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The psychology of getting clients to pay

When the collections get tough, the tough start adding a bit of psychology to the billing.

It can make the difference between getting paid now or getting paid later or maybe not getting paid at all, says Merra Lee Moffitt of Capture Profits, a revenue and profit building consulting company in Reading, PA.

A waning economy is no time to sit at status quo with the billing, she says. People who used to pay in 15 days are waiting 30 days, and the 30-day people are waiting 60 days. And the not-so-dependable payers are sometimes not paying at all.

Get the money up-front

The first tactic: require up-front payment.

All types of professional practices do that, Moffitt says. Many medical practices, for example, won’t schedule non-urgent appointments for patients who aren’t current on their payments. The same is true with dentists. Some even require payment before the service is given.

Getting paid at the start is a wise move for anybody “who fixes problems,” she says. The client comes in with a problem and is more than willing to pay to get it resolved. But after the work is done, “that person doesn’t have the problem anymore,” doesn’t expect to have it again, and now isn’t so willing to part with the money.

“What’s more,” says Moffitt, “when people don’t have enough money to cover all the bills, they have to make hard choices about who gets paid and who doesn’t, and the ones who get put off or left out entirely are the ones they aren’t going to need again.”

The early payment is especially necessary for one-time jobs such as drafting a will or partnership agreement. Get a partial payment at the beginning of the work and full payment at delivery.

Many CPA offices do that. They require clients to pay when they pick up their returns. Existing good clients might get a little more leeway, but not much. They get the invoice at the same time they get the return.

Get the client to say it

Another tactic: Don’t just ask clients to sign the fee agreement and stop there. Get them to say in their own words what they are agreeing to.

Moffitt gives this example:

Attorney: I will expect you to pay your bill upon receipt. Do you understand?

Client: Yes, I understand.

Attorney: Do you have a problem with that?

Client: No, I don’t have a problem with that.

Attorney: So you agree to these terms?

Client: Yes.

Go further. Ask open-ended questions about the payments:

Attorney: I can take one payment before each meeting or two payments now for the first two meetings.

Which works better for you?

Client: I can pay for two meetings now.

Or try this:

Attorney: When do you normally pay your service providers?

Client: I pay most of my bills on the 15th of the month.

Attorney: Would you like to pay us on that schedule?

Client: Yes.

Or this:

Attorney: Tell me what type of payment plan works best for you.

Client: It’s easier for me if I can pay the bill on the 15th of every month.

“The psychology of that,” says Moffitt, “is that people will do what they say they will do. They want to show their integrity.

Set the expectations—gently

Set out the payment expectations. The psychology there is that people will try to rise to the expectations.

“Doing so takes a lot of customer skills,” says Moffitt. “But mostly it’s a matter of not saying ‘this is what you have to do’ but ‘this is what we expect of everybody.’

And be specific about what the firm expects to happen. People will follow what’s actually set out for them to do. For example:

Attorney: Our policy is to collect before we provide the final product, and we take X% to start.

I will need a check or credit card payment to start, and normally we do that at the next meeting. So when you come back, we will expect a payment of $Y. Do you have a problem with that?

That’s a gentle way of saying “you don’t get the product unless you pay for it.”

Take the same tone when introducing a new policy to an existing client: “it is now our policy to give our invoice with the final product.”

Bill on the fortnight

Don’t send out invoices once a month; send them twice a month.

One reason is that a monthly billing cycle says the firm isn’t particularly worried about getting paid immediately. If it takes that long for the firm to get the bill out, it’s okay for the client to wait that long to pay it.

Another reason is that a month after the fact, the service has lost its new-car smell.

And still another is that a fortnightly bill is half what the monthly bill will be, and that cuts the client’s payment pain in half. “It’s easier to come up with $250 twice a month than $500 at the end of the month,” Moffitt says.

One more good reason: the shorter billing span identifies payment problems immediately, and that gives the firm a chance to stop the work before the debt gets out of hand.

Psychology on the invoice, too

Use more psychology in making the invoice look like the firm is serious about getting paid.

One way to do that is to put the client’s phone number right below the client’s address. “That shows the firm can and is prepared to call” about that bill if it isn’t paid.

Another approach is to include a handwritten note from the attorney on any bill that’s past 15 days. All it needs to say is “courtesy reminder” followed by the attorney’s signature.

Besides emphasizing that the bill is overdue, that note tells the client that the attorney is personally aware of the nonpayment and is also concerned about it.

Yet another tactic is to give the client clear warning before sending the account to collections—a warning of both the collection effort and the extra cost it will entail.

State law permitting, include a notice with the last invoice that if the account isn’t paid by a certain date, it will go to collections and the client will be on the hook for both the invoice amount and the cost of the collections.

Don’t license bad behavior

More psychology: never give clients the impression the firm has problems getting people to pay. “That just gives them license to be another problem.”

Instead, always make it clear that everybody pays and pays on time. Nobody wants to stick out like a sore thumb and be the lone collection problem on the books.

Moffitt even recommends not taking the traditional step of calling a few days after the bill goes out to ask if the client received it.

Firms often do that in an effort to show they are serious about getting paid, but getting that type of call can also tell the client that the firm is so used to not getting paid that it’s become paranoid about every bill.

Again, that’s poor psychology. The logical response is that there’s no rush to pay. After all, the other clients don’t pay on time.

Stick to the we-always-get-paid attitude even when it becomes necessary to call about nonpayment, she says. Take the approach that the client surely must have misplaced the bill, because after all, “we give quality legal advice and we only have quality clients, and you’re a quality client so of course you pay on time.”

Take the same approach with repeat billing. If an invoice doesn’t get paid, “keep sending it.” Go on the assumption that it didn’t get to the client—and it’s quite possible it didn’t. Mail does sometimes fall behind a desk.

People follow whatever attitude is presented to them. Tell a client that 92% of the people pay, and that client wants to join the 92%. But say that 8% don’t pay, and now that client thinks “well 8% can get away with it, so I will too.”

Beware the big warning sign

Finally, Moffitt says, watch for the early warning signs of nonpayment.

The most obvious is the usually agreeable client who suddenly becomes disagreeable. The client stops returning calls or generally detaches from contact with the firm.

Stay ahead of that client. Get the money or stop the work. Otherwise, the firm is setting itself up to meet with the brick wall of “I’m unhappy with the service and I’m not going to pay this.”

When the demeanor starts to change, count on it that the client has run out of money. It’s time to start thinking about stopping the work.

Related reading:

The top five reasons firms lose money and go out of business

Psychology to use when presenting a staff complaint to a partner

The forgotten cause of malpractice claims is poor communication









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