand or credenza including space for a printer, a desk chair, two office chairs, a small table and two chairs for the waiting area, several filing cabinets (preferably letter size verticals) and a bookcase. You may also want additional pieces for other equipment, such as fax machines or scanners. A small conference table with chairs for working sessions with clients may also be useful. You should have enough storage pieces to organize your office (and keep clutter out of sight when clients visit), but don’t overload the office with too much stuff. Frame and hang your diplomas and bar admissions certificate to inform your clients of your professional qualifications and to remind you of your achievements. A few pictures of family of friends (or whatever brings you a smile) and tasteful art can help make your office a more comfortable place to work.
Letterhead and Business Cards: Your letterhead and business cards represent you to all who receive them. High-quality engraved stock will always send a positive message about your business to clients, prospective clients, colleagues and friends. Be sure to include your business address and not just a post office box, your business phone and fax numbers, as well as an email address. You may also include any additional information, such as bar admissions, degrees and association memberships, provided the information is factually correct. Look at the stationery and business cards you receive from colleagues to get ideas for your own letterhead and cards. Resist the urge to order large quantities of each: you will likely change business locations during the early years of your practice.
Lawyer Trust Fund Accounts and IOLTA Program
- In the District of Columbia, a lawyer’s responsibility for client
funds that are entrusted to him or her are governed by the D.C. Rules
of Professional Conduct, specifically Rules 1.15 and 1.17, and District
of Columbia Court of Appeals Rule X and Appendix B. The following
is a "nuts and bolts" overview of the rules, but is not
a substitute for reading the Rules for yourself:
- Funds given to a lawyer to hold for a client or third-party
must be held in an account separate from the lawyer’s own funds.
[Rule 1.5(a)]
- The account must be maintained:
- in a financial institution which is authorized by federal,
District of Columbia, or state law to do business in the District,
or
- in the state in which the lawyer’s or law firm’s office
is located, and
- the financial institution must be a member of the Federal
Deposit Insurance Corporation or Federal Savings and Loan
Insurance Corporation or successor agencies, and
- the institution must be on the list of "D.C. Bar Approved Depositories" maintained by the Board on Professional Responsibility. (A current list is available from the BPR by calling 202-638-4290; consult Rule 1.17 for the purposes of this requirement and the obligations of the bank and lawyer.)
- in a financial institution which is authorized by federal,
District of Columbia, or state law to do business in the District,
or
- If the funds are nominal in amount or to be held for a short
period, they may be placed in an interest bearing account for
the benefit of the Interest on Lawyers Trust Account Program (IOLTA).
For more information on IOLTA, see below.|
- The title of each "trust account" or "escrow
account" must contain those descriptive words, as well as
the lawyer’s or law firm’s identity.
- Funds given to a lawyer to hold for a client or third-party
must be held in an account separate from the lawyer’s own funds.
[Rule 1.5(a)]
- Interest on Lawyers Trust Accounts Program (IOLTA): The District
of Columbia Court of Appeals has instituted a program through which
interest from certain interest-bearing lawyer trust accounts is paid
not to lawyers or their clients, but to the D.C. Bar Foundation to
distribute for charitable purposes. The financial institution where
the trust fund account is located is required to transmit these interest
payments directly to the D.C. Bar Foundation. The lawyer must instruct
the financial institution to forward the earned interest to the Foundation.
(Rule X, Appendix B) Not every trust account is covered by this Rule,
and lawyers may decline to participate by following the proper procedure.
Appendix B of the D.C. Court of Appeals Rules sets forth the requirements
for the program and for opting out of it:
- A lawyer or a firm (with which the lawyer is associated) who
receives client funds SHALL maintain a pooled interest-bearing
account for the deposit of the client funds that are "nominal
in amount" or "expected to be held for a short period
of time." The determination of whether client funds are nominal
or to be held for a short period of time rests in the sound judgment
of each lawyer or law firm.
- The lawyer cannot receive interest from these IOLTA accounts,
nor is the lawyer required to notify his or her client that the
funds are in an IOLTA account.
- The IOLTA trust account must be:
- in a financial institution which is authorized by federal,
District of Columbia, or state law to do business in the District,
or
- in the state in which the lawyer’s or law firm’s office
is located, and
- the financial institution must be a member of the Federal Deposit Insurance Corporation or Federal Savings and Loan Insurance Corporation or successor agencies.
- in a financial institution which is authorized by federal,
District of Columbia, or state law to do business in the District,
or
- Upon establishing the account, the lawyer shall direct the
depository institution to:
- Remit the interest or dividends, net of any service charges
or fees, on the average monthly balance in the account, or
as otherwise normally accounted by the institution for other
depositors, to the D.C. Bar Foundation. The interest payment
transfer must occur at least quarterly, and
- Include a statement from the financial institution with each remittance indicating the name of the attorney or law firm on the account and the interest rate applied.
- Remit the interest or dividends, net of any service charges
or fees, on the average monthly balance in the account, or
as otherwise normally accounted by the institution for other
depositors, to the D.C. Bar Foundation. The interest payment
transfer must occur at least quarterly, and
- Lawyers may decline to participate in the IOLTA program by:
- Filing a "Notice of Declination" each year with
the Chief Judge of the D.C. Court of Appeals "within
a thirty-one day period commencing on the first day of March
each year", or
- Filing a petition with the Court at any time asking for
leave to file a Notice of Declination. Such petitions may
be granted for good cause shown.
- Lawyers not filing a Notice of Declination must maintain
accounts in accordance with Appendix B.
- Lawyers may revoke a prior "Notice of Declination" by filing with the Chief Judge of the D.C. Court of Appeals a program enrollment form.
- Filing a "Notice of Declination" each year with
the Chief Judge of the D.C. Court of Appeals "within
a thirty-one day period commencing on the first day of March
each year", or
- For more information about the IOLTA program contact the IOLTA Administrator at the D.C. Bar Foundation: Phone: 202-467-3750 Fax: 202-775-0008.
