Implementing project management in your firm: A few tips to guide you

Project Management Flow ChartMarch 2, 2015 | Peggy Gruenke | Practice Management Consultant | ABA Legal TechShow Speaker 2015

Project Management = Matter Management

Project Management is quite the buzzword these days. The ABA recently published a new book, The Power of Legal Project Management, which has resulted in a number of articles and new CLE programs related to this topic. Legal Project Management is a very broad and deep topic, (the book has 517 pages!), the focus of this article is to create the mindset that legal project management is nothing more that matter management. I’ll explain the basic components of matter management and how it can bring a competitive advantage to your firm.

While Legal Project Management (LPM) has been adopted by most larger firms, a new trend is developing where smaller firms are looking to improve profitability, billing realizations and gain a competitive advantage by designing and using matter management tools. The practice areas best fit for project management are litigation cases and even larger transactional cases. Over the next 5 to 10 years, matter management tools will become a normal way of doing business just like today, how client intake and fee agreements are part of every current law firms’ tool bucket.

At the basic level, matter management involves defining, planning, executing and evaluating. The reason it is growing rapidly, is it can be a competitive advantage in the following areas:

  • Enhance current client relationships by showing them your proactive approach to handling their matters
  • It provides a better way to monitor fees and costs
  • Improve communication with clients and eliminate surprises
  • Deliver greater value to clients by reducing clients’ total legal costs
  • Reduce the average cost of certain types of cases through the development of processes
  • Manage and share the risk
  • Increase profitability and realization rates
  • Improves financial reporting because you are capturing more and better data – key metrics
  • Develop better internal business practices and increase efficiency
  • Build good processes to increase productivity
  • Gain a better understanding of how you are getting things done

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The Evolving Role of a Paralegal in Today’s Law Firm Landscape

Paralegal

October 9, 2014 By: Peggy Gruenke, Law Practice Management Specialist

Like so many areas of the legal industry, the role of the paralegal has changed dramatically in recent years. Paralegals have always taken on tasks that do not require an attorney’s hand for completion, such as drafting complaints, motions, and responses. These tasks are the basic skill set that any trained paralegal should know how to complete. This skill set is not extraordinary. It’s the norm.

So where are the opportunities for paralegals to become more integral and successful? There are countless ways to add value to your firm beyond the basics. In this article, I’ll focus on basic client communication skills to help ensure a great client experience that will lead to future services or referrals and thus a more profitable practice for your lawyer.

Here are some tips to help you take it to the next level and become a real asset to your attorney’s practice.

Your role in client selection and engagement:

Client selection is so important to laying the foundation for a successful and profitable engagement. You can assist your attorney with process by working with him/her to create and implement some of the following:

  • Design a client-screening questionnaire that asks basic questions of prospects. The purpose of this form is to identify any red flags before your attorney wastes time with a free consultation. For example, asking for a prospect’s phone number and full address. If they balk at giving this information then ask yourself, “Why should my attorney give away 1 hour of his time if they are not willing to give this information to you?”
  • Consider creating a new client welcome packet
  • Create editable client intake forms using Adobe and setup these forms based on practice area. Each type of practice area has different key information that needs to be captured during the initial client meeting.
  • Create open file checklists so with every new case you are consistently completing tasks.
  • Try your hand at creating a fee agreement template form in Word so for each new case you are starting with a fresh document instead of cutting and pasting, which can lead to errors.

Your role in managing cases:

I call this understanding the economics of a law firm. This is where the you can become an asset to your attorney by helping in the following areas:

  • Understand how client’s fees are set and how expenses are billed.
  • Understand the billing cycle – from the time hours are entered, to client being billed and money actually collected.
  • Understand the importance of retainers and encourage your lawyer to request and get them. Also, learn as much as you can about trust accounting and the rules for you state. A bonus skill!
  • Understand that for each billable hour, the amount actually collected is determined by how much actually got put on the bill and how much actually got collected. This is referred to as billing realization rates and collection realization rates.
  • Understand the role you can play in making sure all billable time is captured, properly reviewed and discounts are minimized.

Your role in risk management

  • Adopt and use good calendaring and task management processes and be the gatekeeper so appointments, deadlines, court-filing dates, statute of limitations are not missed.
  • Create a system for assuring fee agreements are sent and signed copies are received and saved, along with retainers requested.
  • Notice when a client relationship is headed south and be proactive in talking to your lawyer about things you are noticing.

