There are three threshold questions in discounting – whether you should, by how much, and when?
Discounting goes to the heart of practice profitability.
Most partners earn around 12 – 16% on fees after notional salaries. So if you happily discount all your $10,000 bills down to $9,000, there goes most of your profit.
So firstly, should you discount?
Well, you shouldn’t as a matter of habit. (But plenty do). If you discount habitually, then your clients will expect it habitually. Of course there will be cases where it is warranted, and this will be a matter of judgement.
We’ve always liked the ‘would I be prepared to vigorously defend this bill under any examination’ test.
If yes, then get on with it and bill with pride!!
Alternatively, does it pass the sniff test? Is it way over estimate, without further consultation / agreement? Is there an element of highly inefficient lawyer training reflected in the price? And so on…
By how much, is also a matter of judgement.
If there has been significant scope change on the way through, then you should have the courage to pursue this (provided always that you have kept the client informed and have made arrangements). But just because the client doesn’t particularly like the size of the number isn’t a good reason in itself to cut deep.
Finally, we’ve always felt that dealing with problems on the work ledger before a bill is finalised, is far superior to being forced into a position of weakness by discounting actual bills.
If you aren’t prepared / able to defend your actual bill, the question must arise in the client’s mind – are they all like that?
Published: Queensland Law Society – Proctor, June 2014 (p.59)