- A lawyer or a firm (with which the lawyer is associated) who
receives client funds SHALL maintain a pooled interest-bearing
account for the deposit of the client funds that are "nominal
in amount" or "expected to be held for a short period
of time." The determination of whether client funds are nominal
or to be held for a short period of time rests in the sound judgment
of each lawyer or law firm.
Financial Management
This is a very important, but often neglected area of practice management. (Lawyers are not known as "number-crunchers.") As a small business owner, you should devise a system to help you calculate your income and expenses on a regular basis, preferably monthly. Understanding your cashflow will help you better determine where you can make improvements in your business practices. If your practice is busy, but you are not generating income, you can focus on raising your fees or better collection techniques; if you are generating income, but not making any profit, then you need to curb expenses. While simplistic, this should give you a sense of the importance of knowing your income and expenses. If you can afford the services of a part-time bookkeeper to assist you, by all means retain one.
- Operating Accounts:
Most sole practitioners and small firms have one checking account to receive earned income and pay day-to-day overhead expenses. The money in this account is your money, and should never include money you are holding in trust for your clients. Conversely, money in your client trust account is not your money and should never be used to pay your business expenses.
- Client Trust Accounts:
As of January 1, 2000, the rules have changed, making management of client trust account(s) even more important. Rule 1.15 now states that advances of unearned fees and unincurred costs shall be treated as property of the client unless the client consents to a different arrangement. Therefore, advanced fees and costs must be placed into your client trust account rather than your operating account–unless your client agrees otherwise. This means you will have more transactions each month in and out of your trust account. This is an opportunity for more mistakes. However, if you take the time each month to pay a little attention to your client trust account, you will avoid almost all problems. The key to sound trust accounting is a good audit trail.
- Making a Good Audit Trail
The key to a good trust fund accounting system is making it simple enough so you don’t avoid doing a regular accounting, but detailed enough to recreate your financial transactions if problems do arise. A sound audit trail will help track your financial movements so you can reconstruct what occurred. This could save you countless hours of figuring out an error or sleepless nights worrying about it or worse: a visit from Bar Counsel’s staff. Elements of a good audit trail include:- Orderly bank statements
- Copies of deposit slips with all checks comprising the
deposit individually noted on the deposit slip (including
check amount, who the funds are for, and where the funds came
from)
- Copies of checks deposited (both front and back)
- A cash receipts journal showing cash received (although
checks make a better "paper trail" than cash)
- Check stubs showing monies withdrawn from the account
- A ledger for each client showing each transaction involving
his or her funds in the pooled trust 18 account
- A "bank charges ledger" showing your contributions
to the account to cover bank charges; some of these charges
may be later assessed to the proper clients.
- A account journal showing every transaction in the account, including bank charges. (This is MORE than a checkbook register, and should include the date of the transaction, the client name or number, source of the deposit or name of payee, check number and purpose of the payment, the amount of the check or deposit, and a running balance of the account.)
- Orderly bank statements
- The Process of Account Reconciliation
Make a copy of each check to be deposited into the trust account and a copy of each check written on the account. Also make a copy of each written instruction (i.e., letter from your client) to remove funds from the account. Keep these copies in a file designated by month that includes that month’s bank statement, copies of checks and deposit slips, and a copy of the account journal showing transactions for the month. Store each file chronologically. If a problem arises, you have all the supporting documents in one easy-to-find location.
It is best if you reconcile the trust account balance each month: You should compare the bank statement to the deposit slips and checks written and compare them against the account journal. You should also check these against the individual client ledgers on a monthly or at least quarterly basis. Accountants, bookkeepers and office personnel may be able to do this for you, but you are ultimately responsible for any problems. If you delegate this function (and many lawyers do), be sure to review the reconciliation process and results on a regular basis.
If you choose to do your own accounting or have a bookkeeper into your office, an excellent habit to get into is to review the trust account journal and client ledger to confirm the balances before signing the check. Be sure to double check the information printed on the check. Immediately after signing all checks, make a copy of each one to be put into your monthly account file. This may take a few more minutes each week, but it will increase your confidence in your record keeping process (and thereby reduce your stress). For more information on successfully managing a trust account, see the LPAC Publication Infopak on Client Trust Accounts.
- Making a Good Audit Trail
- Computer Accounting Programs:
There are a number of inexpensive accounting software programs on the market (such as Quicken, QuickBooks, and MYOB, Money, and others) that can work well for the solo or small firm practitioner. However, you should be familiar with accounting principles in order to use them efficiently and correctly. If you are not disciplined to do your business accounting on a regular basis, then hire someone to do it. But do not abdicate your responsibility to review the work of your bookkeeper regularly.
- Time and Billing Software Programs:
There are a number of good, inexpensive software programs on the market to help you capture your billable time and present your clients with detailed, professional bills on a regular basis. For more information, you may contact the D.C. Bar Management Resource line at 202/737-4700 x212.
Written Fee Agreements
It is important to communicate in writing with a client immediately after the initial consultation to define your professional relationship. Clearly defining whether or not you are acting on behalf of the client will help avoid any misunderstandings about the timing, scope and cost of your legal representation. Misunderstandings about the lawyer-client relationship often lead to the souring of the relationship, and costly collection and malpractice suits.
If you are going to represent the client, send the client an engagement letter or, as suggested here, a written fee agreement. The term "engagement letter" is often, but not always, a unilateral written communication from the lawyer to the client setting forth the lawyer’s understanding of the work to be done on behalf of the client. A written fee agreement is very similar, except that it is a bilateral contract between you and your client that will define the basis of your relationship and help both parties make it a positive experience. In non-contingency cases, written fee agreements are not required by the District of Columbia Rules of Professional Conduct. However, from a management perspective, they are essential.
