Law Office Glossary for Solo and Small Firms

These are the words that come up when you run the business side of a practice. The definitions are general. Where a term depends on state rules, the entry says so, and your state bar’s rules govern. For the longer versions, see the client intake checklist and trust account basics.

Accounts receivable

Money clients owe the firm for work already billed. An aging report sorts it by how long each invoice has been unpaid.

Advance fee deposit

Money a client pays before the work is done, to be applied against future fees or costs. It is usually held in the trust account until earned, and state rules set the details.

Billable hour

A unit of time spent on client work that the firm charges for. Marketing, bookkeeping and training are generally not billable.

Calendaring

Entering deadlines and appointments, with reminders ahead of them, into a shared calendar so that nothing depends on one person’s memory.

Client ledger

The trust-account record for one client: every deposit and payment, with a running balance. The client ledgers added together should match the trust account.

Collection rate

The share of billed amounts the firm actually collects. A firm that bills 100 and collects 92 has a collection rate of 92 percent.

Commingling

Mixing client money with the firm’s own money. Rules treat it as a violation even when no money is lost. The narrow exceptions, such as covering bank fees, are set by each state.

Conflict check

A search of the firm’s records for the people and companies in a new matter, to see whether taking it would clash with duties to a current, former or prospective client.

Conflict of interest

A situation in which duties to one client, or the lawyer’s own interests, materially limit what the lawyer can do for another. Some conflicts can be cured with informed consent. Others cannot.

Contingent fee

A fee that depends on the outcome, usually a percentage of what is recovered. Many states require it to be in writing and bar it in certain kinds of matter, such as criminal defense.

Costs and expenses

Out-of-pocket charges paid or advanced for a matter, such as filing fees, court reporters and records. The engagement letter should say how they are billed.

Docket

The court’s schedule and record of a case. Firms also use the word for their own list of deadlines, and docketing is the act of recording them.

E-filing

Submitting court documents electronically through a court’s own system. Rules, formats and portals differ from court to court.

Earned fee

The part of a fee the lawyer has done the work to deserve. Earned fees can be moved from the trust account to the operating account.

Engagement letter

The written agreement at the start of a matter. It names the client, describes the scope of the work and explains fees, billing and how the relationship can end.

Flat fee

A set fee for a defined piece of work. Whether it counts as earned on receipt or must sit in trust until the work is done depends on your state and on the wording of the agreement.

Hourly rate

The per-hour charge for a lawyer’s or a staff member’s time. Many firms set different rates for different people.

Intake

The process that takes a person from first contact to a signed engagement, including the conflict check and the decision whether to accept the matter.

IOLTA

Interest on Lawyers’ Trust Accounts. A pooled trust account for client money that is small or held only briefly, with the interest going to a state program, often legal aid. Whether it is required, and when, depends on the state.

Limited scope representation

An arrangement in which the lawyer handles only part of a matter, such as a single hearing or a document review. The scope should be written down, and rules in many states require the client’s informed consent.

Malpractice insurance

Professional liability coverage for claims that a lawyer made an error. Many policies are claims-made, which covers claims made while the policy is active, so ask about tail coverage when you close a firm.

Matter

One piece of work for a client, with its own number, deadlines and billing. A single client can have several matters.

Non-engagement letter

A letter telling a prospective client that you are not representing them. It notes that deadlines may be running and urges them to consult another lawyer promptly.

Prospective client

A person who consults a lawyer about possibly hiring them. Confidentiality duties apply even if no representation follows.

Realization rate

The share of recorded billable time that ends up on invoices at full value after write-downs. If you record 100 hours and bill the equivalent of 88, realization is 88 percent.

Retainer

A word used for several different things: a deposit against future fees, a payment for being available, or a flat advance. Define it in your engagement letter, because its meaning and where the money sits depend on the agreement and on state rules.

Statute of limitations

The deadline set by law for starting a lawsuit. It varies by type of claim and by state, and missing it can end the claim, so intake questions should bring it up early.

Three-way reconciliation

A check, usually done monthly, that the trust bank balance, the firm’s trust account journal and the total of the client ledgers all agree.

Tickler

A reminder system, on paper or in software, that brings a task or deadline back to the surface on a date you choose.

Trust account

A separate bank account holding money that belongs to clients or other people. The rules for opening, labeling and recording it are set by the state.

Unearned fee

A fee paid in advance for work not yet done. It still belongs to the client until the work is performed.

Work in progress

Recorded time and costs that have not yet been invoiced. Large amounts of it usually point to slow billing.

Write-off

Removing an amount from what the client owes. A write-down lowers the bill before it goes out, and a write-off clears a balance the firm has decided it will not collect.