Don’t Nickel and Dime Your Clients. Just Don’t.

I was a way for a few days getting some much needed R&R this past week and as is typical I experienced a business lesson which translates to solo practice.  It is a pet peeve of mine – being nickel and dimed to death.

My husband and I were on our way home and decided to stop for lunch.  We didn’t want anything fancy, just quick and good and stopped at a cafe.  We knew we would pay for convenience as they offered a myriad of fresh and unusual sandwiches and wraps and when we saw this menu, while a little pricey, we expected it would be good and looked forward to the meal.  The place was a little trendy, the ambiance comfortable.  We ordered two wraps, a hot apple cider and a coffee roll.  All I wanted to drink was a cup of tap water.  My husband paid with a credit card.

For some reason I decided to check the receipt as we waited for our food.  I saw ‘comp’ for $.30 and ‘conv’ for $.50.  While it was less than a dollar I was curious what it was so I asked the cashier.  She told me, ‘$.30 for a cup of tap water and $.50 to swipe a credit card.  I was incredulous.  All of a sudden the ambiance wasn’t so nice, the food would not taste as delicious because I was annoyed.  What was this nickel and diming on top of an already expensive pricetag for the food?  Since when does a restaurant charge for tap water and for swiping your credit card?

It doesn’t matter it was under a dollar.  This isn’t about ‘cheapness’ on my part or the rationale on their part for charging these fees.  This is about poor handling of  questionable/discretionary fees and the impact it has on those having to pay them.  The result of these unexplained charges? I no longer felt good about the place.  I certainly would not recommend it or if asked about it I would highlight their extra fees for things which should not be charged.  These fees felt awful and cheesy and made me feel as if money, not the customer, came first.  Also, these fees were never communicated to me thereby giving me the option to pay with cash or the choice to pay for a beverage I actually wouldn’t mind paying for. It sent the wrong message and in doing so impacted the brand and image of the cafe in a negative way. Even if the food was good, it was no longer worth the price considering there are a number of good restaurants  available and without these fees carved out and in your face.

Most law firms still utilize the billable hour model.  Many law firms still charge for absolutely everything, every paperclip, a single copy, a message on an answering machine which says, ‘I’m returning your call’ and everything else a client would expect to be incorporated in the hourly rate.  It is the nickel and diming philosophy which has created a very sour taste in the mouths of most clients.  No matter the result (or delicious the food) it is the idea that as lawyers we have to charge for everything. It is off-putting and creates a negative and unspoken tension between client and lawyer and can impact the client paying your bill in a timely manner.

Normally this ‘right’ to charge for everything and anything is outlined very clearly in a retainer.  Yet, I wonder if most clients really expect to see this ‘right to charge’ exercised.  And when the bill reflects these fees how much of your ‘brand’ is chipped away each and every time?

Yet others indicate on their bills the ‘right to charge’ and include the N/C (no charge) symbol next to a discretionary event or service just to let the client know the lawyer had the ‘right to charge’ but opted not to.

It is my opinion that standard and customary costs for performing legal services should be folded into the hourly rate or a one time ‘administrative fee’ which covers copies, faxes, postage, etc.  Any extraordinary costs like excessive copying or overnight deliveries should be billed separately and explained as an extraordinary expense outside the scope of the hourly rate or retainer. Some would even argue special deliveries should not even be charged.

Nickel and diming clients is a sure way to make sure the client never returns.  Nickel and diming clients is a sure way to get talked about by your clients and not in a positive light.  Nickel and diming simply because you have the right to per your retainer does not mean it is a right you should exercise unless you are protecting yourself in the event you have to sue for fees.

What is your philosophy?  Are there limits or rules within your practice area which require you to parse out each and every cost? And if so, how do you handle it so as not to alienate your client?

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26 comments on “Don’t Nickel and Dime Your Clients. Just Don’t.

  • I agree with you completely. In addition to the “nickel & dime” factor, some firms have charged for copies, long distance, etc. at a rate that is greater than their actual cost. When they itemize it as a reimbursable expense, instead of a profit center, that is also fraud. Don’t just follow the herd. Think it through.

    BTW, I get the same annoying nickel & dime feeling when I stay at luxury hotels. Charging for internet connection and local phone calls is ridiculous. Isn’t it strange that you get that, plus breakfast, for free at CHEAPER hotels?

  • Debra, it’s all a matter of positioning and communication, branding and marketing. I know even if I pay a little more for a room, ‘free’ wi-fi is such a draw even if it’s folded into the room cost. When a law firm handles these ‘fees’ properly it can become a draw as well. This restaurant, btw, really frosted my cupcakes when they did what they did. What a great way to have a customer feel, don’t you think? I did notice, however, the person in front of me swiped their credit card and probably didn’t even notice the additional charge. Were they banking on this transient crowd not noticing or caring?

