From accepted fee estimate to legal fees in the books
How an accepted fee estimate drafts a legal invoice, and how legal fees and recovered disbursements post to separate revenue accounts in the ledger.
By Achekam · · 4 min read · For Legal businesses in South Africa, Nigeria, Kenya
Launching soon. The Industry CRM add-on described in this article is launching soon. This article describes it as it will work at launch.
A fee estimate the client accepts is where the money side of a matter begins. In many small practices, though, the estimate is a word-processed letter, the acceptance is an e-mail, and the invoice is typed again into the accounting system. By the time the accountant looks at the income statement, fees and recovered disbursements sit together on one line, and nobody can say how much of the year's income was really the practice's own work.
With Achekam's Legal pack, the estimate, the acceptance and the invoice form one chain, and the income lands in accounts that keep fees and disbursements apart.
Fee estimates in the Legal pack
The pack uses the words a practice uses: customers are Clients, records are Matters, leads are Enquiries, and quotes are Fee estimates. A fee estimate is made up of items from the practice's catalogue, and the pack's starter catalogue lists what a law practice typically bills:
- consultations;
- professional fees;
- fixed-fee matters;
- retainers;
- disbursements recovered.
None of these items arrives with a price, and that is true of every industry pack: no starter item carries one. The practice sets its own.
From the client's yes to a draft invoice
The client accepts a fee estimate on a link, by typing their name and ticking a box. The client's IP address and browser are kept with the acceptance. Once an estimate has been sent it is frozen; if the terms change, you send a revision instead of editing the version the client has already seen. That protects both sides when there is a later disagreement about what was agreed.
Acceptance drafts the invoice in receivables. Drafting is the default for good reason: someone in the practice looks at the draft, adds the matter reference, checks that it matches the signed mandate, and issues it. An invoice can be issued at once on acceptance only where an administrator has given recorded authority for that.
For most practices the draft-first route is the right one. It leaves room to confirm that the estimate's terms are the ones in the fee agreement before anything reaches the client's statement.
Not every estimate is accepted. A client may ask for a lower figure, a narrower scope, or a fixed fee instead of time-based charges. Because a sent estimate is frozen, the negotiation shows up as a series of revisions rather than as one document quietly rewritten, and the version the client finally accepts is the one the invoice is drafted from. When a client asks why the invoice differs from the first figure they were quoted, the revisions answer the question.
Fees and disbursements on their own accounts
Switching the Legal pack on adds its revenue accounts to the practice's chart of accounts and its unpriced items to the catalogue. The catalogue posts to two accounts:
| Account | Code | What it holds |
|---|---|---|
| Legal fees | 4310 | The practice's fee income |
| Disbursements recovered | 4320 | Costs recharged to clients |
Each invoice line names the revenue account and the product it sells, so revenue is posted account by account. Where a line sells something that has a cost, the cost of sales goes into the same journal. For a practice that mainly bills time and recharges disbursements, the effect is simple: fees and recoveries are never lumped together again.
If an account code the pack needs is already used in your chart for a different type of account, activation is refused and the clashing account is named. Ask your accountant to look at the chart before you switch the pack on, especially if codes have been customised.
Setting your own prices on an unpriced catalogue
Pricing the catalogue is the first job after switching the pack on. Some points to settle:
- Consultations: a set amount per consultation, or charged on time.
- Professional fees: the rates you bill at, and whether they differ by fee earner.
- Fixed-fee matters: one item for each kind of fixed-fee work you offer, each with its price.
- Retainers: the amount and what it covers; Investopedia's explainer on retainer fees sets out how retainers paid to lawyers work and the difference between earned and unearned retainer money.
- Disbursements recovered: usually priced on each estimate at what the disbursement will cost, rather than fixed in the catalogue.
Keep the catalogue short. A list of a few well-described items is easier to estimate from than a long list nobody reads.
What your accountant sees in the ledger afterwards
Your accountant sees fee income on Legal fees (4310) and recharged costs on Disbursements recovered (4320), each built from issued invoices that trace back to an accepted fee estimate. A question such as "how much of last quarter's income was really recharged costs?" is answered from the ledger instead of from a spreadsheet, and the trail from income line to invoice to accepted estimate is there for anyone who needs to follow it.
That trail also helps at year end. When the accountant tests income, each invoice has its estimate and the client's recorded acceptance behind it.
Before the first fee estimate goes out
- Your accountant confirms that codes 4310 and 4320 are free in the chart.
- The pack is switched on and its items appear in the catalogue.
- Each item is priced, or marked for pricing per estimate.
- The practice decides who reviews and issues draft invoices after acceptance.
- Disbursements are described on estimates in a way the client will recognise on the invoice.
Fee estimates usually follow an enquiry that has been converted into a client and a matter, described in turning an enquiry into a consultation and a matter, and a conflict check that has been cleared, covered in running a conflict check before accepting a matter.
Price the starter catalogue before you send the first estimate, and agree with your accountant how disbursements appear on it, so both accounts mean exactly what their names say.
General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.
