Collection work is something that can’t wait, because a dollar of receivables doesn’t stay a dollar for long.
The dollar the office bills this month will be worth only 50 cents six months from now. In a year, it will be worth no more than 23 cents and probably more in the range of 19 to 20 cents. After two years, a 5-cent recovery is about the best any office can expect.
Much of the loss comes from the fact that people move; after a year, as many as 25% of the bills in collections will go to the wrong address.
One way to keep the receivables from aging is to give the partners quarterly printouts of the all the accounts that are 120 days old or older. On this printout, identify the attorney in charge, the amount due, how long it has been due, and what payments or payment arrangements have been made.
Ask the lawyers to check off what they want done with each of their accounts—write it off, turn it over to a collection agency, or send it to small claims court.
One firm reports that this strategy reduced the average age of its accounts from 65 days to 31 days.
