Email Invoices to Clients -- A Proposal

Parsley Sage Rosemary & Ginsburg llp

“always a reasonable result for a reasonable fee, always”

MEMORANDUM

To:	Management Committee
From:	Mike Marget
Date:	August 7, 2012
Re:	Stop Going Postal – Let’s Email Invoices to Clients

Law firms are continually searching for opportunities to either (A) increase revenue or (B) reduce operating costs.  This is an ongoing priority for managing partners and administrators in law firms of all sizes.  Occasionally, not often, we are able to identify a single proposal which accomplishes both simultaneously.  This is one of those rarified occasions. 

PSRG should adopt procedures to convert from mailing client invoices to delivering client invoices via email.  We propose moving quickly over the next three (3) months to achieve 100% electronic delivery of invoices – no exceptions.  Successful implementation of this proposal will:

1.      Improve cash flow by placing invoices into client’s hands faster; and

2.      Reduce operating costs – e.g., postage expense; paper costs; personnel costs associated with manual processing of paper invoices.

I am aware there is a natural resistance to change among the firm’s lawyers.  Some will be skeptical about whether expense savings will actually be achieved.  Also, it is likely the lawyers will express concern about how this will be implemented from client perspective.  We have anticipated many of these concerns as set forth herein.

Finally, it is important we all recognize continued reliance on the US Postal Service is not a viable long-term option.  Proposed cutbacks at the Postal Service – originally scheduled to take effect last May; currently on-hold pending a financial subsidy from Congressional [insert own joke here!] – will add (on average) 2 additional days delivery of first class mail.  Based on our $6 million revenue budget, the Post Office cutbacks will cost PSRG $96,000 in 2012 revenue this year – if the proposed cutbacks come to pass.  We really have no choice and need to get ahead of possible USPS cutbacks.

Email delivery of invoices ensures same day delivery – a 1 day reduction in the current collection cycle; cutting 3 days from the collection cycle once the USPS cutbacks are implemented.  Email invoices to clients also will reduce our operating costs.  The time has come for PSRG to stop licking stamps, suffering paper cuts, and reduce its carbon footprint by hitting the “send” button to deliver invoices to clients!

Snail Mail to Get Slower

Unless Congress intervenes, the USPS plans to close 242 of 487 regional mail processing centers to stem its annual multi-billion dollar operating deficits.  Shuttering these facilities will add 2½-to-3 additional days to the average “next day basis” for first class mail. 

This means the time necessary to deliver paper invoices by mail to clients will increase from 1 day to an average of 3 days.  Similarly, 2 additional days will be added to the time it takes for the client’s envelope containing a check payment to arrive at the firm.  In essence, should the USPS cutbacks take effect, the firm’s accounts receivable collection cycle will increase by 4 additional days.

If the firm’s collection cycle increases by 4 days, PSRG is likely to miss the budgeted revenue target by $96,000.  This is computed as follows:

Firm’s annual fee revenue budget:	$6,000,000
Number of banking days in year	250
Average daily fee collection	$24,000
Postal Service cutback delays (# days)	4
December 2012 collections moved to January 2013	$96,000

By simply adding 4 days to the collection cycle, $96,000 – which otherwise would have been collected by December 31^st – will be collected instead in January 2013.  This means $96,000 less 2012 revenue and a corresponding drop in net income to partners.

Operating Cost Savings: Email vs. Snail Mail

Sending paper invoices through the mail costs a lot.  Postage is expensive.  Add to that the processing invoiced before the postage is affixed: personnel costs, printers, toner, paper, envelopes, and a lot of handling, sorting, folding and stuffing.  It is also necessary to take into account the time required for the USPS to affect delivery.  