  • When I go over my contingency fee agreement with clients I let them know that I am not going to nickel and dime them with copy costs, stamps, calls or other little things. I make it clear that the only costs that are in addition to my fees are going to be things that people charge me for. For example, hospitals and doctors offices charge me to get my client’s records. I pay the cost of getting those records and once we settle or win a case those costs are paid in addition to my fees. Other examples would be filing fees, expert witnesses fees, service of process and or other types of services. But when it comes to copies made in my office or keeping track of stamps I just don’t have the time or the desire to nickel and dime my clients for these types of things.

    What I have noticed lately is apparently some attorneys here in Denver are charging interest on top of their costs. For example if they hire an expert witness and have to pay them a retainer they are charging 18-20% interest on those costs. It is outrageous and possibly unethical. I can very easily envision an attorney purposely running up the costs in a case so that he could make more money on it. Anyone else hear of this?

  • I bill by the hour for some work but consider ordinary office expenses beyond couriers and overnight delivery to be included as part of the cost of doing business. In cases involving copies, I note that the first 50 copies per month are simply free. I never charge for first class postage. For calls under 3 minutes, I bill the time but mark it “no charge” and do the same for left messages in phone tag – shows attention to detail AND good customer service.

    Clients LOVE to see no charge items on their bills; it says their lawyer cares, is careful and respects the clients check. What you want as a solo is to get the client to brag about you, to refer family. That kind of marketing cannot be bought.

  • Of course I agree – who wouldn’t? My retainer specifies that my flat fees include all costs including legal research fees, postage, phone charges, etc… (though I do reserve the right to bill for extraordinary costs since sometimes an appellate record can cost $3000 to reproduce).

    I am not a fan of the “no charge” – it just rubs me the wrong way. If you did something extra for me, you don’t need to go and brag about it with the NC. Bleh.

  • Carolyn, providing a NC notation for an otherwise billable event is no different than indicating a professional discount when appropriate. It is a reminder of a service provided ( not necessarily an extra) that the lawyer chose not to charge for but needs to keep record of for any number of reasons. It’s not a ploy. I often used The NC designation because I seldom charged for short phone calls (under five minutes) yet I wanted a record of the phone call and to provide a timeline of interactions for the client. It secondarily made a client think twice before challenging a bill.

      • John, re: record-keeping – you never know when you are going to have your bills analyzed. I always found this very effective because even if I didn’t charge for the phone call I had a record (as did the client) of the conversation taking place. I was a family lawyer and this served me well the few times I had to go to court to fight for fees. So often the client would say they never had these conversations to try to knock down the overall bill! The judge saw the services provided with no charge and created contemporaneously and…I got my fees! Everything done on a bill has multiple purposes :-)

  • What if you are already the least expensive hourly rate in town? Wouldn’t you want to be paid for every cost outlay, such as the ridiculous cost of postage. The court charges a dollar a page for copies, certainly my own ink, paper, and copy machine should entitle me to half of what the court charges. What I do is send a sample bill or budget with my engagemen letter to prepare the client later for my real bill. My clients appreciate my low cost services. I also afford them many opportunities to save money throughout the process by doing some things themselves.

    • Anthony, the key to your success (clients appreciating your approach) is you communicate everything and provide options. In my story, there was no communication – just after the fact costs. So, you are working with your targeted audience effectively!

  • Also, I do like to no charge alot. Often my initial consults are two hours and I NC the whole thing on the bill. I spend next to nothing on marketing so my marketing is client satisfaction, and I remind them about the value they receive as much as possible.

  • This comment is from Jay Foonberg via e-mail:

    “You are unintentionally raising the difference between the “Block Bill” which I recommend which sets forth each and every little thing you did without allocating any specific part of the bill to that service, as opposed to the “line item bill” which isolates every service and time and allocates a fee ( directly or by part of an hour).and spells it out for the client. I call the Line item bill, an “invitation to warfare”. The client will always find some nit picking thing to fight about and delay payment of the rest of the bill.

    Unfortunately, banks, insurance companies, courts and other institutions seem to enjoy practically forcing the small firm or solo into begging for what they have earned.

    If you are going to do “Line item” bills, use lots of “No/charges. to attempt to reduce delays in payment and disputes.”

    My thoughts\\Jay

  • I once referred a client to another attorney because I was unable to handle the client’s case. When the matter was resolved, I telephoned the other attorney, told him that the client was satisfied with the result and thanked him. The telephone call lasted maybe two minutes. The other attorney promptly billed the client for my telephone call!

    Not only did the other attorney get another telephone from me, an irate telephone call, but he never got another referral from me, or any other attorney I knew. What a dumb thing for him to do.

      • Last I heard, he had given up his practice in the community and was working out of a bar his wife owns in a remote, desert community in Nevada. He sits at a far end table and consults with clients. Good place for him, but his clients deserve better.

    • Not only was it stupid, it was entirely unethical. The fact is, yours was not truly a phone call about the client’s matter (certainly not from the perspective of the client), so it was improper for the attorney to lay it off on the client.

