Overbilling was the downfall of the fictional Bendini, Lambert and Locke law firm in John Grisham’s blockbuster, “The Firm,” thanks to the valiant efforts of rookie lawyer Mitchell Y. McDeere.
But overbilling is not a subject that’s talked about very often, particularly in the service sectors of accounting and lawyering. What recourse does a small business owner have if he believes he has been overbilled?
“The subject of overbilling is more difficult than malpractice,” said Joe Jones, CPA, and publisher of the Mississippi Business Journal. “There is really no objective standard of fairness with respect to professional fees. Note that trial lawyers occasionally get paid tens of thousands of dollars an hour when judgments are rendered. Absent a contract for professional services, which few people bother with, it is difficult to determine what is unreasonable.”
George S. Smith, CPA, CVA, of Jackson-based Smith, Turner & Reeves, one of the largest accounting firms in Mississippi, said most professional service firms are careful to make sure the bills it sends clients are reasonable.
“(Professional service firms) take the relationship very seriously and recognize that mutual trust is important to the continuing relationship and possible referrals of additional business,” he said.
Overbilling for professional services may occur for several reasons,
“First, the time charged to the client may be excessive due to inefficiency on the part of the professional firm,” Smith said. “Second, the services may not have value due to inaccuracies or poor advice. Next, the professional firm may have placed a premium on the fees for what they perceive as value of the services and that view may not be shared by the client.”
The client perception of overbilling usually occurs because of poor communication on the part of the professional firm, Smith said.
“As a client, you should ask for and be provided with a complete explanation of how you will be billed for the services that you are to receive,” he said. “In the case of routine services, such as a tax return or preparation of a simple contract, the professional firm should be able to provide a pretty close estimation of the fees for those services. In the case of more complex services, a range of estimated fees is almost always possible. At a minimum, the client should insist on periodic updates of the accumulated costs of services. This may be weekly if necessary. No professional firm wants to surprise the client with an unexpected bill. However, few may offer to provide weekly cost information without any prompting from the client. It is always preferable to get a quoted fee at inception of the engagement, if possible.”
If a client believes overbilling has occurred, he may contact the firm for an explanation of the bill. If that doesn’t work, he can request a meeting with the principal or partner in charge of his account for a more detailed explanation of the bill, Smith said.
“If you have a continuing relationship with the firm, this represents an opportunity on the part of the firm to patch a problem in the relationship,” he said. “Even if the services are of a non-recurring nature, most professional service firms would rather write off a bill than risk having an upset client who might cause damage to the firm’s reputation. Frankness is very important to this discussion. If you believe you did not receive value equal to the bill, the firm needs to hear this. If the services received has resulted in harm to you, such as paying additional taxes or making a bad financial decision, this is important for the firm to know.”
In the case of larger fees, some CPA firms and law firms provide billing review services to determine the reasonableness of charges, which can sometimes be very effective in negotiating lower bills, Smith said.
Jack O. Coppenbarger, executive director of the 2,600-member Mississippi Society of Certified Public Accountants (MSCPA), said in the 14 years he has been involved with the statewide association — the last six as executive director — he’s never taken a complaint about fee billings.
“I believe this speaks to the clear communication CPAs have with their clients about the work ongoing, the time and staff needed, and the ultimate costs,” Coppenbarger said.
The MSCPA and the American Institute of Certified Public Accounting (AICPA) are voluntary membership organizations with no authority to sanction.
The Mississippi State Board of Public Accountancy (MSBPA), the licensing agency for the state, regulates CPAs. It does not, however, govern non-certified practitioners, such as enrolled agents (EAs) or public accountants.
The Director of Practice for the Internal Revenue Service (IRS) is responsible for investigating errant practitioners and sanctioning where appropriate in matters concerning the IRS. If deemed necessary, CPAs and non-certified practitioners, including attorneys, can have their ability to practice before the IRS revoked.
“The state board can only be involved with investigations of violations of rules or standards,” said Ransom C. Jones, CPA, investigator for the state board. “If a CPA has injured the public and there is proof, we would investigate and take disciplinary action against their license.”
If discussing possible overbilling with their CPA doesn’t help, clients can always hire a lawyer to help negotiate the bill, Jones said.
But what about clients that feel they’ve been overbilled for legal services? They can contact The Mississippi Bar’s Fee Dispute Resolution Board, said Cham Trotter, president of the Bar.
“Fee dispute resolution is voluntary for the lawyer and the client,” he said. “It provides a mediation/arbitration type apparatus to resolve the matter.”
If the board determines there is an error on the part of the lawyer, it could be a factor in the fee dispute, Trotter said.
“There is, of course, a difference between negligence and malpractice,” he said. “There are many different ways to skin a cat and one lawyer may not handle a case the same as another one. That doesn’t mean there’s malpractice if the client is unhappy with the outcome.”
The Fee Dispute Resolution Board, comprised of nearly 20 lawyers, handled 68 billing disputes last year, the same number as the previous year, said Michael Martz, general counsel for The Mississippi Bar.
“Only a very small number of those complaining were businesses — and most cases were mediated,” Martz said. “With a little help and guidance, the parties ultimately work it out between themselves. Arbitration is all or nothing, so everyone usually agrees it’s better to keep a little piece of the pie.”
Most fee dispute cases are settled within three to six months, Martz said.
“If the parties want to be reasonable, it’s sometimes settled quicker,” he said. “There are no sanctions involved for the attorneys because these are only fee disputes and the process is voluntary, but if somebody wanted to file a disciplinary complaint, that’s a different procedure completely.”
If resolving a fee dispute with the billing party isn’t possible, consumers can always file a complaint with the Better Business Bureau of Mississippi, said Bill Moak, president of BBB.
“We have an active complaint resolution program,” he said. “We will immediately get in touch with the provider and learn as much about the issue at hand from both sides and work with them to resolve it.”
Contact MBJ contributing writer Lynne Wilbanks Jeter at firstname.lastname@example.org or (601) 853-3967.
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