From a proper management perspective, you should have a fee agreement with every client. A well-written fee agreement encompasses more than your hourly, flat or contingent fee; it should define the parameters of the work to be completed, and address your obligations to the client, and the client’s obligations to you. It should also address your rights (e.g., to seek withdrawal) and your client’s rights (e.g., to terminate representation). This is discussed in more detail below.
First, the minimum requirements:
- Rule 1.5(b) of the D.C. Rules of Professional Conduct states that
"when a lawyer has not regularly represented the client, the
basis or rate of the fee shall be communicated to the client, in writing,
before or within a reasonable time after commencing the representation."
See also, Comment 1 to Rule 1.5.
- Although Rule 1. 5 may only require a written rate disclosure,
a comprehensive agreement can avoid misunderstandings that a simple
hourly rate disclosure will be inadequate to prevent. Therefore, it
is strongly recommended that a lawyer draft a comprehensive fee agreement
to be signed by the lawyer and his or her client at the start of each
representation.
- Be clear in the language you choose. Avoid legalese. Use common language that is clear to your clients. Remember, because you are the person drafting this document, it is possible that any error or ambiguity may be resolved against you if a fee dispute later arises.
- Define the scope of your services: Expressly state in the agreement
the legal matter in which you are representing the client. Be specific.
If the matter is a DWI case in D.C. Superior Court, write that in
the agreement. If your representation will not include any potential
appeal, state that as well. If your client hires you in a more general
role of counselor, write it down, along with the parameters of your
counseling role. If an associate or paralegal will work on the case,
put in the agreement that the 21 firm has the authority to assign
other attorneys or staff in the firm to work on the matter. Make sure
you and the client agree on this definition of your services. Resist
the temptation to guarantee any results to the client, beyond giving
the matter your best legal effort.
- Define the timing of your services: Make your services contingent
on cooperation and payment from the client. If you want payment before
commencing work, clearly state to the client that your services start
after the client has paid the advance or the flat fee. State that
your services may cease if the client fails or ceases to pay your
bill. If you later decide to terminate representation of your client
for non-payment of fees, be sure you are in compliance with any and
all court rules and procedures, including seeking leave to withdraw
if such leave is required. See also, Rule 1.16(d) about steps to follow
whenever a representation is terminated.
- Explain the fee arrangement: For your client’s edification, explain
the type of fee arrangement you are using. If it is a flat fee, expressly
state that your fee is a one-time, up-front payment before services
begin. For an advance fee, explain in the agreement that you will
be charging your services against the advance fee on an hourly basis,
and write in that hourly amount. Let the client know that when the
advance fee is exhausted, you will require more money. By the same
token, explain that you will return any unused portion of the advance
fee (pursuant to Rule 1.16). When a fee is contingent on the outcome
of a matter, Rule 1.5© requires that the fee agreement: (1) "shall
be in writing", (2) "shall state the method by which the
fee is to be determined, including the percentage or percentages that
shall accrue to the lawyer in the event of settlement, trial or appeal,
litigation, and other expenses to be deducted from the recovery",
and (3) shall state "whether such expenses are to be deducted
before or after the contingent fee is calculated."
- Fee Advances and Costs: Rule 1.15(d) now states that advances of
unearned fees and unincurred costs shall be treated as property of
the client unless the client consents to a different arrangement.
Therefore, advanced fees and costs must be placed into your client
trust account rather than your operating account–unless your
client agrees otherwise. State in your agreement where the fee and/or
cost advance will be placed. If it is to be placed in your client
trust account, state when the fee will be withdrawn. For example,
you may want to state that once each month (e.g., the X day of each
month or the first Friday of the month, etc.) you will move the client’s
funds from your trust account into your operating account to pay for
the fees and costs incurred on behalf of the client during the prior
month. You may also want to state that you will return any unearned
fees and include a clause about how you will bill the client when
the advanced fee is exhausted. (See also, Paragraph C, above.)
- State examples of the services to be billed to the client: For
your clients who are billed on an hourly rate basis, explain that
they will be billed for your time on all aspects of the case, and
cite several types of billable services, such as depositions, telephone
calls, drafting correspondence, pleadings, trial preparation, etc.
State the amount of your minimum time increment: one-tenth of an hour,
one-quarter of an hour, etc. Clients will appreciate knowing these
details in advance, and such disclosure will save you numerous headaches
over time.
- Explain the client’s obligation for costs: There are two types
of costs usually billed to the client: Costs incurred in your office,
such as copying charges, postage fees, long-distance telephone charges,
22 etc., and costs billed by outside vendors, such as court filing
fees, messenger services, and process fees. Some lawyers pay all costs
and pass them along in their bills to the clients; other lawyers charge
clients for the in-office costs, and have the clients directly pay
the costs incurred by outside entities; still other lawyers require
funds in advance from clients to pay for costs incurred during the
course of the matter. Decide how you want to bill your client for
costs and so state in the agreement. [Note: Disbursements to outside
vendors cannot be "marked up" before being billed to the
client, e.g., a copying job sent to a copying company at .05/page
cannot be billed to your client at .10/page. D.C. Bar Legal Ethics
Opinion 185.]
- Explain your billing practices: Let your client know how often
he or she can expect to receive your bill (preferably monthly), then
make sure you stick to the promised schedule. Also explain when payment
is due (upon receipt; within 30 days, etc.). You can charge interest
on the unpaid balance as long as you disclose the terms in your written
fee agreement with the client, and follow all applicable laws as set
forth in D.C. Bar Legal Ethics Opinions 75 and 60.
- Allow your client time to question your bill: Discussing your bill
with your client will ease client concerns when the bill starts to
mount. Let your client know in the fee agreement that he or she may
discuss the bill with you at any time. However, put a time limit on
the ability to question specific charges--say, within 30 days of receipt.
This may save you problems with a client who later decides to question
all charges and not pay the bill.
