Although just a snapshot of the way in which professionals approach the delicate issue of pricing legal work for clients, a recent survey of 260 transactions at a leading mid-market law firm revealed that 72% of quotes were under the final amount billed, by an average of 21%. An additional 12% was also written off before the client's bill was submitted.

As last year's report by the Commerce and Industry Group, 'Stop the Clock', stated, underestimating the final amount a client has to pay can cause dissatisfaction and mistrust of lawyers.

Coupled with the current pressure from clients to reduce costs, the better partners are able to correctly appraise the needs of a client, quote accurately, manage the work efficiently and manage variations, the greater the client's satisfaction.

Private practice lawyers have plenty of resources available to them within firms to help them narrow the gap between client expectation of the price and the actual amount charged, as well as develop innovative ways to charge for their services. So what steps can firms take to address this disparity between quotes and actual bills?

Firstly, we must understand which factors influence this imbalance between what is often estimated and the final bill that is delivered.

Understanding client needs

Clients expect law firms to react quickly; yet to fully understand a client's needs, lawyers need to invest time in understanding all the factors involved in a project before committing to a price. The temptation is often to embark upon assignments before fully considering the extent of work involved. Accurate project scoping is often hampered by colleagues who do not focus on the needs of their colleagues.

Internal communication

A secondary aspect is that multi-disciplinary project teams, once they embark upon work, are often not aware of how the different elements they are tasked with delivering have been costed into the overall bill. Better communication across departments quickly ensures teams supporting the projects do not overspend.

A desire to win work

Firms seeking to win new work from incumbent advisers can be tempted to low-ball fees to ensure they win the work. Project leaders are then under pressure, often subconsciously, to claw back these discounts by overcharging when clients vary the scope of the work or when hidden complications arise.

Deep-seated hourly billing cultures

When so many law firms focus the way they reward and incentivise their staff purely on the number of hours billed, the commitment and motivation to develop a value-based billing structure is hampered. Firms that have developed a more balanced approach to rewarding their partners and staff are more focused on working with clients over the long term.

So what support can lawyers get from business professionals within their firms to help them deliver great value for money to clients?

- Recognise that a problem might exist

Without the ability to review cost estimates against final bills, management teams will struggle to persuade colleagues that a problem might exist. Frequent reviews at a practice level will help partners to understand which elements of the delivery process might need examining N initial scoping, communication across legal teams working on the matter, time recording, etc. Recording quoted fees can be easily captured by business development teams within credentials or deals databases.

- Modularise pricing

Not only will this help clients understand more fully what they are paying for, but legal teams will know the amount of time they should be spending on each part. Lead partners will also have something to reference back to when specifications change.

Firms such as Eversheds have taken a very proactive approach to the provision of scoping notes and use a process they have developed internally, DealTrack, which breaks down transactions into smaller chunks with associated costs to each chunk.

- Build in contingency fees

Insisting that a contingency fee is incorporated into a cost estimate is a way that firms can demonstrate to clients that projects have uncertainties which they should be aware of. This mentally prepares clients for uncertainties. Finance directors are well placed to advise on the correct percentage of contingency to apply.

- Provide client reports

Allied with the earlier point of better scoping of work is the need to better communicate progress throughout the project. Clients often say that they must see progress against the budget regularly reported, not just to avoid nasty shocks. In the surveying and construction sector, Gantt charts are an essential aspects of projects, are easily managed by administrative staff and enable clients to see exact progress against cost estimates, as well as risks, dependencies and additional works.

- Undertake post-transaction feedback

Law firms such as Addleshaw Goddard, Baker & McKenzie and Osborne Clarke are using peer partners, former partners or business development teams to gather structured client feedback after projects. Happy (and unhappy clients) are delighted to give constructive feedback and this serves two importance purposes N it helps clients to say how the service could have been improved, and it makes them feel valued.

- Undertake internal reviews

Outside the legal sector, firms such as PA Consulting have implemented an approach they call Red Team – independent partners who challenge and review the proposals of their colleagues. Slaughter and May, arguably the UK's most profitable law firm, is widely reported as always holding 'effective discussions' with clients before agreeing fees. By getting under the skin of different projects before they commence work, firms can manage both the expectations of clients and the 'rose-tinted' views of their colleagues.

Business development teams can also play a valuable role by retrospectively analysing what fee earners thought they were told to deliver against what the client actually wanted in the end. This form of rear-facing analysis can benefit the project team in several ways N by helping to understand how to interpret client needs more effectively, how to communicate client needs to the team and reviewing the overall quality of supervision given.

- Measure the profitability of each project

Only the most well-managed of firms have good analysis on the financial value of their clients and, even where billing systems may be sophisticated enough to deal with this, it is likely no-one has taken the initiative to analyse this information and share it among the professional teams.

Management of such information (quote versus time billed, against profitability) is vital if professional teams are to understand there is a real problem, start to adopt measures that will help minimise the risk of billing over and above the quote, and measure changes in this trend. There is a clear role here for finance and business development teams to develop this business information, analyse it and communicate it to project teams.

These seven areas are where business support teams can help lawyers more accurately develop pricing propositions and value-based billing, and manage work more effectively. The legal profession has never seen a time when such a degree of pressure is being exerted to change the way work is priced, delivery is efficiently managed and staff are rewarded accordingly.

Matthew Record and Liz van Hullen are consultants at Record Associates.