Your role in understanding and using technology

Here lies the greatest opportunity for paralegals to add value to a law firm. This can become your competitive advantage. I think it is a save bet to say that legal technology is the most talked and written about area in the legal industry. And it can also be the topic for a whole separate article. So for this article, I want to leave you with a list of resources you can use to increase your knowledge in this area and really make a difference.

The following list of websites and blogs is a nice place to start for learning about technology in the law firm:

Thanks for reading and learn more by following me on Twitter @PeggyGruenke andsign up to receive my newsletter.

 

Would You Pass a Trust Account Audit?

By Peggy Gruenke, Owner LegalBizSuccess | On Twitter

ChecklistRecently, there was an article in Attorney-at-Work regarding random trust account audits. We all know mismanaging a trust (IOLTA) account can have terrible consequences. However, while it seems to be discussed in theory, most attorneys receive little or no training on how to manage a trust account before opening one of their own. Law schools don’t address this in enough detail based on the blank look I get when I mention trust accounting to new grads. Only the enlightened the bar associations conduct a hands-on, mud up to your elbows, trust accounting class for all new lawyers. (I think they need to turn it up a notch and get a little muddier.) All of which begs the question, “Are your trust accounting practices sufficient?”

If you are in doubt as to whether you are at risk for disciplinary action regarding mishandling of client funds, here is a mini checklist and items you can start implementing today:

Do you maintain separate client ledger for each client’s money held in trust?

You better. Ethics rules require keeping an individual ledger for each client so specific funds can be identified. So make sure you have the ability to do this – even if it is a simple spreadsheet. If you are not good at accounting and QuickBooks, there are great practice management software packages available today to help you manage these funds and stay in ethical compliance.

Does your invoice include an accounting summary of your client’s trust funds?

This is simple and your practice management system should have this feature available. You have a duty to notify your client how and when you used their funds and keep detailed and accurate records. Below is a sample of what you should be including on an invoice where client trust funds were used.

  1. Invoice detail of work performed (time entries)
  2. Total amount due (new charges)
  3. Amount applied to pay the invoice (payment)
  4. Remaining client trust balance

If your invoicing software does not allow you to create a custom invoice template (like above), then you can include with the invoice a report called “client trust ledger report” which is basically a spreadsheet showing all deposits and withdraws and current trust balance.

Best practice tip: After applying the trust funds to the invoice, send the client an updated invoice, which includes the amount of retainer applied and the balance remaining in trust. If the balance is zero or approaching zero, you should also include a letter requesting additional retainer money be deposited (if you are anticipating more work to be done.)

Trust Accounting Statement Clio

Do you accept credit card payments for retainers deposited into your IOLTA account? And if so, how do you account for the credit card fees?

Does your credit card company allow for credit card fees to be deducted from your operating account? If not, are you keeping a reserve in your IOLTA account to cover these fees and then properly recording them when entering the deposit? (Side note: This is the one exception to the rule regarding lawyers depositing their own funds into IOLTA accounts: it is acceptable for a lawyer to deposit their own funds into the IOLTA account to cover the payment of bank fees, including credit card fees.)

Do you know what a 3-way trust account reconciliation is and how to do one?

A 3-Way Reconciliation means that your IOLTA Bank Balance matches your Checkbook Trust Balance and they both match the Sum of all Individual Client Ledger Balances. Most accountants do not understand 3-way reconciliations. That’s no excuse for your lack of understanding. You have fiduciary responsibilities and you cannot delegate this responsibility. Here is a simple spreadsheet to use for a 3-way reconciliation.

Where do you deposit flat fee payments? Not all flat fees are created equal.

This fee may be deposited in the trust account until earned or, upon full disclosure and client consent (in your fee agreement), may be treated as earned upon receipt and deposited in the operating account. This is a common practice for criminal cases. In some states, even litigation tasks billed as flat fee tasks and clearly communicated in your fee agreement can be earned upon receipt. Check you individual state ethics rules.

Best practice tip: Upon receipt of the money, create a flat fee invoice, apply the payment and provide the client with a copy of the invoice.

If your flat fee is for work that involves multiple steps, like bankruptcy filings, then it is better to deposit the flat fee into a client’s trust account and withdraw when reaching specific events or milestones. Again, as outlined in your fee agreement.

One last tip, something that actually came from an attorney who suffered through the Katrina disaster.

On each check you receive that will be deposited into your IOLTA account, write on the memo line of the check: Client Name and Matter. May seem obvious to you now, but if a disaster struck and you had to re-create your IOLTA accounting records, there is no way you will have remembered this information.

Thanks for reading and happy reconciling!

