Module 1

Billing 101: how attorney fees and billing generally work

Before you can read any legal invoice with confidence, it helps to know the general vocabulary and the common structures. This module is plain background knowledge. It is general education, not legal advice, and it does not address your specific bill.

The common fee arrangements

Law practices generally charge for their work under one of a few broad models. Knowing the general shape of each one makes an invoice far easier to read, because the structure of the bill usually follows the structure of the fee agreement.

Hourly fees

Under an hourly arrangement, the practice generally bills for time spent on the matter at a stated rate per hour, often broken into fractions of an hour. Different people working on a matter (for example, a senior attorney, a junior attorney, a paralegal) commonly have different hourly rates. An hourly bill is generally expected to show, in some itemized form, who did what, when, and for how long.

Flat fees

A flat fee is generally a single agreed price for a defined piece of work, regardless of how many hours it ends up taking. Flat fees are commonly used for well-defined, predictable tasks. A flat-fee bill generally does not turn on time entries, because the price was fixed in advance rather than measured by the hour.

Contingency fees

In a contingency arrangement, the practice's fee is generally a pre-agreed percentage of an amount recovered, and is generally payable only if there is a recovery. Contingency arrangements are common in certain kinds of matters and are typically governed by a written agreement that states the percentage and how costs are handled. (This program itself is a flat-fee education product and does not use a contingency model.)

Retainer arrangements

The word "retainer" is used in more than one general sense, which is a common source of confusion.

Because the same word covers different ideas, the written fee agreement generally controls what "retainer" means in any particular engagement.

Trust accounts and advance deposits, in general

When a client pays money in advance that has not yet been earned, that money is generally expected to be held separately from the practice's own operating funds, commonly in what is generally called a client trust account. As a general matter, funds held this way are drawn down as work is actually performed and billed, and an accounting of that drawdown is generally expected. The specifics are governed by professional-conduct rules, which differ by jurisdiction. This module is describing the general concept, not the rule that applies to any specific situation.

Trust or client funds account (general concept)

A general term for an account in which client money that has not yet been earned by the practice is held separately from the practice's own funds, and from which earned amounts are generally drawn as work is performed and billed.

What an itemized invoice generally contains

An itemized legal invoice is, in general, a detailed accounting of what was done and what is being charged. While formats differ widely between practices, an itemized invoice commonly includes some combination of the following general elements.

None of this is a rule you should apply to any particular bill. It is simply the general anatomy, so the parts of an invoice are recognizable when you look at one.

What task-based time entries generally look like

In a time-based bill, the work is generally recorded as a series of dated entries. A clearly written task-based entry generally identifies the date, who performed the work, a description of the specific task, the time spent, and the resulting charge. As an industry matter, the description is the part that tells a reader what the time was actually spent on.

Illustrative example, not legal advice, not your situation

A generic, well-formed time entry might read like this in the abstract:

"04/12. J. Doe (associate). Draft and revise response to discovery requests; review client documents in preparation. 1.8 hours at $300/hour. $540.00."

By contrast, a generic entry with little task detail might read only: "Attention to matter. 1.8 hours. $540.00."

This is a made-up illustration of how entries can be written in general. It is not drawn from any real bill and it is not a statement about your situation.

The general industry term "block billing"

"Block billing" is a general term used in the legal-billing field. As an industry matter, it generally refers to the practice of grouping several separate tasks together under a single time entry and a single combined time figure, rather than recording the time for each task separately. The general observation people in the field make about block-billed entries is that they can make it harder to see how much time any one task took. This module is defining the general term so it is recognizable. It is not a judgment about any particular invoice.

Block billing (general industry term)

The general term for grouping multiple distinct tasks under one combined time entry instead of recording each task's time separately. Whether and how it appears in any particular bill, and what that means, is not something this module decides.

How costs and disbursements generally differ from fees

It helps to keep two general categories distinct.

A clearly itemized invoice generally separates these two categories so a reader can see what is being charged for professional work and what is being passed through as an expense.

Everything in this module is general background. It explains the common vocabulary and the common structures so an invoice is readable. It does not look at any specific bill, it does not say anything is right or wrong, and it does not tell you whether you have a claim. Those judgments are not part of this material.

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