- Use of Fee Arbitration: More and more lawyers and clients are using
arbitration to resolve fee disputes. Many of them are using the services
of the D.C. Bar Attorney/Client Arbitration Board (ACAB) for final
and binding arbitration. In the District of Columbia, it is permissible
to include in a fee agreement a requirement that any fee dispute between
you and your client be submitted to the ACAB, "provided that
the client is advised in writing of the availability of counseling
by the staff of the ACAB and provided the client consents in writing
to the mandatory arbitration." D.C. Legal Ethics Opinion 218
(It is important to read the entire opinion before drafting your arbitration
provision).
- Plan ahead for returning the client’s file: D.C. Bar Legal
Ethics Opinion 283 states that a lawyer must keep client files for
a minimum of five years, unless the client requests that he or she
take possession of the file, [Remember, the file, with one narrow
exception stated in Rule 1.8(i), belongs to the client.] Locating
a client after five years either to return the file or to seek permission
to destroy or discard it is a time-consuming and often impossible
task. Opinion 283 recommends adding a clause to your written fee agreement
that allows you to destroy or discard the client’s file after
five years unless the client requests it before the expiration of
this time. (It may be prudent to keep the file longer than five years,
depending upon your type of practice.) In any event, all valuables
must be returned to the client or other proper party before the file
can be destroyed or discarded. See Opinion 283 for additional guidance.
- Be sure to include space for you and your client to sign the document, and to acknowledge the terms of your new relationship. You should give the client time to read the agreement and ask questions before signing the document. Many lawyers mail the fee agreement to the client after their first meeting so the client has time to review it independently. Once the agreement is signed, give your client a signed 23 copy as soon as possible so that the client can refer to it if any questions arise during the representation.
Using Non-Engagement Letters
If you have met with an individual and decline to represent him or her, you should send a non-engagement letter to that person. The non-engagement letter helps to avoid malpractice and disciplinary problems raised in situations such as the following example: A person consults with you and you orally decline the case at the consultation, but the person later claims and believes (after the statute of limitations has run) that you are his or her attorney. You have no written record of your declination of the case. A non-engagement letter sent to the client would help to avoid this growing type of malpractice claim. You should consider the following elements when drafting your own non-engagement letters:
- A clear statement that you are not accepting the individual’s case.
Avoid using legal jargon that may be misconstued by the would-be client.
Be understandable and concise that you will not be representing the
person in this legal matter.
- Your reasons for declining the client’s case. Although you need
not disclose your reasons, you may want to so you do not lose the
person as a future source of business. For example, you may inform
the client that you do not practice that area of law, or it may be
more complex than you have resources to handle at the present time.
In either case you must be truthful, but again, you need not disclose
your reasons.
- Avoid commenting on the merits of the client’s matter. This is
especially true if you are unfamiliar with the law and the legal issues
presented by the client. Your opinion as to the merits of the case
might influence the client’s diligence in obtaining other counsel.
Unless you were hired to research and investigate the issues, you
might even include a statement that declining the case is not an opinion
of the merits.
- Avoid giving specifics on time limitations, but it is acceptable
to state that time limitations may exist. Encourage the client to
seek other counsel as soon as possible so as not to jeopardize his
or her rights or responsibilities.
- Send the letter to the client by certified mail or other delivery method that you believe is appropriate. Put a copy of the letter in the person’s file, and keep it until your risk of a malpractice or disciplinary claim is past. If the non-engagement letter comes back to you as undeliverable, take notes of your efforts to locate the client, and attempt to send the letter again. Keep these notes in the file.
Practice Management Systems and Procedures
Every business needs to have a set of systems and procedures to accomplish the work that needs to be done. Common systems in a law practice include time and billing systems to track expenses and bill clients for your services, and calendar and docketing systems to keep you organized, on time, and to avoid missing important events.
These systems, if properly implemented, will improve the efficiency of your practice, improve your legal services to your clients, help you to avoid problems that can lead to malpractice and disciplinary complaints, and reduce the stress in the day-to-day practice of law.
Creating these systems does not have to be complicated. Actually, a simple system that works is better than a complicated one. The hard part is having the discipline to stick with your system until it is so well integrated into the way you do business that you cannot work without it!
The most common types of law office systems and procedures are listed below. Use these to develop your own systems. Write down your systems and procedures step by step. Do this so you will remember them, but also for any employee to refer to when learning how your system works.
- Client Communications
Attorney/Client Relationship: Effective and regular communication is the foundation of a positive and profitable relationship with your client. Communicate with your client throughout your relationship to build the relationship and avoid problems:- Listen to your client. Learn the client’s initial goals for
the relationship and put them in writing. Provide realistic advice
and guidance. Continue to listen to the client’s goals and expectations
throughout the relationship; note in writing to the client if
the goals or expectations change.
- Provide a written fee agreement, the foundation of your lawyer/client
relationship. The written fee agreement should encompass the scope
of the representation, the basis for the fee, the timing of your
services, and any other issues negotiated. (See Part XIII, Written
Fee Agreements, above.)
- If you decline to represent a prospective client, write a letter
to confirm your “nonengagement” so the "client"
doesn’t wrongfully claim later that you were his or her attorney.
- Disengagement letters should be sent with a final bill; an
order of withdrawal may also still be necessary. [See Rule 1.16
of the D.C. Rules of Professional Conduct, and court rules if
the matter is pending before the court.]
- Schedule face-to-face meetings with each client periodically;
use these meetings to build 25 your relationship with your client,
especially if circumstances of the case or the expectations of
your client change.
- Special communication problems with "difficult" clients:
Learn to identify problem clients who may need more direct communications.
These clients include lawyer shoppers, clients who are reluctant
to pay a retainer or seek a reduced retainer, vengeful clients,
and clients who have unreasonable expectations. Do not be afraid
to terminate a client appropriately if the problems persist, for
you may be the client’s next defendant.
- Your receptionist is your "Manager of First Impressions.”
The way your receptionist welcomes and handles clients by telephone
or in person will set the tone for how the client views your firm.
