Well, this is my last article with regard to “accounts receivable” as part of the area of “billing” which is one of the five areas that make up every business in the world. The other four parts of every business are : “Clients” or “customers”; “Administration”; “Getting the work done”; and “Collecting.

You will probably be happy that this is my last article regarding “accounts receivable” because now you will see me step down from my “soap box.” I really do get “exercise” about this topic, but I think it is wholly justified because a “positive cash flow” is the lifeblood of any business, and in particular the law business.

I would like to finish the topic of “accounts receivable” by simply setting out to you our “accounts receivable” system that enables us to work this system in such a way that it creates this “positive cash flow” and relieves the “pinch of need.” I think the best way to describe the system is to simply just take it a step at a time as we actually generate the information and work with the information regarding our “accounts receivable” on a monthly basis. For the ease of following what we do, I am going to simply number these paragraphs in the order in which the information is generated and the collection activities are pursued:

1. Accounts Receivable List: Every month our computerized billing system generates an “accounts receivable” list. This list shows each client’s account as to what is current, what is over thirty days, sixty days, ninety days, 120 days and over 180 days old. This list is alphabetized, and it contains the contact information for the client as well as that contact person’s phone number. This list makes it very easy to review your “accounts receivable” and to utilize this list for making the phone calls that are needed in order to help collect your bills. One of these “accounts receivable” lists are generated every month when we close out our billing cycle at the end of each month.

2. Accounts Receivable Meeting: I have trained myself to sit down and work the “accounts receivable” list no less than once a month. Where I can enlist other people’s help, I do so. When I review the “accounts receivable” list, I will put people’s initials by certain “accounts receivable” that I think they need to pursue the collection of. Often, these accounts are matters that the individual in the office is working with most directly with the client even though it may be a piece of legal business that I originally generated. Enlisting other people to help you in collecting the “accounts receivable” is very important. Sometimes the best person to collect the “accounts receivable” is your bookkeeper. For some reason, lawyers simply don’t seem very good at letting other people help with the collection of “accounts receivable.” If a person is trained properly, they can help collect the “accounts receivable” without offending the client. I always give these people who help me collect the “accounts receivable,” authority to make payment arrangements, take credit cards, and make reasonable discounts of the bills in return for a lump sum payment. If any issues of any kind are expressed by the client with regard to any billing, I ask these people to get me involved in the matter immediately.

3. Accounts Receivable Letters: Quite often we send out “accounts receivable” letters on a monthly basis as cover letters for our bills. I think these letters help us collect our “accounts receivable.” It is important to let a client know if a payment has been received but is not reflected in their bill. We try to get our billing out as soon after the end of the month as we can, but quite often that billing does not actually hit the mail until sometime between the tenth and the fifteenth of the month. If the client has paid a bill sometime in the first ten days of the month, quite often that payment will not show up on the bill. I have found that indicating in a cover letter for the new bill that a payment has in fact been received, but it will not be reflected until the next month’s bill, helps alleviate any misunderstanding with the client. Anytime you can reassure the client that you are operating your business in a professional manner, you will be solidifying the confidence that the client has in you with regard to handling their legal matter. Lawyers who run their business in a sloppy manner, oftentimes handle the client’s matter in a sloppy manner. There is no substitute for acting at all times like a professional. We also use these cover letters in our billing for clients who have multiple matters in our firm. Oftentimes, a recap of all the outstanding bills they have for various matters is very helpful both for the client and for the lawyer to see exactly how much legal services are being expended on a monthly basis. I have also used these cover letters to make suggestions to clients with regard to setting up a payment schedule or in suggesting to them a lump sum we would receive in full settlement of their bill. Oftentimes this will generate a check for a payment or lump sum payment to pay the bill in full. It is difficult to get something if you don’t ask for it!

4. Suit Letters: When you cannot get a client’s attention with regard to the fact that they have an outstanding bill with your law firm, it is perfectly reasonable to send them a letter indicating that you are going to sue them! I can now hear the “hue and cry” from all of you who have just read what I have just stated. The Office of Chief Disciplinary Counsel for my state bar and my malpractice carrier state over and over and over that lawyers should not sue for their bills. Bologna! Why should a lawyer be any different than any other business? If we have earned it, we should have our bill paid. I highly recommend not to sue any client in the firm’s name. I have been with firms who have done that, and it is not usually very pleasant. It simply can be bad publicity in more ways than I can probably explain in this column. Setting up another company that you can assign your legal bill to who will then go about the process of collecting from the client through the use of a lawsuit is a smart idea. Obviously, if you believe you are going to get sued, or if you believe the suit is going to draw a disciplinary complaint, you not only need to think twice about suing, you probably don’t want to sue at all, and simply write off the bill and forget about it. But, there are those accounts where you have done a spectacular job, you don’t have anything to be ashamed of at all, the client has been very satisfied with your work, has never expressed anything to you about any discipline issue or malpractice issue, and just simply is not paying you. Being selective in which clients you decide to sue is an art form. Be very very careful, but pursue the collection of your justified billing.

I have placed some of our accounts for collection with various collection law firms, with very mixed success. Frankly, I am astounded by the idea that because you are an attorney, somehow you should not have your account paid as though you are any other kind of business such as a doctor, a dentist, a car mechanic or the grocery store. I have seen a set a set of circumstances involving my clients where I represented them with regard to how to get their creditors paid when they have gotten themselves in a financial crunch. I think I have seen about every kind of bill a client can have from a creditor. The collection industry in the United States is a huge industry. Amounts as low as $50 are pursued with the vigor that would make a “loan shark” envious. With all of the apparatus set up to collect bills in our general economy, why should we as lawyers simply write off our accounts and forget about any effort whatsoever to collect them through the same channels as other people who are pursuing collection of their bills. We as lawyers need to change this climate! One of the ways we can change this climate is to expect to be paid for our services and to pursue collection of these accounts when they are not paid!

Well, there you have it. More information than you ever wanted to know about “accounts receivable” in law firms.

Next week we are going to talk about “accounts payable.” I have several suggestions with regard to how to deal with your “accounts payable” in your law firm that I think you will find very interesting. You have to keep track of these “accounts payable” or your vendors will get very upset that you are not paying them on a timely basis. I think you will find some of our procedures helpful to you with regard to how to deal with your “accounts payable” to be sure you keep them both at a reasonable amount and paid on a timely basis.

Talk to you next week.

Jim Wirken is a civil trial attorney and the Chairman of the Board of The Wirken Law Group in Kansas City.