In contrast, generation of invoices for email delivery requires significantly less labor and material costs – i.e., most of the processing is accomplished automatically within the computer system – while also promising virtually instantaneous delivery to clients.  The following is a side-by-side comparison of the procedures involved with paper invoices-vs.-email invoices:

Invoicing via USPS ·         Printers monopolized for hours or days ·         Personnel cost – deal with paper jams ·         Personnel cost – replenish paper trays ·         Personnel cost – replace toner cartridges ·         Toner cost – toner is expensive ·         Paper – reams and reams of paper ·         Envelopes – a lot of envelopes ·         Personnel cost – empty paper output ·         Personnel cost – sort, fold, stuff ·         Personnel cost – affix right postage[i] ·         Postage cost – costly as compared to email ·         Post Office deadline – missing the pickup time can add 1 more day to collection cycle

Invoicing via Email ·         Instead of printing, the billing system automatically creates invoice PDF and sends PDF with email addresses to Outlook “draft” file ·         Billing manager sends email(s) with a single mouse click.

Behind the Curtin – How Email Invoicing Works

Emailing invoices does NOT involve printing paper invoices, then scanning the paper to create a PDF, and finally manually entering email addresses, as some partners I have spoken with assumed.  Processing invoices for email delivery is much more straightforward with nearly all of the work performed within the computer system.

Up-to-date software, like that from Orion, streamlines the email invoicing process.  The key features are as follows:

1.      Billing module stores both a physical mailing address and email delivery addresses for every client and matter.

2.      Each matter must be designated either for “printed invoice” option or for “email invoicing.”

3.      Matters designated for email invoicing may contain multiple email addresses using the common “To:”, “CC:” and “BCC:” designations. 

4.      During the billing process, the computer system automatically generates a PDF of the invoice which is sent, together with the corresponding email delivery addresses, to a pre-designated Outlook account.

5.      The billing manager or administrator then accesses the Outlook account to “send” the emails.  Same individual will be responsible for monitoring said Outlook account for any non-deliverable email notices or replies which may be received.

The entire process of preparing and sending invoices by email involves significantly fewer steps than what is required to print and send paper invoices.

Proposed Action Plan

A.     The August billing (of July time) will proceed as in the past.

B.     We will schedule a meeting of all billing lawyers for mid-August to discuss Action Plan:

a.      Stress negative impact of pending USPS cutbacks.

b.      Illustrate potential cost-savings – less postage, paper, toner, overtime.

c.       Demonstrate potential revenue gain by shaving even 1 day from collection cycle through instantaneous email delivery of invoices.

C.     Effective September 1 – for all new clients, intake procedures and engagement letter will be modified to obtain email addresses for invoice delivery.

D.     Reach out to existing clients using form letter and reply form – see Attachments A and B.

E.     Be prepared for the following:

Frivolous Objection	Reasonable Response
Will emailed invoices be considered confidential communications?	Emailed invoices are as confidential as all other emails containing confidential and privileged information.
Will emailed invoices be caught in spam filters?	Emailed invoices are no more or less likely to be caught in spam filters.  Nevertheless, each email will contain a legend asking the recipient to enter the sender’s email address in their contacts list to reduce the likelihood.
What if email address is incorrect?	Email addresses are manually entered only once – during initial setup.  If an error occurs, sender will be monitoring “unable to deliver” messages on a daily basis.
What if client changes email addresses?	Recipients will need to notify us of changes of email address – just like clients must notify us of changes of physical mailing address.
What if clients insist upon receiving a paper invoice?	The invoice is attached to an email in PDF format.  Recipient can always print the PDF.
What if client wants invoice sent to a different email address than regular email correspondence?	The billing system permits client to designate one or more addresses to receive invoices via email.  We will not be defaulting to any current email address you may be using.
Firm cannot force clients to change; what if client refuses to enroll?	Paper invoicing by mail will continue until client enrolls for email invoice delivery.  We will figure out a Plan B for non-enrolling clients later on.
Attachment A – Sample Client Enrollment Letter Dear [client name]:             Parsley Sage appreciates the opportunity to serve as your legal counsel.  In discharging these responsibilities, we strive to do so in the most efficient manner possible, using technology as appropriate to maximize the level of client service and reduce the cost of those services to you.  Recent news concerning increased postal rates and possible service cutbacks have caused us to reassess our dependence on the U.S. Postal Service as the primary means by which we communicate with you each month concerning the work performed on your behalf and the fees associated with such work.             Beginning in September, we plan to begin transmitting our monthly statement of services performed to all clients via email.  Your invoice will be attached as a PDF to an email message, so you will be able to either file it electronically and/or print a paper copy for processing your payment to the firm or for your files.             Please refer to the enclosed form to advise us of those email addresses you would like us to utilize to send your monthly invoice in the future.  After signing and dating, we ask you to return the completed form to us either by mail or via email at your earliest convenience.  Should you have any questions concerning these matters, do not hesitate to contact me.
Attachment B – Sample Client Enrollment Form Please return this form: By mail to: Parsley Sage Rosemary & Ginsburg LLP Attention: Accounts Receivable 123 Sesame Street, NW Washington, DC 20001 By email as a PDF to: Billing@PSRG.com Client Name:  Big Buck Bank, N.A.                          Client Number: 00312 use semicolons (;) to separate multiple email addresses Matter No./Description TO: email addresses CC: email addresses 001 General Representation 005 White Acre Loan Agreement 009 Acquisition of Bob’s Bank & Trust Signature:  ________________________________         Date: ________________ Print name: ____________________________________