Poor skills and attention will result in fewer clients. If you
are unavailable to talk to a client, your receptionist must take
clear and accurate messages and leave the client confident that
the message will get to you. If you have an answering service
or machine, make sure that the out-going message is clear, and
that the system works properly (test it from time to time). If
you retrieve your own messages, write them down on individual
message slips so you have a record of each call. Use message slips
on colored paper to make them easier to find on your desk or briefcase.
- Use each telephone message slip as a prompt to return the call.
When returning the call, take notes of the conversation with your
client; if you do not get through to the client on the first attempt,
make a note of the date and time on the slip. If your client complains
that you did not call back, you will have a note of your good
faith attempt(s).
- Respond to all telephone calls within 24 hours. If at all possible,
respond the same day. If you cannot respond, assign a responsible
staff member to call and take a detailed message.
- If possible, set aside blocks of time each day to return telephone
calls from clients. Prompt return calls are appreciated by clients
and will help build your relationship with them.
- Give your client a legal file folder at the time he or she
signs the written fee agreement. Put the client’s copy of the
written fee agreement in the file, and instruct your client to
keep all written communications, pleadings and bills in the file
for future reference.
- Monthly bills are an excellent form of communication with your
client. The bill should project your efforts on behalf of the
client. Use descriptive terms that inform the client of your efforts.
Avoid short descriptions such as “Services Rendered”
or “Research.” A bill that projects effort and value
is more likely to get paid!
- Create a form cover letter for each client to generate a letter
quickly to that client. Include the client address block, greeting,
and salutation, and pre-format it for your letterhead. Store it
in your computer for easy retrieval the next time you need to
send that client a letter. This will keep your costs low by increasing
your productivity.
- Listen to your client. Learn the client’s initial goals for
the relationship and put them in writing. Provide realistic advice
and guidance. Continue to listen to the client’s goals and expectations
throughout the relationship; note in writing to the client if
the goals or expectations change.
- Docket and Calendar Control System
The key to a successful system is to have two sets of eyes and two brains frequently comparing and updating the calendars. Humans make scheduling errors, and those errors need to be found before they become a serious problem. In the best of all possible worlds, you will control the entries on one calendar and a staff person will control the other. Compare the two calendars on a weekly or biweekly basis by reading aloud line by line through one calendar, while the other person is following on his or her calendar. Go through the calendar until the last event listed Make sure you have not forgotten to add an event to both calendars, accidentally double-booked time, or recorded an event on the wrong day or time. Immediately resolve any discrepancies. Now if your computer-based calendar crashes or you lose your portable calendar, you have an accurate back-up calendar that avoids what would have been an almost certain disaster.- A proper Docket Control/Calendar system must have at least
two separate calendars: both paper-based or one paper-based and
one computer calendar system.
- The controls must be maintained by separate individuals, with
the attorney being one; if you are a solo practitioner without
employees, consider sharing the task with a convenient, noncompeting
colleague.
- Staff should be adequately trained to schedule calendar events properly, and should understand the paramount importance of an accurate calendar.
- When a new event is scheduled, such as a client meeting, deposition,
closing, or discovery due date, the date and time of the event
should be placed on both calendars. Develop a form that is circulated
to all calendars in your firm or practice group.
- One person should be charged to receive all incoming mail,
faxes or hand-deliveries. The document should be date/time
stamped and reviewed to see if it is a docket/calendar item.
The item should be placed on one calendar immediately. The
document should then be forwarded to the proper attorney who
will manage the calendaring for the second independent calendar.
- If the event is set by telephone or in person, the person scheduling the event should give the details to the person in charge of the second calendar to update. (See sample update form.)
- One person should be charged to receive all incoming mail,
faxes or hand-deliveries. The document should be date/time
stamped and reviewed to see if it is a docket/calendar item.
The item should be placed on one calendar immediately. The
document should then be forwarded to the proper attorney who
will manage the calendaring for the second independent calendar.
- If the calendar item is court related (e.g. a notice of hearing,
discovery), then the person receiving the document should make
a copy for a tickler file made up of 31 sections, and filed according
to the date of the hearing, etc. (See next section for detail
on creating a tickler system.)
- The system must be cross-checked periodically--preferably weekly.
- Each Friday, a weekly calendar for the following week showing
all events for all attorneys (in the firm or practice group)
should be distributed to each attorney and appropriate staff.
At that time the tickler file should be cross-checked against
the items on the calendar. Thereafter, the two calendars should
be compared for the following week. At least once per month
the two calendars should be compared for a 4-6 month time
period.
- Each Friday, a weekly calendar for the following week showing
all events for all attorneys (in the firm or practice group)
should be distributed to each attorney and appropriate staff.
At that time the tickler file should be cross-checked against
the items on the calendar. Thereafter, the two calendars should
be compared for the following week. At least once per month
the two calendars should be compared for a 4-6 month time
period.
- Each attorney should have a back-up attorney to handle cases
in case of illness or emergency. If you are a sole practitioner,
find a compatible colleague who can monitor your cases; seek permission
from your clients to have another attorney handle any emergencies
while you are away. Be sure to check for conflicts in advance
and resolve them.
- A proper Docket Control/Calendar system must have at least
two separate calendars: both paper-based or one paper-based and
one computer calendar system.
- Reminder (or Tickler) System
- A tickler system is a way to remind you of upcoming events or
deadlines. It is separate from your calendar, and works as an
independent system to make sure you never miss an important event
or deadline. The tickler system can be part of a case management
program on your computer, or it can be a paper-based manual system
you create yourself. The best one is whichever one works for you.
- The manual system has many versions, but this one seems to work
best:
- Create a file or purchase an accordion file with at least
31 subparts numbered 1 to 31; make a copy of each important
motion, notice, etc., and place it in the file according to
the date of the month on the document. The date of the event
should also be entered on your calendar system. You or a staff
member should regularly check the tickler file at least several
days or a week in advance. It is OK to file documents for
different months in the same folder.
