Collect 100% of your Account Receivables
By Irene Leonard, Lawyer Coach
Just as having a healthy lifestyle reduces our aging process, having a healthy collection policy will reduce the aging of unpaid accounts. Having a successful law practice includes getting paid promptly. There's little point in working hard, being good and enjoying what you do, if in the end you have cash flow problems because of aging receivables – client bills that haven't been paid for at least 60 days.
The following pointers should help you take control of your aging accounts receivable, and end the aging process.
Talk about money with your clients. In my coaching practice, I've found that asking for money is a common concern for lawyers, especially those starting their own practices. Make it part of your routine to bring up the issue of payment during the initial phone call or meeting, as well as during your representation. If necessary, find ways to get over your reluctance or fears of asking for money. Practice scripts that you are comfortable saying.
People don't pay their accounts for many reasons. You need to know those reasons early on and not wait until the account is over 90 days old, when it will in most cases be too late to collect. Having conversations will help you learn what's up with your client.
Be reasonable and frank about fees. Make sure your fees are reasonable. Advise the potential client up front how much the representation is likely to cost. If it's a lot of money, the client should have the bad news when he is in the best position to assess the financial burden. Ask enough questions to help you and the client determine whether he can afford your services. Have the same discussion about how you charge for your services.
Be willing to turn new clients away. Don't take a client who can't afford you or when your gut tells you, "No." Your gut is usually a better judge of clients who aren't going to pay. If you are worried that you don't have enough work anyway, trust that a better client will come along to fill the void. Spend your time marketing or building relationships with other clients or referral sources who will send good work your way rather than working for a client who may not pay you.
Obtain an advance fee deposit. If you have funds in trust, you will be able to take the funds within a few days of sending your client the invoice. This is the ideal way to end your aging account receivables.
Make sure the advance fee deposit is appropriate. Asking for a small deposit might seem helpful to the client, but actually is not fair. The client can't help but make assumptions about how much your representation is going to cost, based on the deposit you ask for. If the bill turns out to be two or three times that, it can lead to difficulties in receiving payment from a client who hasn't budgeted enough money to pay you.
Maintain "ever-green" accounts. Send an invoice or a reminder to have your clients replenish their trust accounts, to make sure they don't dip below your threshold amount while you are representing them. Have systems in place to help you identify when you might need to increase the amount. This ensures that there will always be funds available to pay for ongoing work.
Have good relationships with your clients. An often-overlooked tip for getting your accounts paid is to make sure your clients like you. If they trust, know and like you, you are more likely to be paid. Or at the very least they will feel guilty if they are not paying you.
Let your client know the value of your services by keeping him informed of the steps you are taking on his behalf and why. Help him understand how complicated or difficult the work is. It's up to you to help him see the value of your expertise.
Be good at what you do. If you are good at what you do, that will reduce client complaints or rationale for not paying your account. Early in my legal career, I had the best collection rate in my firm and I was given the undesirable chore of making collection calls on behalf of the other attorneys in my small firm. I learned that many clients didn't pay because they were upset with the quality of the work provided. Perform as promised, so that you don't give clients an excuse to not send the check. In addition, being good helps you feel more self-confident, so it's easier to ask for money and get paid.
Don't give the client a chance to question your hours. Record all your time promptly, contemporaneously and conscientiously so clients cannot question the time you spend on a matter. Provide detail so that the client has a clear and appreciative understanding of the work you performed.
Invoice promptly and frequently. Clients pay bills sooner if they receive your invoice closer to when you performed the work. Send your final invoice as soon as the matter is completed when the client still appreciates what you did for them. Don't wait until the end of the next billing cycle. At the least, send bills monthly rather than batching them over a few months. Most clients prefer to receive a monthly bill.
Be proactive when monitoring your receivables. Have systems in place that keep you informed of who, when, why and how much is outstanding. These systems help you know when to stop working for clients who are not keeping their accounts current or topping up their ever-green accounts. Use the systems to have frank discussions with your clients.
Follow up personally and promptly on overdue accounts. Deal with any problems early by talking with your client yourself. Don't let your receivables get over 45 days old without taking action. If you don't treat the non-payment of your bill as important, the clients may not treat paying you as important. Personal contact also is a good opportunity to find out why the account is overdue and what the client thinks of your work.
Have the authority to use your client's credit cards. Have your professional engagement letter include a provision that provides credit card information and the authority to pay your invoice using the credit card. Both individuals and businesses appreciate the opportunity to use their credit cards this way.
Maintain firm collection polices. If your firm does not have collection policies, lead the charge to have them created and followed. You will be able to use those policies with clients and the other partners or associates in the firm to help you get paid early.
No matter where you are in your professional career, you can take steps to reduce the aging process of your account receivables. It's important for you to take responsibility and do what you can do to make sure you get paid.
Any lawyer can deliver legal services, but not every lawyer can collect. Take the steps to become one of those lawyers who collects. The feeling of satisfaction and success will be worth any uncomfortable conversations you might have to have to get there.
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