Structured Retainer Payment Plans

If you want to collect 100% of what you bill and not turn away potential clients, consider using Structured Retainer Payment Plans.

As you know not many clients can afford to pay your entire projected fees and costs on their legal matter in advance.  Structured Retainer Payment Plans are designed to keep your office cash flow positive while accommodating your clients’ abilities to pay.

The objective of a structured retainer payment plan is to eliminate client collection problems, but it does involve a few more administrative tasks.

You will need to develop a Retainer Payment Plan Agreement; you will need to refer to that agreement with every retainer payment request; you will need to bill the retainer payment plan; and you will need to keep track of and report the transactional history of your client’s money along with your accounting and billing of fees and costs.

Clients who have money on deposit with you in a trust, retainer, or escrow account will want to see an accounting of their money when they are requested to pay more.

There are two basic retainer billing methods; Monthly/Weekly Retainer Installment Payment Plans and Evergreen Minimum Balance Retainer Payment Plans.  For these to work, the client has to be able to pay a large enough initial retainer deposit to cover what you project fees and costs will total during the first three months.

Monthly or Weekly Retainer Installment Payment Plans work best for clients who are cash tight.  Those clients need to depend on making the same retainer payment each week or each month.

The risk of not getting paid in full increases when a client cannot pay a projected three month retainer and/or misses just one retainer payment.  You will have to determine whether or not you want to take these risks.

For both types of Retainer Payment Plans the client needs to sign a Retainer Payment Plan Agreement and the basic terms of that Agreement should appear on each client billing statement and each Retainer Replenishment Notice.

Each billing statement and each Retainer Replenishment Notice should present a transactional history of the client’s payments and your disbursements as shown below:

Retainer Payment Plan Transactional History

Client opening retainer deposit 3/22/15 $500

Client retainer payment 3/31/15 $500

Client retainer balance on 3/31/15 $1000

Client retainer payment 4/10/15 $500

Client retainer payment 4/22/15 $500

Client retainer disbursement to pay 4/30/15 statement $1200

Incurred but unbilled charges of $1000 from 4/30/15 to 5/11/15

Client retainer balance on 5/11/15 $800

Weekly/Monthly Retainer Installment Payment Plan

The Weekly/Monthly Retainer Installment Plan requires the client to pay a Retainer payment each week or each month.

For weekly installment payment plans, it is better to email or text the Retainer Installment Payment Notice every week and to incorporate the retainer payment plan transactional history (Table 1) with the notice.  Whatever you do, do not depend on your client to remember to pay. Always send a Retainer Installment Payment Notice.  You can automate this entire process.  There is no cost for an email or a text.

When using an emailed or texted Retainer Installment Payment Notice your monthly billing statement to the client for fees and costs should show the ending retainer balance from the previous statement, retainer money received and retainer money disbursed this month and the current statement ending retainer balance.

Evergreen Retainer Payment Plan

The Evergreen Retainer Payment Plan requires a client to deposit what you estimate to be about a three month retainer deposit and to agree to replenish the retainer balance by that amount when the retainer balance reaches ½ that amount.

For example, let’s say you estimate that the client’s matter will cost $10,000 in fees and costs over the next three months. You prepare the representation and business practices agreement for you and the client to sign.  Your client agrees to pay $10,000 and to continue with $10,000 payments when the retainer balances reaches the minimum of $5,000.

The trick to Evergreen Retainer Payment Plans is keeping the minimum and balance ratios to the three month estimated fee/cost billing and the minimum retainer payment at ½ that amount. These are good rules of thumb for the time it takes for the client to receive a notice from you and for you to get paid while continuing to work and charge fees and costs to the client’s matter.

Your Retainer Replenishment Notice should be accompanied with a full accounting of the client’s money as shown above in Table 1.  You still need to send a detailed fee and cost bill at the end of the month and the monthly fee and cost bill should display the current retainer ending balance from the last month, this month’s retainer transactions and this month’s ending balance.

The Retainer Replenishment Notice and the monthly fee and cost bill should both have a message reminding the client of the terms of the client’s Retainer Payment Plan.

Notifying your client the minute the retainer balance reaches the replenishment minimum is critical to making this system work.  We at Interbill will be releasing a new feature in 2016 that will automatically prepare an email and text notification to the client when fees recorded against the client’s retainer reaches the replenishment minimum.  The email will contain the full accounting of the client’s retainer money as in the above example, fees recorded but not yet billed will display before the ending retainer balance.

To receive a demonstration of Interbill’s monthly Installment Retainer billing and Evergreen Retainer billing features, please email or call 800.733.9933.






Phil Paisley

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