- Examples of what to place in the file include letters to opposing counsel for which you are waiting for a response, discovery notice filed according to the due date, hearing notices, and deposition notices.
- Create a file or purchase an accordion file with at least
31 subparts numbered 1 to 31; make a copy of each important
motion, notice, etc., and place it in the file according to
the date of the month on the document. The date of the event
should also be entered on your calendar system. You or a staff
member should regularly check the tickler file at least several
days or a week in advance. It is OK to file documents for
different months in the same folder.
- Computer-based calendaring programs and personal information
managers (PIMs) usually 28 include some form of tickler system.
Any of these software programs can be helpful if used consistently.
- Because no system is foolproof, plan on physically reviewing each of your files at least six times per year. This will often catch an event you may have missed, and maybe generate a new idea or tactic in the case.
- A tickler system is a way to remind you of upcoming events or
deadlines. It is separate from your calendar, and works as an
independent system to make sure you never miss an important event
or deadline. The tickler system can be part of a case management
program on your computer, or it can be a paper-based manual system
you create yourself. The best one is whichever one works for you.
- Conflicts Checking System
- Each firm should have a written policy on conflicts and how
to check for client conflicts. The policy should include a process
for maintaining a conflicts filing system, a procedure for checking
conflicts before a prospective client is interviewed, and a procedure
for checking conflicts before hiring new lawyers or staff.
- An alphabetical file card system of all clients and opposing
clients may be adequate for some practices. List the type of legal
service performed next to the client name. Also note the date
the file was opened, the date closed, the lawyers in your office
assigned to the case. If you do corporate work, include additional
information about officers, directors, subsidiaries and parent
companies, principal owners, and other professionals serving the
entity. You will also have to keep track of the prospective clients
you initially interview, but that do not engage your services.
- Keeping your conflicts file on a computer can be very effective
if the information is kept up-to- date and is well organized.
Many lawyers use their time and billing program or case management
programs to enter all clients, even clients not retaining the
firm. The program can then be searched to check conflicts. An
inexpensive computer-based system conflict system is to create
a document in WordPerfect or Word that includes the names of all
potential conflicts. You can then search that document for possible
conflicts using the "Search" function in the word processing
program.
- The more complex the matters you handle, the more sophisticated and thorough your conflicts system should be. You can delegate this task, but you should not abdicate responsibility.
- Each firm should have a written policy on conflicts and how
to check for client conflicts. The policy should include a process
for maintaining a conflicts filing system, a procedure for checking
conflicts before a prospective client is interviewed, and a procedure
for checking conflicts before hiring new lawyers or staff.
- Case File Management System
After calendaring, file management creates the greatest opportunity for sloppy management. Sloppy files lead to sloppy cases. Sloppy cases lead to disgruntled clients. Disgruntled clients lead to–well, we don’t need to go there!- Effective case file management includes a system for filing
each client file and filing each paper document in each file.
An organized file allows you to work more efficiently, and shows
the client your level of commitment to the case.
- File Control:
Develop an easy system and stick to it. Start with centralized storage of all files: Alphabetical storage of files in a file cabinet will do. (Some lawyers swear by a numerical filing system that avoids rearranging file drawers when new clients arrive, it requires you to memorize the file number for each client.) Even if you are a sole practitioner without administrative help, file the files correctly each time. Do not leave files on your desk unless you are working on the file. Each file should have the client name displayed on the file tab, but avoid file labels that include detailed client information; when you take the file to court, confidential information may be visible for all to see. - File Organization:
Create a filing system for each file, based on your particular practice area. Use files that have at least four inside surfaces with prongs to attach documents. Keep each client file organized the same way, so that you know where each type of document (pleading, correspondence, discovery, etc.) is in each file. For example, file all documents related to your attorney/client relationship inside the front cover, place all correspondence on one surface, all pleading on another. Use the additional surfaces for discovery forms, evidentiary documents and reports.
- Closing and Storing the Client File:
At the end of each case, review your client’s file for materials that can be returned to the client. Make copies of case law, briefs and memos that may be useful for your "forms file". If you agree to keep the client file, be sure to maintain the file in a safe, secure location for future reference. Let your client know that you will keep the file in storage for a minimum of five years (See D.C. Legal Ethics Opinion 283). While it is true that your client may be more likely to return to your services knowing that you have a complete history and file, you are also taking on a responsibility to properly maintain the file.
- File Control:
- Effective case file management includes a system for filing
each client file and filing each paper document in each file.
An organized file allows you to work more efficiently, and shows
the client your level of commitment to the case.
- Forms/Document Management and Retrieval System
- Creating a procedure to recover pleadings, briefs and memos
from case files will save you time and effort the next time you
encounter a similar case or factual issue. The basic idea is to
save helpful documents that you have created or copied so that
you do not have to recreate the documents from scratch.
- After preparing a pleading or brief, store the document in a "forms" directory of your word processing program for later access and use (e.g., c:\forms\will). The same issue may arise in a later case, and you will already have the basis for a new pleading or brief.
- At the end of each case, search the file for attorney work
product (from all counsel in the case) that may be used as
a basis for a pleading or brief in a later case.
- Copies of published cases that you may have copied to use in your case should be recycled from client files for use in later cases.
- Storage:
Use a separate file drawer to archive these documents. File the pleadings, briefs and memos alphabetically in folders labeled by subject area. In a separate drawer, file copies of published cases alphabetically in folders by case name. Even if you just save the leading cases in your practice area, reusing the copies of these cases in the future will save time, money (and trees)!
- Discovery:
Proper storage and safekeeping of your client’s discovery documents are required. Important client documents and case evidence should also be protected from theft, fire, or other physical damage. Most attorneys do not have space or resources to house everything in fireproof file cabinets, but there are some things that may be worth the additional investment. A "one-of-a-kind" piece of evidence in your possession should probably be kept in a fireproof safe. Evidentiary photos can be stored separately from the negatives; store the negatives off-site in a secure and confidential location such as a safe deposit box.
