Planning can keep legal costs more affordable

There is one thing that a good accountant and a good attorney have in common with a good priest and a good bartender. Each, if doing his job properly, is more than willing to listen intently to the problems of others in a caring and non-judgmental way.

In doing so, each can make his client/customer/parishioner feel better. When a person explains his sad story to another, it is a refreshing catharsis. It is worth remembering, however, the good feeling tends to cost more when provided by the accountant or attorney.

It is this key point which veterinarians should remember when they visit with members of their professional team. Legal and well-qualified accounting consultations are ordinarily billed by the hour or fraction thereof.

Consequently, it is usually good advice to bear that thought in mind in taking advantage of such services.

This month, I would like to share some tips on how to minimize legal and accounting expenses while at the same time deriving the maximum possible benefit from these professionals.

At the outset, let me make one point clear regarding my opinion of the role of legal and accounting professionals in the business life of veterinarians. These services are critical and probably underused in most professional practices. In most veterinary practices, expenditures for legal and financial consulting services should be simultaneously minimized and increased.

Spiraling costs

First, let us examine how non-discretionary legal and accounting fees can be minimized.

Lawyers and accountants spend most of their time in an effort to resolve specific problems for their clients. For example, the veterinarian shows up at the law firm or the accountant's office when he has a client lawsuit or the state tax department sends an unjustified claim for a tax payment. This is a problem, which the client veterinarian must get resolved. The visit is non-discretionary. While there, the distressed practitioner pours his or her heart out to the attorney or CPA. There is endless banter about how unreasonable clients can be, how confiscatory taxes are, how tough it is to be in professional practice in the new millennium.

While these things may all be true, the philosophical discussion is costing between $2 to $5 a minute.

When the veterinarian finally gets down to business and explains the problem, she goes over everything: How the client suing is really out of line because she is married to the sister of the best receptionist in the practice.

Besides, the practice used to board the entire family's animals for free because the uncle was the tax assessor and everyone figured if we treated them right, the taxes would go down and besides that-time marches on at the regular hourly rate.

Keeping costs down

So what can be done to minimize legal or accounting fees? Try to follow these simple rules:

Identify in advance the purpose of your visit.

Why are you going to seek professional advice? Do you want to buy or sell property? Do you want to defend a potential or existing claim? Do you have a dispute with a vendor or breeder?

Remember that your attorney or CPA doesn't understand your business nearly as well as you do, so you may need to flesh out the story with relevant information. The topic may be focused on a medical procedure you performed or on a position in your practice that you have been able to fill only with people willing to do chronic overtime.

What you don't want to do is force your advisor to have to drag pertinent information out of you while simultaneously having to sort through piles of irrelevant minutia contained in your rambling narrative. If you organize your thoughts, present them coherently without digression, you will get a better, cheaper and faster resolution to your problem just about every time.

Write down the names of the parties and the main issues.

By identifying the players in writing, you can go over the matter more quickly with counsel. Your lawyer or accountant won't have to take many notes quickly with counsel. The notes will also serve as an agenda to keep your conversation on track and reduce the possibility that you will omit a pertinent fact.

I get calls all of the time from veterinarians who have stories like this:

"My clinic has four partners, one of them owns 50 percent, one has 30 percent, and I don't know what the others have, but the real estate is owned by two of them, one-third each, and a real estate trust is partly owned by one of the partner's wives, but she's divorced from him now."

Believe me, if you write down the players (draw a flow chart if necessary), you will discover what information you are lacking, and you will save money during your professional consultations.

Provide your advisor with concrete ideas that you have already brainstormed for yourself.

No one knows your situation better than you do. You have a good sense of your objectives and a fair sense of how and whether those objectives can be met. If you have developed a set of what-if scenarios, you can direct your meetings to be the most productive and least lengthy necessary to achieve your goals.

Include in your brainstorming issues that could conceivably cloud the transaction later on.

Be prepared to ask:

What if my partner divorces?

Am I liable as a minority partner if our bookkeeper under-withholds or fails to remit our sales tax?

If we outgrow this practice location, what if my partner doesn't want to move?

Select the right professional for the job even if her fee seems high.

If you have an employment tax problem, seek out the partner in your CPA firm who specializes in that. If your real estate purchase is unusually complex, ask your attorney to refer you to a firm or one of his partners who specializes in that area. A complex closing involving 50 hours of a general practitioner's time at $100 per hour should probably have been handled using 10 hours of a real property specialist's time at $200 per hour.

The benefits add up

So what should a veterinarian do with all that money he is saving by cutting the chit-chat, organizing his thoughts in writing and choosing the right advisor?

It should probably be spent on lawyers, CPAs and financial advisors. Remember, practice professional fees should be simultaneously minimized and increased. We have minimized the non-discretionary fees through organization and planning. Now, we should improve our income by maximizing the use of good advice to generate savings and plan tax-wise capital spending. We might even use professional guidance to fine-tune a good benefits or retirement strategy. These are fees which need not, but really should, be spent (discretionary fees).

Next month, in the last of this series of articles on legal and accounting fees, I will discuss specific ways in which reasonable expenditures on quality professional financial and legal services can yield outstanding results for the practice bottomline as well as practice quality.

Dr. Allen is a partner in Associates in Veterinary Law, P.C., a law practice specializing in business and legal counsel for veterinarians and their families. The former owner of two multi-doctor animal hospitals, Allen currently writes and speaks on topics in veterinary medical law and serves as a regional director of the American Veterinary Medical Law Association. He can be reached at www.veterinarylaw.com or call (607) 648-6072.