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7 ways to improve your billings and collections processes

The financial face of the legal business has changed over the years and most firms have learned to become aggressive about collecting outstanding accounts. However, if your firm is still allowing clients to delay payment, recognize that it’s costing you money, sometimes a lot of money.

“An unpaid bill is an interest-free loan,” says business and financial management consultant Gene Siciliano, CMC, CPA, president of Western Management Associates in Los Angeles. “The firm is lending its capital to finance the client’s business.” And statistically speaking, the older an unpaid bill, the higher the risk it will become a bad debt, i.e., permanent capital for your client’s business.

Siciliano recommends firms implement these seven controls to keep their accounts receivables healthy.

1. Screen all your potential clients

Start with the basics. Screen prospective clients before accepting their business.

“Some firms take on clients based on a phone call,” Siciliano says. Others screen prospects, but only the obviously high-risk ones.

Every prospect needs screening, and not just the criminal clients. Even low-risk corporate clients need scrutiny, because all businesses are not necessarily sound. Any client’s business could be in financial trouble.

The next step is to do something that’s rarely done. Ask if another firm has worked on the matter. If so, ask for the name of that firm and why the prospect is not still a client there.

Then call that firm and ask the same question. The prospect may say the representation was inadequate. The attorney may have another story—that the client was let go for not paying the bill.

2. Get a retainer

Another basic but oft ignored get-the-money-in rule is to collect a significant retainer. With a retainer in hand, the firm can reduce, if not eliminate, its payment risk. This is especially important if the firm’s practice is to never sue for unpaid fees.

The amount depends on how quickly the matter will get resolved. If it’s a simple matter of filing a document, Siciliano recommends you get all the money up front. If it’s litigation, get enough to cover two months’ work.

A month before the retainer runs out, ask the client to refresh the retainer for yet another two months.

That’s good payment insurance. If the retainer doesn’t get replenished, the firm still gets paid for the current month’s work, and it can stop the work at the end of the month when the money runs out. Don’t get caught in the “imminent court date, can’t back out now” trap.

“Every client relationship is a negotiation,” he says, “and good negotiation requires a win-win balance.” So if the client balks at paying the second retainer, show the here’s-what’s-in-it-for-you: “We realize your legal situation is important to you and we don’t want to stop your work, so we would like to make it easier for you. We can give you three weeks to fund the new retainer.”

Get some sort of commitment. Pin the client down: “How soon can you pay the whole amount? In a week? Two weeks?” If the client needs more than that, set up a payment plan: “Can you pay $X now and $Y next month?”

Make it clear the attorney will not continue work on the matter if the client doesn’t continue paying. Oh, and by the way, you have to mean it.

“Firms tend to keep clients going for long periods of time without seeing any money,” Siciliano says. “Then when they don’t get paid, their hands are all but tied. If they take legal action to get the money, they risk getting sued for malpractice.”

3. Add a personal touch to the bills

Here’s another tactic: When a bill is large, do more than just drop it in the mail. Add a personal touch of appreciation for the business.

A successful approach is for the attorney to hand-deliver the bill. At the same time, give the client a bottle of wine. Or invite the client to lunch.

Also acknowledge that the firm recognizes that the bill is significant and that it appreciates the client’s business. Be frank about it: “We’ve done a lot of work for you, but this is still a lot of money, and we want you to know we appreciate your business.”

“Now,” says Siciliano, “the firm is more than just a hired gun. It’s a partner with whom that client has a personal relationship, and it’s the close relationships that get paid when the money gets tight.”

4. Offer a discount for prompt payment

Years ago much of the non-legal business world would routinely offer 2/10 net 30 payment terms, or a 2% discount if the bill is paid within 10 days. Otherwise, the full amount is due within 30 days.

Consider offering 5/15 net 30 terms to your clients. That’s good enticement for early payment, because over the course of a year, the client can see a significant savings. In some cases, especially many government agencies, their policy requires them to take all discounts offered. And while the firm is indeed giving away 5% of its fees, it has steady cash flow and it has lowered its risk of nonpayment.

Compare that to having to negotiate the amount due or send the bill to collection. The firm could end up having to write off much more than that. Caveat: the risk in this technique is that some clients will take the 5% and still pay late. If this happens and you don’t reclaim the discount, you’ve just lowered your fees by 5%. See #7 below.

5. Call the client before the bill is late

Be willing to talk openly about getting paid. A few days before the bill is due, call the client and get the payment machine rolling.

Ask if the client got the bill, has any questions about it, or needs any additional information.

Ask when the firm should expect to see the payment. If it’s going to be late, ask why. Then ask if the firm can do anything to get the process moving faster.

Doing that, Siciliano says, the firm shows it’s serious about getting paid for its services.

What’s more, at that early stage of the payment cycle, there’s time to negotiate a payment schedule so the attorney can continue the work and continue to get paid for it.

6. Reward prompt-paying clients

A little used payment enticer that Siciliano recommends is a “preferred client plan” for clients who pay their bills on time.

In exchange for the prompt payment, the client gets a bonus. The bonus can be whatever the firm wants—an hour’s time taken off the bill each month, no charge for phone calls under 10 minutes, free overnight delivery, a lower hourly rate, or maybe discounts on charges for copies and other office services that normally appear on your bill.

Give it some fanfare so clients want to get on the preferred list. Put the policy in writing and send it to the clients in a letter.

Or make it exclusive by telling each client the firm is offering it only to the people it most appreciates or to the top 10% of its clients or to the clients who have historically kept their accounts in good shape.

7. Create and enforce a stern collection policy

Now for the accounts that go unpaid despite all your inducements.

“Collection is not a haphazard activity,” says Siciliano. “The firm needs to make an aggressive collection effort because it’s become a creditor and needs to get its money in.

The firm must set a procedure and follow it to the letter. Assign collection duty to someone in the office, and make that duty a key part of the job, not something to do when there’s time for it.

As to who gets the job, Siciliano recommends you make sure it’s somebody who is a good negotiator and has a nice but firm phone personality.

But don’t give the job to the firm’s controller, he says. Controllers are invariably busy and focused on numbers to the extent that they have neither the time nor the inclination to make the calls.


Some of these ideas may sound “unprofessional,” says Siciliano, but nothing will hurt your sense of being a professional more than having a client decide after the matter is closed that your services were not worth paying full price for.

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