- Creating a procedure to recover pleadings, briefs and memos
from case files will save you time and effort the next time you
encounter a similar case or factual issue. The basic idea is to
save helpful documents that you have created or copied so that
you do not have to recreate the documents from scratch.
- Timekeeping and Billing System
An efficient timekeeping system will capture more billable time. An efficient billing system will help you collect your fees for the time billed.- Keep a time sheet at hand at all times. The time sheet can
be a preprinted form or a “pop-up” timer on your computer.
Decide what type of time-capturing device is best for you and
stick to it.
- When you are finished with a task for one client, log your
time immediately. Studies are unanimous: The sooner you log your
time after completing the task, the greater your financial return
on the time billed. If you wait to log the time, you are likely
to forget to bill it. And if you do remember later, you will often
forget the actual amount of time spent on the task, and log less
time for the client so as not to risk overcharging.
- Periodically throughout the month, transfer your time sheets
into your billing system so that at the end of the month all time
logged is ready to be billed.
- The primary goal of billing is to turn your legal services
into financial compensation. Send monthly bills to every client
whom you did work for that month and any client who still owes
you money. The secondary goal of billing is to communicate with
the client. A properly drafted bill will inform the client of
the progress in the case. Even if you didn’t do any work that
month for an active client, getting your name and telephone number
before the client keeps you in your client’s mind. Use your firm
letterhead or reasonable facsimile to print your bill.
- Run your bills and mail them on the same day each month. Clients
will expect to receive a bill about the same time each month.
Time your bills to reach your clients at the point in the month
when they are most likely to have funds to pay.
- Discuss expenses with your client and reach an understanding
about discretionary expenses such as large-volume copying and
overnight delivery charges.
- Consider setting up a Credit Card Merchant Account so you can
accept client payments by credit card. You can do this through
the financial institution that handles your other banking needs.
The cost is usually less than $400 (for the credit card scanner
and printer), and approximately three percent (3 percent) of each
transaction. It is an inexpensive way to increase your collections.
- If a bill to a client is going to be unusually large, place a call to the client to discuss the bill. Do not feel guilty and reduce the bill; make sure the client understands the value of your work, and your efforts to provide value to the client.
- Keep a time sheet at hand at all times. The time sheet can
be a preprinted form or a “pop-up” timer on your computer.
Decide what type of time-capturing device is best for you and
stick to it.
- Strategic Planning
Every law practice can benefit from some form of strategic planning. Make time to get away from your office every four to six months to look at the overall "big picture" of your practice. Set theses dates and times a year in advance and try to stick to them. If you can, go somewhere relaxing. Review your marketing plan, business plan, financial reports (income and expense statements, accounts receivable, time logs, etc.), client questionnaires and previous goals, and evaluate how you are doing, and where you are going. If you are in a firm, include all attorneys in the firm in this process. Ask for input and suggestions from staff as well.- If you do not have one in your business plan, create a mission
or goal statement for yourself and your practice. Short term goals
of six months to a year and long term goals of two to five years
are common. Review these statements periodically.
- After evaluating your past and present performance, set long and short term goals for your practice. These goals can be in the areas of marketing, revenue, employee moral, client satisfaction, personal satisfaction, or the numbers of new clients accepted. State your goals and stick to them!
- If you do not have one in your business plan, create a mission
or goal statement for yourself and your practice. Short term goals
of six months to a year and long term goals of two to five years
are common. Review these statements periodically.
Bar Resources
The D.C. Bar has many valuable programs to assist members in the practice of law and to help with professional development. Take advantage of your Bar membership and use the following programs and services:
- Practice Management Advisory Service:
The Practice Management Advisory Service offers practice management assistance to all members of the D.C. Bar. The purpose of the program is to assist members in establishing and enhancing sound policies and procedures in the areas of law office management, practice management and case management. At present, the program offers several services to Bar members. These include in-office assessments of management systems and procedures, and the Management Resource line, a telephone advisory service to answer questions about practice management issues. The PMAS also publishes articles on various practice issues. For further information, please contact the Director of the Practice Management Advisory Service at 202-737-4700, ext. 212, or at www.dcbar.org/pmas.
- Membership Benefits Program:
This program serves Bar members through a variety of benefit programs, including: express delivery services; car rental discounts; a professional liability insurance program and a full range of basic and supplemental insurance plans, including term life, disability income, personal accident and major medical expense; cellular phone service, discounts on fax machines and supplies; financial services; LEXIS discounts; long distance services; magazine subscriptions, office supplies; and credit card services. Visit the Membership Benefits Program online or call the Bar at 202-626-1310 for additional information on these programs.
- Legal Ethics Committee and Ethics Counsel:
To help lawyers answer ethical questions that arise in their practices every day, the D.C. Bar has an active Legal Ethics Committee. On request, the Committee will issue opinions interpreting the Rules of Professional Conduct. As a service to members, lawyers also are available to respond to telephone inquiries on legal ethics issues arising under the Rules. Call 202-737-4700, ext. 231 or 232.
- District of Columbia Court of Appeals Opinions and Information:
Court information is now just a click away. Recent court opinions are also available, usually within 24 hours of being issued. Visit the D.C. Court of Appeals online.
- Publications:
The Bar publishes a number of publications that are very helpful in the day-to-day practice of law. The D.C. Rules of Professional Conduct: You should have the Rules on hand. When deciding the amount to charge a client, trying to understand a possible conflict, drafting your letterhead, or determining what can be stated in a yellow pages ad, you will want to consult your own copy of the Rules. The Rules are online for your own copy and subscription service. District of Columbia Practice Manual: This large two-volume set contains a primer on 30 practice areas. Compiled by representatives from the Sections of the Bar, and published by the D.C. Bar Communications office. Call 202-737-4700, ext. 268, for more information.
