Almost half of Australian small law firms and conveyancers (43 per cent) have seen an increase in requests for fixed-fee pricing in the last 12 months across most practice areas, according to the Smokeball State of Small Law Australia Survey.

New South Wales, Victoria and South Australia have all seen a 50 per cent increase in requests, with Queensland the only State to record a smaller increase of 28 per cent. Market forces and a need for bill certainty are noted as the leading reasons for the fixed-fee trend but firms also said they are seeing a rising unwillingness to pay large legal fees, even for work that has been completed, which is causing firms to ask for a fixed fee before work commences.

However, changing your billing model, or certain areas of your business to fixed-fee has been profitable for almost half of firms (43 per cent), with only one-quarter (25 per cent) declaring it unprofitable and an additional 15 per cent stating it makes no difference.

Fixed-fee billing is recorded as most profitable in New South Wales (47 per cent) and Queensland (45 per cent) followed by Victoria (35 per cent) and South Australia (25 per cent).

However, it is not a positive trend for all firms. While no South Australian firms find it unprofitable, 29 per cent of Victoria firms do, along with 24 per cent of NSW firms and 18 per cent of Queensland firms. These respondents find that matters always take more time than you can bill in a fixed fee arrangement and clients who want fixed fee bills tend to shop around for cheaper rates that may not reflect the work done.

The key to ensuring profitable fixed fee billing is to know your data explains Clarissa Rayward, Director and Creator of the Brisbane Family Law Centre and the Happy Lawyer, Happy Life knowledge centre. “Moving to a fixed fee business is one of the core reasons I enjoy what I do”, says Clarissa. “Since tossing the timesheets five years ago we have a more client-centric business with no fee arguments, no debtors, cash flow predictability, and a business that rewards efficiency. We know how much it can cost to work matters but also how much income we need to run the business every day and that is where we start from to build our fixed fees.”

“The most important thing to understand with fixed fee billing is that one price doesn’t fit all so you need to build a scope for your fixed fee prices that can be moved up or down depending on the client’s needs, complexity, timing and where the matter may go. This gives the clients choice and a more collaborative approach to the work”.

Clarissa uses Smokeball’s AutoTime tool to automatically record all work done on a matter, so while her lawyers are not manually recording their time, she still has full data on how much the matter cost, how much her lawyers cost, their individual profitability and how profitable each team or practice area is in real time. This ensures the firm’s fixed-fee pricing is created with knowledge that can generate profit for the firm as well as providing value to the client.

Jane Oxley, CRO, Smokeball adds “Having full confidence in fixed fee billing means knowing how much time your matters truly take from the research and phone calls that are easy to record, to the emails and internal meetings that can be harder to record manually as they are often unscheduled, high in volume, and easily forgotten. Fixed fee requests are only getting more popular so firms, especially smaller firms need to make sure it works in their favour while also responding to the market and not feel they are losing with this billing model.”

Indeed, the trend in fixed-fee pricing looks set to continue with more than half of all firms (53 per cent) expecting an increased in fixed-fee pricing in the next 12 months. Only 12 per cent of respondents do not expect an increase and 35 per cent are unsure.

Respondents see fixed-fee pricing moving more into more practice areas including family law, litigation, conveyancing and wills and estate planning. Clients are demanding bill certainty and are more aware of the potential for cost blow outs.