      I’m guessing you also did not get a referral fee…

  • I prefer flat fees in a block bill (which I learned from Mr. Foonberg). Even if hourly rates are used, it should be with a flat fee mentality, i.e., everything is included in the hourly rate. Anthony, including a bunch of fees comes off as phony to me. If you included all those fees in your hourly rate, you may have the same rate as other local attorneys but you’re claiming to be the cheapest game in town. I’m with Carolyn, no N/C on the bill, esp. not for paper, copies, postage, etc. If it’s for a phone call, that seems more understandable.

    Is the legal profession the only professional service that tries to get away with this? It seems so. I’ve never been nickel and dimed by any of the accountants I’ve used over the years.

  • From Marylin Toland:

    My pet peeve at restaurants is the practice of rounding up your bill. The server brings only the dollar bills and not the change (coins). I’ve had this happen at three different chain restaurants, complained about it and thought the practice had ended. Then yesterday it happened again. It’s insulting, even when the server says that I should consider it part of their tip. It’s another chain restaurant and I am directing my complaint to the national office this time.

    On ‘nickel and diming’ with clients: I was an associate in a small firm that charged clients for everything – every copy, fax, etc – plus they charged clients per minute for long distance phone calls even after the firm was incurring no additonal expense for the call (free long distance plan). This charge was in addition to billing for the attorney’s time. I do not follow this example in my own firm. I charge clients only for ‘non-customary’ expenses, such as large copy projects, certified mail, international postage. I am ambivalent about charging for travel time outside of a local area. My fee statement says that I can charge at 50% of my hourly rate, but I hesitate to do so. I’m trying to come up with something that’s fair to me (I am using my time), but that does not discourage clients from using my services.

  • Great and thoughtful post and comments. I’m a little late to respond.

    I’m a solo and part of my practice is divorce. I bill by the hour. I’ve thought of moving to a flat monthly admin fee, such as $25, for charges such as copies, faxes, etc. I’m in an executive suite, and the anchor tenant provides these services to me, and bills me for them. However, it is time consuming to keep track of everything. The other option is to simply increase my rates.

    Regarding @Rachel Rogers comment, I had the occasion to go to the hospital ER in January of this year. I was there for less than 8 hours, but the bill exceeded $10K. Then the invoices started, from at least 4 different providers (hospital, cardiologist, XRay imaging, etc.). Point is: (a) law like medicine is expensive, particularly where there are emergencies (such as TROs, etc.); (b) hospitals and MDs nickle and dime on everything.

  • @Matthew – I agree that both law and medicine are both expensive! However, having worked in both industries, I’m happy that at least we, as lawyers, are in charge of our fee schedules.

    Most medical institutions and providers have their rates controlled by third party insurers who generally deny most of those nickles and dimes, while also drastically cutting the allowable fees for service. That said, I was once charged $9.50 for a single dose of children’s tylenol at the ER, so I understand EXACTLY where you’re coming from!

    One of the determining factors in my decision to pursue law school instead of graduate study in psychology was that as a lawyer, I don’t have to deal with managed care!

    I’m still waiting for bar exam results, so haven’t begun practicing – and am torn as to how I will handle the costs of these necessary expenses that add up so quickly. With consumers more cost-conscious than ever before, I don’t know what the best answer is for covering all of the incidentals that reduce the net on a case.

    • Betty, Matthew – I would watch Jay Shepherd’s classes on Fix Your Fees, Fix Your Practice and if he doesn’t discuss this issue, ask him what he does when it comes to this issue. Granted, he deals with employers and isn’t necessarily a solo but he is very advanced in his thinking. Also, listen to Ron Baker’s class – The Firm of the Future – and see what he has to say. Given they are for the value pricing, expenses must come up.

      • Thanks, Susan! I will definitely listen to those classes. There is just so much to think about, so many decisions to make. I’m so glad that I don’t have to invent the wheel with all of the resources that are available on this site!

  • I agree with you that nickel and diming clients make them frustrated and annoyed. It is bad enough that they have to see small time entries for “Email correspondence with opposing counsel,” let alone charges for copying and faxing. Unless it is significant (say over $50) I don’t charge for administrative stuff unless it recurs on a regular basis for the client.

  • My solo practice is specialized somewhat atypical. I represent very large businesses that simply won’t pay for ordinary expenses such as routine telecommunications, copying and electronic research–they expect such overhead to be covered in my rate.

    In my opinion, this is, by far, the better way to go (as long as your rate covers the expenses!). it promotes efficiency–reduction of ancillary costs. It also is more consistent with the concept that the client is purchasing soup-to-nuts professional services rather than a temporary employee.

    I recall the days when firms would charge $1 per faxed page and mark up LEXIS and Westlaw charges by 200% to recover the cost of the equipment and space for the terminals. I don’t know how those lawyers could pretend even to themselves that such markups were legitimate. The strict outside counsel requirements that all large business clients impose on us are a direct result of such abuses.

    As for the n/c entry, I think it’s useful.

    • “The strict outside counsel requirements that all large business clients impose on us are a direct result of such abuses.”

      That’s why it’s better to beat them to the punch. Lawyers should spot the trends (dissatisfaction) and capitalize upon them before they are imposed upon us!

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