How do I handle a fixed fee case?

The client has paid up front, but I want the timekeepers to receive proportional credit for their time.

The crux of this problem is that since you don't know the value of the time worked on this matter until it is complete, you can't bill for fees until then. Nevertheless, you still want to keep track of the money received. This solution addresses both of these concerns.

There are a few ways to address your requirement, here's the one that we prefer.

  1. Enter a retainer billing for the amount of the flat fee. Merge the billing transaction.

  2. When you get your money from the client, enter a payment against that retainer billing. This has two effects; viz., it reduces the retainer A/R and it creates a retainer balance equal to the amount of the payment.
  3. Put the matter on hold. This allows you to accumulate all of its fee and cost activity yet defer "billing" until you've entered all of its transactions. If the flat fee includes costs, use status code I (hold fees and costs). If the flat fee covers just fees, use status code F (to hold fees only). Either of these status codes allows the retainer receivable to continue to be billed as a balance forward if the client didn't pay all of it yet.
  4. Enter your fee activity at your most common billing rate. You won't actually be charging your client at this rate, but this will allow you to determine whether or not the case was profitable by using this rate as a standard.
  5. At the conclusion of the case, after all fees (and costs, if relevant) have been entered, go to Transactions/Fees/List Alter, enter the client and matter codes and click on Options/Automatic distribution of write-ups and write-downs. In the "new billable" box, enter the amount of the flat fee to be attributed to fees. Do not click the "adjust hours" box. Then click "redistribute." This process writes up or down (depending on whether or not the value of time work exceeded the amount of the flat fee) each and every time entry assigned to the matter. It does this by changing each transaction's "billable" amount while leaving the "actual" value of each individual entry unchanged. As a result, you can determine, timekeeper by timekeeper, the profitability of the matter.
  6. Take the case off of hold.
  7. Run the billing generator. This will create a fee receivable precisely equal to the flat fee amount.
  8. Enter a Retainer Transfer to pay the receivable. As a result, you will credit your A/R and debit the balance in your retainer account.
  9. On management reports be sure to include a column for retainer transfers. They reflect the fee credit applied to each timekeeper just as does a fee payment. (You may want to use Legalmaster's "calculated field" capability in MIRC to add fee payments and fee retainer transfers together and thereby get a single figure representing fee credits.)

    Please return me to the list of Frequently Asked Questions.