---

[i] A few years ago, at my first law firm, the mailroom staff was processing a large stack of one-ounce envelopes containing client invoices.  At some point, their work was interrupted to create a $4.50 postage stocker for an unrelated package of documents.  Returning to the original project, the staff neglected to notice they forgot to reset the postage meter to 33 cents.  Days later, no fewer than ten clients mailed back the overpriced envelopes back to the firm with “nice” messages suggesting mailroom supervision would permit us to reduce our excessively high hourly rates.  This is not one of my fondest memories as a law firm administrator.

Top 10 Things to Consider before Deciding to Marry a Corporation

Parsley Sage Rosemary & Ginsburg llp

“always a reasonable result for a reasonable fee, always”

MEMORANDUM

To:	Top 10 File
From:	Mike Marget
Date:	August 3, 2012
Re:	“Corporations are people, too, my friend.”

Last month, a Seattle woman, Angela Vogel, was issued a marriage certificate to wed "Corporate Person" -- a corporation. 

Top 10 Things to Consider before Deciding to Marry a Corporation

10. – Can a rabbi with just a single member LLC perform the ceremony?
 9. – Am I ready to become stepmother to his subsidiaries? 
 8. – Does the reception have to be held in Delaware?
 7. – Under Citizens United, can he use corporate funds to help pay for my dress?
 6. – Am I prepared to take the heat from Rick Santorum?
 5. – Can I trust him to behave at the bachelor’s party?
 4. – Band or DJ?
 3. – Does his religion require our kids to attend Business Schools?
 2. – Will he really look like Mitt Romney in his rented tux?
 1. – Should I sober-up first?

Why is my Capital Account Negative?

Parsley Sage Rosemary & Ginsburg llp

“Always a reasonable result for a reasonable fee, always”

MEMORANDUM

To:	Rosemary R. Rosemary
From:	Mike Marget
Date:	August 2, 2012
Re:	Your Negative Capital Account Balance @ 12/31/2011

I hope you have recovered from the migraine I inadvertently induced while trying to respond to your question last week.  I thought it best to try again, this time in writing.  Your question to me was:  “Why does the firm’s 12/31/2011 balance sheet show a negative number for [your] Capital Account?”

[Keeping it simple.]  In a partnership, a partners’ Capital Account works as follows:

1.       Last year’s year-end Capital Account balance; plus

2.       Cash or fair value of property contributed by the partner to the firm during the year; plus

3.       The partner’s share of the firm’s net income for the year; minus

4.       Total distributions the partner received during the year in the form of: (i) draws; (ii) draw equivalents (e.g., insurance premiums and profit-sharing/401k contributions funded by the firm on the partner’s behalf); and (iii) fair value of property or capital, if any, returned by the firm to the partner; equals

5.       Capital Account balance at of the end of the current year.

If a partner’s Capital Account balance is negative, it means the partner’s aggregate distributions over time exceed (a) the amount of the partner’s initial and subsequent capital contribution plus (b) the partner’s share of net income accumulated during the partner’s tenure.

How is this possible?  Debt makes it possible.