With over 30 years experience in the legal environment, as an entrepreneur/business owner and an IT consultant, Peggy has combined her experiences to bring results and a competitive advantage to law firms assisting solo and small firm attorneys in building their businesses. Peggy focuses on the solo/small firm lawyers with the delivery of practice operations services, including practice management, technology, marketing, financial services and business development.  Peggy is an avid cyclist for JDRF, Gold Certified Clio Consultant and Xero Certified. She serves on various industry associations.

IOLTA Tip #3: Properly Maintaining IOLTA Accounting Records

 

checkbookEvery lawyer who holds money for clients must have a system in place for maintaining and properly recording all transactions related to these funds. There are many resources available to read and review. In this article, I offer a few tips to make sure you have proper accounting procedures in place for handling client funds held in your IOLTA account.

 

Here are a few basic facts before discussing accounting procedures:

 

  • The “IOLTA” acronym stands for “Interest on Lawyers’ Trust Accounts”;
  • The basic nature of an IOLTA account is that it is, in essence, an escrow account, for the deposit of unearned client funds. The interest earned on these accounts generates revenue for the state’s legal aid fund.

 

  • Lawyers are required to send itemized bills to clients at the time the lawyer withdraws funds from a trust account to pay themselves for services. These itemized bills should show:
    • the services provided with a description and dollar amount;
    • the amount withdrawn from the client’s trust account to pay the bill;
    • the amount of funds the lawyer continues to hold in the client’s trust account after withdrawal for payment of the invoice.
  • Lawyers should not make withdrawals from trust accounts by ATM or checks payable to “Cash” and are required to use pre-numbered checks.

 

For the trust accounting, you also need:

 

1)    The trust bank account balance to match the trust liability account balance.

 

2)    A ledger for each client’s trust balance, the total of which equals the trust bank account balance.

 

3)    A detailed ledger, for each client, showing the ins and outs of the trust monies.

 

When it comes to your trust accounting, there’s one requirement that affects lawyers and other legal professionals and doesn’t exist in most other professions. It’s called the 3-way reconciliation report. The Rules of Professional Conduct require lawyers to demonstrate that their financial records accurately reflect all of the transactions in which a client has given them monies “in Trust.”  The “three-way” reconciliation accomplishes this by comparing the total of the individual client ledgers and the bank charges with the balance in the check register. Both amounts should be the same. http://goentrust.com/what-is-a-3-way-reconciliation/

 

How  a 3-way reconciliation works:

 

  1. The first part of the reconciliation is the Checkbook Register.
  2. The second piece is the Bank Statement
  3. The third piece is the IOLTA Balance Register (or Trial Balance). This is a report of all client trust transactions, deposits and withdraws, showing a final balance for each client.

 

To complete the 3-way match you first reconcile the Checkbook Register to the Bank Statement.  The Bank Statement must match the Checkbook Register after taking into account any withdrawals or deposits that have not yet cleared the bank.  Most people are familiar with this process as it is the same as balancing your personal checkbook.

 

Once that is complete, you need to make sure the Checkbook Register matches the total on the IOLTA Balance Register.

 

The first step shows you have recorded in your checkbook all of the transactions that cleared the bank.  The second step shows you have recorded all of the transactions which affect the client’s IOLTA balance.

 

There are plenty of IOLTA resources out there. It’s a matter of accessing those resources. The best thing that you can do with respect to IOLTA accounting is to access the available information, and to learn as much as you can. Then, create a system for managing your IOLTA accounting, and follow, in addition to the ethical rules, your own internal procedures, which should include monthly three-way reconciliation.

 

Peggy Gruenke, Chief Operating Officer and Business Development. More articles available on my blog LawBizCOO.

Tip #2: IOLTA/Credit Cards – New IRS Section 6050W & How it Affects Attorneys

IOLTAContinuing my posts on best practices for IOLTA accounts/transactions, I wanted to share this information with you.  This information comes via the ABA Commission on IOLTA.

“Beginning January 2013, new IRS requirements regarding the reporting of credit card transactions will go into effect and may have the potential to negatively impact IOLTA accounts and lead to ethical violations by lawyers. Here are the key points about you will want to know about if you accept credit cards:

  1. Pursuant to the Housing Assistance Tax Act of 2008, credit card processing companies are required to verify and match each merchant’s federal tax identification number and her legal name with those found on file with the IRS. An EXACT match is required.
  2. For the purposes of this requirement, lawyers who accept credit card payments are considered “merchants.
  3. If there is NOT an exact match between the information provided to the credit card processing company and the information on file with the IRS, there are serious consequences:
    1. Beginning January 2013, the IRS will impose a 28% withholding penalty on all credit card transactions, including those that the lawyer directs to her IOLTA account.
    2. If client funds that should be in the IOLTA account are withheld due to the lawyer’s failure to act and thus are not available to the client on demand, ethical issues are raised.
    3. The credit card processing company should have received information from the IRS if a mismatch occurred and already notified the lawyer of the problem. However, it is not known if all processing companies have provided such notice.”

