Between growing client demands and the need to stay competitive — law firms are increasingly adopting alternative payment arrangements to provide better client service, like evergreen retainers.
Learn more about the benefits of evergreen retainers, when you should consider them, and how to implement this new payment arrangement for your law firm.
What Are Evergreen Retainers?
An evergreen retainer is a type of fee agreement in which a client pays a fee into a separate trust account, which is known as an Interest on Lawyers’ Trust Account (IOLTA). When legal services are provided, lawyers can invoice against the trust account to get paid.
As the trust account is depleted, the client must replenish it once it hits the predetermined minimum balance. This differs from a traditional retainer structure, which has a client pay a lump sum in advance that the law firm bills against. Once that retainer is depleted, the client is then billed for the additional work at the typical hourly rate.
When to Use Evergreen Retainers
Evergreen retainers are ideal for some legal situations, such as when a client prefers not to pay a large retainer upfront for legal work that will take months or years. Using an alternate form of payment, such as an evergreen retainer, relieves the burden of expensive legal services without risking your cash flow.
For example, you may have a case that will total $50,000 once completed, but it will take six months. That can be a lot of money for some clients to produce all at once, but if it’s broken up into $5,000 trust balances over several months, that may be more affordable for the client.
Some law firms use evergreen retainers for litigation like personal injury, criminal defense and civil cases, probate, divorce and family law, and medical malpractices, all of which can go on for weeks or months. This helps lawyers devote time to cases that won’t be resolved for a while without disrupting the cash flow.
Why Should Law Firms Use Evergreen Retainers?
There are numerous benefits to evergreen retainers, including:
Increase Cash Flow
Having an outstanding balance on your invoices can have negative effects on your law firm’s finances and overall cash flow. There’s also time and money lost in tracking down payments and sending invoice notices to clients.
Evergreen retainers ensure that your client always has the funds for legal services in advance. If you have the funds in trust, you can invoice against them as needed to improve cash flow, rather than waiting for a client to receive and pay an invoice.
Improve Collection Rate
Law firm collections can be a strain on your business. Evergreen retainers ensure that the money is held in trust while legal services are provided, making it more affordable for clients to pay and reducing your unpaid invoices.
Evergreen retainers have the benefit of simplifying client invoices. Each invoice is paid on a schedule, and clients replenish the funds when the balance on the account dips below the minimum.
This process is further automated when your firm uses online payments. With PracticePanther, your firm can easily request, collect, and deposit retainer payments with the native payment processor, PantherPayments. When you send the custom payment link to the client via email or business text message, simply configure the setting to deposit in the desired client account.
How to Adopt Evergreen Retainers
Evergreen retainers are simple to implement with the right legal billing software. Without the proper legal billing practices, the invoice and balance tracking needed to adopt evergreen retainers can be difficult to manage.
Clearly Communicate Your Firm’s Use of Evergreen Retainers
Your law firm should have a clear legal billing policy that outlines your payment terms, including an evergreen retainer clause. This communicates how the evergreen retainer works, clearly and concisely, so clients know what to expect.
At a basic level, your firm’s evergreen retainer clause should include:
- The minimum balance for the trust account
- The time frame clients have to replenish funds
- Payment methods to replenish the evergreen retainer
- Action steps for late payments
Your firm will need to decide the minimum balance for evergreen retainers. There can be a set amount across all cases or you can determine the minimum balance on a case-by-case basis. No matter what your firm chooses
It’s important to note the consequences if a client fails to honor the evergreen retainer clause. For example, you may stop working on a case if the client doesn’t replenish the trust in the allotted time. Either way, disputes are best avoided when clients clearly understand their responsibilities.
The best and easiest way to kick off the billing conversation is during the client intake process. Clients are already reviewing contracts and expect to get a full picture of what it’s like working with your firm.
Monitor Retainer Balances
When you have evergreen retainers, it’s up to your firm to monitor client balances to ensure they don’t deplete. To stay in compliance, your firm should implement a system that automatically tracks balance and notifies clients when their trust accounts are running low.
IOLTA-compliant law practice management software like PracticePanther simplifies the process for evergreen retainers with automated payment reminders, online payment processing and invoice templates, and more to seamlessly manage every aspect of your firm’s billing.
Standardize the Invoice Process
Though you’re billing against the trust fund, it’s essential that clients still receive detailed invoices with the retainer balance and scope of work.
It’s also important to differentiate invoices, which are billed to the trust, and requests to fund the trust account. For example, in some cases, the invoice amount may exceed what’s left in the trust, and your client may need to pay the invoice and replenish the trust account.
PracticePanther’s law firm software helps you streamline the billing and invoicing process with time-tracking features, branded invoices, custom invoice templates, automated workflows, and robust financial reporting features.
Use Legal Billing Software to Streamline Evergreen Retainers
With evergreen retainers, your firm can offer a transparent, predictable, and affordable payment experience for clients, while maintaining cash flow. To properly manage evergreen retainers, legal practice management software can help your firm develop robust processes for client communication, account balance tracking, invoicing, and compliance.
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