At the end of 2011, instead of paying-off the firm’s bank line of credit and reserving cash for the 2011 profit sharing liability, the Management Committee paid bonuses to partners on December 31^st.  In other words, a sizable amount of the firm’s 12/31/2011 cash in the bank went into the partners’ pockets, rather than paying down liabilities.

This raises the question as to how the firm will deal with those 12/31 liabilities when they come due. 

·        Our loan agreement with Big Bucks Bank & Trust requires us to have a zero borrowing balance for any 30 consecutive days each year. 

·        We can postpone funding the 2011 profit sharing plan liability until September 15, 2012, should we want to wait that long.  As in prior years, we will extend the due date of the firm’s 2011 tax return until September 15^th.  The profit sharing liability must be funded in full before the firm’s tax return is filed, if the firm wishes to take the profit-sharing expense as a tax deduction for 2011. 

Last December I explained to the Management Committee, the 2012 Budget anticipates generating sufficient cash to payoff both liabilities no later than end of July 2012.  We paid the bank line of credit down to zero on May 1^st and did not borrow again until July 16^th.  On July 16^th, the firm tapped the line of credit again to help fund 2011 profit sharing contribution. 

Negative Capital Account balances are considered, by some, an indication the law firm is aggressively managing its cash resources.  Negative balances are seldom found in large law firms.  They are uncommon in smaller law firms, but I am aware of several firms who, like PSRG, report negative Capital Account balances at year-end.[i] 

Whether a law firm should maximize partner distributions – which is likely to produce negative Capital Account balances – must be tempered by firm liquidity considerations.  High partner draws are contraindicated if the firm runs the risk of cash shortfalls to meet its routine monthly cash requirements for payroll, operating expenses and client cost advances.

I hope this explanation is more transparent and less physically painful than my earlier attempt.  Esoteric financial precepts, like this, are not easily explained to non-accountants.  They are closely guarded concepts accountants employ to ensure job security.

All the best, mike

---

[i] Negative Capital Account balances usually come at a cost.  Postponing payoff of bank debt in favor of additional partner distributions means the firm will incur interest expenses otherwise avoidable if the distributions were delayed.  Similarly, once the actuary completes its testing of the profit sharing calculations, any funding delay will f result in loss of tax-deferred investment earnings inside the plan in an “up market.” 

Top 10 Signs Opposing Counsel is from Another Planet

Parsley Sage Rosemary & Ginsburg llp

“Always a reasonable result for a reasonable fee, always”

MEMORANDUM

To:	Top 10 File
From:	Mike Marget
Date:	July 10, 2012
Re:	Top 10 Signs Opposing Counsel is from Another Planet

10. – Facebook profile says he likes “walks on the beach, classical music, and abducting humans for weird medical experiments.”
 9. – Metadata downloaded from his latest court filing reveals the word “Klingon” was deleted 87 times.
 8. – He has a few jillion frequent flyer miles.
 7. – Wants your firm to join him in petitioning the Federation Council to overturn Pluto’s demotion to dwarf planet status.
 6. – After a few drinks, he starts telling jokes starting with the phrase: “You might be from Alpha Centauri if ….”
 5. – He boldly goes where no man has gone before – to see a midnight revival of Sex and the City 2.
 4. – His garage is saucer-shaped.  (Always a dead giveaway.)
 3. – Authorities in Arizona are trying to deport him to Europa.  
 2. – He has Charlie Sheen on speed dial.
 1. – Tells you in confidence that a future Supreme Court decision will unanimously overturn 531 US 98 (2000). 

Top 10 Steps the Firm is Taking to Sustain the Planet

Parsley Sage Rosemary & Ginsburg llp

“always a reasonable result for a reasonable fee, always”

MEMORANDUM

To:	Top 10 File
From:	Mike Marget
Date:	July 6, 2012
Re:	Top 10 Steps the Firm is Taking to Sustain the Planet

10. – Managing Partner is converting his SUV to run on Oil of Olay.

 9. – Amended the health insurance plan so endangered species can be claimed as dependents. 

 8. – Conserving water by serving clients cold drinks with dry ice.

 7. – Swapping out all existing PCs with new hybrid PC capable of running on either electricity or gasoline.

 6. – Relocating the accounting department to Antarctica.

