In this guide 6 sections
Hourly matters need time entries with narratives and rates. Fixed fee matters need a scope, milestones and a record of effort anyway. Contingency matters need the fee agreement, advanced costs and a settlement statement. Record effort on all three, or you cannot compare their profitability.
Hourly work starts with clean time entries
A billable hour matter lives or dies on the time entry. Each one needs a fee earner, a date, a duration, a matter number and a narrative that a client can read without a phone call.
Rates sit in layers. A partner, an associate and a paralegal each have a standard rate, and a client may hold a negotiated one. The system should pick the right rate by person and matter.
Write-downs matter. If a partner trims twenty entries before the invoice goes out, the report should show both the recorded value and the billed value.
- Fee earner, date, duration and task code per entry
- Rate card by person and by client agreement
- Narrative text that passes the client’s billing guidelines
- Write-on and write-off with a reason
Fixed fee work still needs time recorded
A fixed fee removes the hourly invoice. It does not remove the need to know what the matter cost you. Staff should keep logging time against the matter even though the client never sees it. Habit matters here.
Record the scope in plain words at the start. A conveyance excluding a lease variation, or a company incorporation including the share register, tells you later whether extra work is billable.
Break the fee into stages where you can. A matter that bills on instruction, on exchange and on completion produces cash earlier and flags stalled files sooner.
Contingency matters carry long exposure
Under a contingency arrangement the firm is paid only if the case succeeds. That makes the signed fee agreement the most important document on the file, with the percentage or formula, the treatment of costs and the client’s rights written clearly.
Costs advanced for experts, court fees, medical reports and travel become a running ledger. A personal injury file can sit for years, so the ledger must show who paid, when and whether it is recoverable.
At settlement, a statement lays out the gross amount, deductions, repaid costs, fee and net to the client. The matter record should hold the signed copy.
- Signed fee agreement with date and version
- Advanced costs ledger with receipts attached
- Offers received and decisions the client recorded
- Settlement statement and trust account movement
Comparing profit across the three models
Partners ask which model earns more. The honest answer needs the same inputs for every matter, namely hours spent by each person, costs incurred, fees collected and the date cash arrived.
From those four, the system can show effective hourly yield. A fixed fee that looked generous may come out lower than hourly work once the late changes are counted.
Contingency results are lumpy. Report them by year of opening and by year of resolution, so one large win does not hide a pile of unproductive files.
Setting up the matter record properly
Add a fee model field to the matter opening form and make it mandatory. Everything else follows from that choice, including which screens a fee earner sees and which invoice template applies.
Review a sample of closed files for each model. Check whether the engagement letter, the time records and the final bill agree.
Start with one practice group, such as family or injury work. Fix the gaps there, then roll the same fields out to the rest of the firm.
Fee model recording sheet
A one-page matter sheet with three blocks, hourly, fixed fee and contingency. Each block lists the fields to capture at opening, during the matter and at closing, such as rate card, scope statement, stage dates, advanced costs and settlement statement. A footer row holds hours spent, fees billed, fees collected and yield per hour.
Open a blank worksheet to printQuestions owners ask
Do fixed fee matters need timesheets?
Yes, internally. Without time records you cannot tell whether the fee was priced well or whether the scope crept.
How should advanced costs be tracked on contingency files?
Keep a ledger per matter with the payee, date, amount, receipt and whether the cost is recoverable. Review it at each major step.
Can one matter use two fee models?
Yes, for example a fixed fee for the pleadings and hourly for trial. Record each phase with its own terms so the invoice follows the agreement.
What report shows whether a fee model is working?
Effective yield per hour by matter type and fee model, compared with the standard rate. Add days from work done to cash received.