United States: Five Best Practices For Improving Collections

Some of your clients will be slow to pay — and some may not pay at all.  Making improvements to your collection process will help your firm's cash flow.  Here are simple and effective practices to implement.

  1. Bill Promptly
    The sooner you bill, the sooner you will see the revenue, so be in the habit of sending your invoices on a regular and timely basis. Clients tend to forget the value of your services as time goes by, so it pays to be prompt. As an added bonus, billing promptly subtly suggests to clients that you expect to be paid quickly. If you sit on your invoices, clients may infer that you are in no hurry to collect.

The definition of "prompt" will depend in part on the type of matter involved. For transactional matters, for example, bill at or before closing, as clients usually do not waste time before reinvesting proceeds. For protracted litigation, bill monthly or even semi-monthly (especially if you are fronting fees for third parties, such as experts and litigation support).

A necessary corollary to the maxim of billing promptly is that you also must capture time promptly. After all, you cannot bill for time that has not yet been recorded. Attorneys should submit time records at least weekly, but preferably daily.

  1. Invoice Smartly
    It is not enough for your invoices to be sent promptly; they also must be sent smartly. That means invoices must accurately describe the services rendered, in a manner easily understood by the recipients. If an invoice is not clear, it is likely to be set aside.

You should also ensure that every invoice makes the due date and amount due obvious. Smart invoices can cut the number of billing disputes, which almost always delay payment.

  1. Establish Written Policies and Procedures
    No matter its size, every law firm should have written policies and procedures regarding billing and collection practices. These should include:
  • A timeline that spells out when invoices are sent;
  • When and how follow-up is conducted;
  • The number of days past due that constitutes delinquency; and
  • How delinquencies will be handled.

These policies and procedures must be followed consistently. Attorneys should not have the authority to go outside the standard practices for favored clients. That is not to say attorneys should not get involved in collecting from delinquent clients. But their collection role should be within the established firmwide parameters. A standard past due notice might be more effective, for example, if the billing attorney adds a handwritten note to it.

  1. Follow Up
    It may be uncomfortable, but there is simply no way around it: You must routinely follow up when invoices go unpaid. Again, you will want to stick to a strict timetable.

For example, your firm might send a new statement as soon as the initial statement is more than 30 days out, with additional follow-ups at 60 and 90 days. Frequent communication with delinquent clients is a vital component of the collection process.

  1. Avoid Discounts for Delinquent Clients
    Attorneys can be tempted to offer discounts to delinquent clients just to get some money in the door on a relatively timely basis. Avoid this temptation. Even if it works and they remit part of their bill, providing discounts to late-paying clients only trains them to think that they will be rewarded for dragging their feet.

Clients who receive a discount after failing to pay for six months have little incentive to pay the next invoice on time. Rather, extend discounts only to clients who pay in full on time or, better yet, ahead of schedule.

Action is Essential

Your firm cannot afford to sit back and hope that clients will pay their invoices on time — you must be proactive.

Sidebar: How to Prevent Late Payments

When it comes to collections, sometimes the best offense is a good defense. This means trying to avoid circumstances that lead to late payments.

For example, your firm should do its best (to the extent that such efforts are reasonable and ethical, of course) to keep clients happy. Satisfied clients generally are more likely to pay their bills on time. To keep clients content, regularly update them on the status of their legal matters and assure them that progress is being made.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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