What action should you take to avoid an ethical violation in 2013:

  • Contact your credit card processor to verify that your legal name on your merchant account matches the legal name you use to file your tax returns;
  • Correct mismatches if informed of one.

For more infomration:  https://www.lawpay.com/news/irs60502.pdf

Tip #1: Handling Credit Card Payments and IOLTA

Tips and Techniques to Properly Manage Your IOLTA Funds (Interest on Lawyers Trust Accounts):  Mismanaging an IOLTA account can have terrible consequences on a lawyer’s career, sometimes to the point of disbarment. For the month of December, I will be doing a series of posts to address questions you may have when handling your IOLTA accounting. This is an important topic whether you are just starting your law practice or if you have been practicing for years.

For this first post, let’s focus on the term commingling. Commingling attorney funds with client funds occurs when:

  1. The client’s funds are combined with the attorney’s personal funds;
  2. An attorney keeps his own money in the IOLTA account, this includes:
    • Depositing money from a client into your IOLTA account that is a payment for an invoice for services performed;
    • Failing to promptly withdraw earned fees from the trust account. Once you have undertaken the work and the client agrees that you have earned the fees, you have an immediate right to the funds on deposit in the IOLTA account intended to pay these fees.  If you fail to promptly withdraw these earned fees from the trust account, you are commingling your funds (the earned fees) with client’s funds.

Today let’s look at the proper way to handle credit card payments from clients. Accepting credit card payments for advance fee deposit, while very acceptable, creates some practical issues that you need to decide how to handle. The options below assume that all credit card fees are being deducted from the operating bank account.

Option1: Set up two merchant service accounts:

  • One for credit card payments on invoices to be deposited into the operating account, and;
  • One for payments that are advance fee deposits to be deposited into IOLTA.

If your current merchant service provider says they can’t create two accounts to differentiate the credit card receipts, it will be too expensive or they can’t withdraw all fees from the operating account,  please call me. You are probably paying too much already and I can recommend a vendor who can save you some money.

Option 2: Deposit all credit card transactions into your IOLTA account.

  • Whoever is making the deposit entries into your accounting system, must have the ability to determine if the payment is an advance fee deposit or a payment for fees earned and invoiced. If it is for earned fees, your accounting person must promptly write a check out of IOLTA payable to the law firm for deposit into the operating account.

Option 3: Deposit all credit card payments into your operating account.

  • If this is the procedure you choose to set-up, you must promptly remove all funds that are advance fee deposits. You accomplish this by writing a check out of the operating account, payable to your law firm, with reference to client name and matter, and deposit this check into the client’s IOLTA trust account.

Option #1 is the best practice for making sure no commingling of funds occurs. It is more efficient and less prone to errors. If you aren’t satisfied with the current procedures you are using for managing your IOLTA transactions, or other accounting functions, please contact me. I can refer you to someone who will be able to make this process easier and more automated – no matter what accounting system you are using.

Peggy Gruenke, Chief Operating Officer and Business Development, pgruenke@lawbizcoo.com

More articles available on my blog LawBizCOO and follow me on Twitter

An Informed Client is a Happier Client: Client Intake Forms and Procedures for Managing Your Law Practice

By: Peggy E. Gruenke, COO Godbey & Associates

Not only is an informed client a happier client – they also tend to pay on time, are less frustrated and have a better chance of becoming a good referral source. All pointing to good things for growing your practice.

Your initial interview is the first step in managing your risk and  is an opportunity to screen cases and clients unsuitable to you, thereby leaving you with the time and resources to provide excellent client service to those clients you choose to represent.  Initial client meetings are to define the working relationship and set client expectations.

  1. Set context for relationship. Remember you want to be in control; don’t let them start off trying to mange you.
  2. Clarify financial obligations and consequences.
  3. For some, it may be first encounter with an attorney and they have no idea what to expect-explain the process.
  4. Clearly and accurately communicate:
  • Course of action
  • Possible outcomes
  • Implications of decisions
  • How long things may take
  • Expected fees and expenses
  • What types of documents they may receive

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