 5. – New mandatory CLE class on “Global Warming and the Law of the Jungle.”

 4. – Converting all the office thermostats to Celsius. 

 3. – Recycling monthly financial reports from prior years.  It will save paper and no one will notice.

 2. – From now on Top 10 Lists will consist of only 9 items.

Celebrate FREEDOM FROM OVERHEAD DAY

Parsley Sage Rosemary & Ginsburg llp

“always a reasonable result for a reasonable fee, always”

MEMORANDUM

To:	All Partners
From:	Mike Marget
Date:	June 22, 2012
Re:	FREEDOM FROM OVERHEAD DAY – Celebration Time C’mon

Saturday, June 23, 2012 marks FREEDOM FROM OVERHEAD DAY for most small and midsize law firms.

Although Hallmark is unlikely to produce any greeting cards, and the occasion will receive less recognition than National Pi Day,[i] FREEDOM FROM OVERHEAD DAY commemorates a significant annual event in the financial life of any law firm.  It is the calendar date when a law firm has earned enough money to cover its annual overhead costs.  From that date forward, all the cash goes to the lawyers!

In its most rudimentary form, a law firm’s revenue can be divided into two pools:

·        Overhead – occupancy, marketing, equipment, legal research and staff expenses
·        Lawyer Compensation

Assume your firm begins working on January 1^st and earns the same amount of money each day while spending nothing.  When the law firm has accumulated enough money to pay all overhead expenses that will come due during the year, FREEDOM FROM OVERHEAD DAY has arrived.

According to a survey published last year, 47.4% of the average small firm’s revenue goes to paying overhead costs and the balance constitutes partner and associate compensation.[ii]  FREEDOM FROM OVERHEAD DAY is calculated by comparing the relative law firm revenue and overhead costs as reported by the survey and applying those figures to the 366 days in calendar year 2012.  The breakdown works as follows:

Overhead Element	% of Revenue	# Days	Dates Covered
Occupancy Costs	6.8%	25	January 1 - 25
Marketing Costs	2.4%	9	Jan 26 – Feb 3
Equipment Expenses	2.1%	8	February 4 – 11
Library & Reference	1.5%	5	February 12 – 16
Other Overhead	16.7%	62	Feb 17 – April 17
Staff Salaries/Benefits	17.9%	66	April 18 – June 22
Total Overhead	47.4%	175

June 23 is the 176^th day of calendar year 2012.  In theory, June 23^rd is FREEDOM FROM OVERHEAD DAY and it’s all profit for the lawyers from here on out.  Be sure to celebrate (and spend) responsibly.

---

[i] National Pi Day (or π Day) is celebrated by math enthusiasts around the world each year on March 14^th (which can be abbreviated as 3.14 and Pi = 3.1415926535…).  Coincidentally, March 14^th also marks the birthdate of Albert Einstein.  I’m told Pi Day is a big deal at Princeton.

[ii] “Small Law Firm Economic Survey,” 2011 Edition, published by The National Law Journal and ALM Legal Intelligence (2011).  This survey focuses on the economics of firms with 20 or fewer lawyers.

Top 10 Things I've Learned about Cloud Computing

Parsley Sage Rosemary & Ginsburg llp

“Always a reasonable result for a reasonable fee, always”

MEMORANDUM

To:	Top 10 File
From:	Mike Marget
Date:	May 15, 2012
Re:	Top 10 Things I’ve Learned about Cloud Computing

10. – The “Time Travel” app does not automatically adjust for the Julian calendar.

 9. – Surprisingly unavailable in any shade of blue.

 8. – It is not less filling and does not taste better.

 7. – Optional cup-holder holds virtually no cups.

 6. – Incompatible with all known ESP-based bandwidth protocols.

 5. – Users’ manual contains no information regarding cute little kitten playing the piano.

 4. – Avian data carriers are prone to delays, low throughput, and work only at low altitudes; but on the upside, the cost is essentially chicken feed.

 3. – Won’t work with any 8-track tapes.

 2. – Chips running the Cloud-based servers are made mostly from Doritos.

 1. – According to Donald Trump, security access protocols should include a user-ID, a password, and a long-form user-ID issued by the State of Hawaii.