Law Firm Law Firm Billing and Finance

Question 1

What is an 'IOLTA account' as used by US law firms?

Accepted Answer

Interest on Lawyers' Trust Accounts — a pooled trust account for small client funds

Answer

IOLTA (Interest on Lawyers' Trust Accounts) accounts pool small or short-term client funds; the interest generated goes to fund legal aid programs rather than accruing to the client or firm.

Question 2

What does 'realization rate' measure at a law firm?

Accepted Answer

The percentage of billed hours actually collected as payment

Answer

Realization rate measures what percentage of the fees billed to clients is actually collected — it accounts for discounts, write-offs, and uncollected invoices.

Question 3

Which billing method charges clients a fixed amount regardless of actual time spent on the matter?

Accepted Answer

Flat fee billing

Answer

Flat fee billing charges a predetermined fixed amount for a defined scope of work, giving clients cost certainty regardless of how long the matter actually takes.

Question 4

What is a 'write-down' in law firm billing?

Accepted Answer

A reduction in billed hours or rates before the invoice is sent to the client

Answer

A write-down occurs when a supervising attorney reduces the hours or rates on a draft invoice before sending it to the client, typically for quality control or value adjustment.

Question 5

What does the term 'matter origination credit' refer to at a law firm?

Accepted Answer

Credit given to the attorney who brought the client or matter to the firm

Answer

Origination credit is compensation given to the lawyer who originated (brought in) a client or matter, often factored into partner compensation decisions.

Law Firm Practice Test

Law Firm Practice Test

Law Firm Law Firm Billing and Finance