- D.C. Bar Web Site:
The Bar’s web site at www.dcbar.org is full of useful information and tools for Bar members. Everything from a calendar of events, to ethics opinions to a searchable roster of Bar members, this site continues to grow and expand. A great member resource worth a “bookmark” on your internet browser!
- Lawyer Counseling Program:
To assist lawyers who experience substance abuse or mental health problems that interfere with their personal lives or their ability to serve as counsel or officers of the court, the Lawyer Counseling Program was established in 1985. The program has helped hundreds of lawyers through confidential intake, assessment, short-term counseling and/or referral to appropriate professionals. Call 202-347-3131.
- Attorney/Client Arbitration Board:
For a fee, the Attorney/Client Arbitration Board assists lawyers and clients with the final resolution of fee dispute issues. The Board also offers an arbitration service for the confidential resolution of legal malpractice claims between lawyers and clients. Call 202-737-4700, ext. 238.
- Continuing Legal Education:
The D.C. Bar CLE Program offers comprehensive courses at reasonable cost to help attorneys improve their knowledge and skills in substantive law, practice and procedure; law office management; and legal ethics. The faculty includes both locally and nationally renowned practitioners and scholars. Most courses are conducted in meeting rooms at the D.C. Bar’s offices, 1250 H Street NW. Call 202-626-3488 or view the online catalogue at www.dcbar.org/cle. - Listing of Washington Law Libraries:
A comprehensive list of all law libraries open to lawyers in the Washington metro area. Includes addresses, phone numbers, hours of operation, and more.
www.dcbar.org/for_lawyers/resources/links.cfm
- Clients’ Security Fund:
If new clients come to you and state that their previous lawyer stole their money, you will want to refer them to the D.C. Bar Clients’ Security Fund. For additional information call 202-737-4700, ext. 237.
- Sections Membership:
The 21 Sections of the D.C. Bar offer a wide selection of professional activities with more than 600 events and publications produced annually. For the seasoned practitioner or the new attorney, Sections provide a myriad of opportunities to advance an individual’s 34 specialized interests and to network with colleagues. For more information, call the D.C. Bar Sections Office at 202-626-3463.
Additional Resources for Law Practice Management Information
- Books
- Bennett, J. How to Start and Build a Law Practice in the
District of Columbia. Bar Association of the District of Columbia
(202-223-6600)
- Flying Solo: A Survival Guide for Solo Lawyers. ABA
Law Practice Management Publication (800/285-2221)
- Foonberg, J. How to Get and Keep Good Clients. National
Academy of Law, Ethics & Management, Inc. (available through
ABA 1-800-285-2221)
- Foonberg, J. How to Start and Build a Law Practice.
ABA Law Practice Management Publication (1-800-285-2221)
- Getting Started: Basics for a Successful Law Firm. ABA
Law Practice Management Publication (includes model partnership
agreement on diskette) (1-800-285-2221)
- Morgan, J.H. How to Draft Bills Clients Rush to Pay.
ABA Law Practice Management Publication (1-800-285-2221)
- Women Rainmakers’ 101+ Best Marketing Tips. ABA Law Practice Management Publication (1-800-285-2221)
- Bennett, J. How to Start and Build a Law Practice in the
District of Columbia. Bar Association of the District of Columbia
(202-223-6600)
- Publications
- District of Columbia Rules of Professional Conduct (including
opinions of the D.C. Bar Ethics Committee) (202-737-4700 ext.
268)
- American Bar Association Publications Catalog. Listing
of publications and audio/visual materials produced by the ABA,
including Law Practice Management Section publications. (312-988-5522)
See also www.abanet.org/lpm/catalog
- District of Columbia Rules of Professional Conduct (including
opinions of the D.C. Bar Ethics Committee) (202-737-4700 ext.
268)
- Periodicals
- Washington
Lawyer, published and distributed to members 11 times
a year by the Bar, for up-to-date information on issues affecting
the practice of law in the District of Columbia.
- Law Practice Management, published eight times yearly
by the ABA Law Practice Management Section (1-8001285-2221) www.abanet.org/lpm
- The GP Solo and Small Firm Lawyer, published quarterly by the ABA General Practice/Solo and Small Firm Section (1-800-285-2221) www.abanet.org/genpractice
- Washington
Lawyer, published and distributed to members 11 times
a year by the Bar, for up-to-date information on issues affecting
the practice of law in the District of Columbia.
- Organizations and Associations
- D.C.
Bar Law Practice Management Section: Offers monthly "brown
bag" lunch seminars on management topics for solo and small
firm practitioners; bi-monthly newsletter; plus other opportunities.
Contact the D.C. Bar Sections Office (202-626-3463) for membership
information.
- D.C.
Bar Continuing Legal Education Program offers several programs
each year on law practice management issues. Consult CLE catalogs
and other Bar publications for more information.
- Local voluntary bar associations and local chapters of national
legal organizations can be a good source of practice information.
Consult the Guide to Legal Washington (listed above) or
visit
www.dcbar.org/for_lawyers/resources/links.cfm
- D.C.
Bar Law Practice Management Section: Offers monthly "brown
bag" lunch seminars on management topics for solo and small
firm practitioners; bi-monthly newsletter; plus other opportunities.
Contact the D.C. Bar Sections Office (202-626-3463) for membership
information.
This booklet is provided as a service to members of the District of Columbia Bar by the Practice Management Advisory Service. It is not intended as a substitute to independent research and planning, but as a resource to assist you in your efforts to start your own law practice. This booklet has not been endorsed or adopted by the Bar’s Board of Governors. It is advisory only and is not binding on any office or person charged with responsibility for attorney discipline. The reader should also consult directly the District of Columbia Rules of Professional Conduct. The references to commercial products, services, or companies in this booklet are not intended as endorsements. The booklet may not be copied or reproduced in any manner without the consent of the District of Columbia Bar.
A publication of the District of Columbia Bar Lawyer Practice Assistance
Program
September 2000 Edition
