We have been talking about the last five areas that make up every business in the world, this fifth are is “collecting.” The four other areas that make up every business in the world are: “Clients” or “customers”; “Administration”; “Getting the work done”; and “Billing.”

Last week we began discussing the importance of sending a “cover letter” with your billing statement so your client will be more inclined to promptly pay their bill. Today, we will finish talking about “cover letters” and why it is a good idea, in certain instances, to send a “cover letter” with your billing statement.

One of the biggest problems in our office, and I believe this is true in most other offices, is that our billing systems are set up on a monthly basis. It is incredibly difficult to get a truly accurate bill at any other time other than at the end of the month once the billing cycle is closed. Sure, we have computer systems that run pre-bills, but often, all the time from everyone who is working on a matter will not be in this pre-bill. Everyone must stop, check the pre-bill, get all their time in, and then, and only then, can you really tell what the actual status of a client’s bill is. Even then, there may be some errant expense that has not been picked up on the bill as of yet. Unfortunately, the practice of law does not neatly lend itself to client’s wanting to know the status of their bill at the end of each month. Oftentimes, clients will want to know the status of their bill or you will need to know the status of the bill, sometime before the end of the billing cycle.

One of the other things that happens with regard to these pre-bills, is they will often not be reflective of the total amount of money that you have collected against the bill. Oftentimes, a check will come at the end of the month for the previous month’s bill that was really received at the beginning of the month that follows the month you are just now closing out to get billed. The client is going to wonder where that check will show up if they get their bill and it is not shown on it, and their bill comes after the time they have sent you the check. This is probably one of the most important areas with regard to using cover letters for your bills. In short, if there is any reason whatsoever to put a cover letter with a bill in order to communicate with a client about the status of their bill, do it!

If we have received a check from the client but it does not show up on the bill that we are mailing, we always put a cover letter with the bill and say that their payment of “x” will show up on next month’s bill, and that accordingly, the amount of your bill is “y” because if you take the payment that they made and apply it against the bill that is attached, you get a new balance.

If you have written anything off on a bill, oftentimes it is a good idea to do a cover letter with the bill noting to the client that you have no-charged them on various items.

If you have reached a capped fee because you cap your fee for a segment of work, or capped it simply because of a dollar amount, you can tell your client that you have reached that cap and now they need to contact you about entering into a new fee agreement. Of course, the problem with this is that oftentimes, you will reach that cap mid-month when there is really no good way to get a pre-bill, and at the end of the month you now find out you have ran over the cap substantially, and as you told the client, anything that you run over the cap “is on the law firm’s nickel, not the client’s nickel.”

The above are just some of the examples that make it important to do a cover letter to a client. Another good reason would be to tell a client about a successful result. Another reason would be to tell a client about a difficult part of the case that has been encountered or is coming up that is going to necessitate you having to spend more of their money.

If the old adage about real estate is “location, location, location,” and the new adage of trying to keep the client that you have is “contact, contact, contact,” then surely the absolute most important thing to do with regard to getting paid on a timely basis, and making your clients as happy as they can be about having to pay a lawyer, and that is no easy feat at all, is the adage, “communicate, communicate, communicate.”

All you have to do in order to get a cover letter done for a bill is simply put on the bill a notation of “CL” for cover letter, or if a client has multiple matters in the office, “CCL” which means combined cover letter, and you will hopefully have set up a system with your staff that it will at least generate a template for a cover letter that can then by reviewed by the biller, tweaked with regard to being sure it is accurate and having it go out as a transmittal letter with the bill.

I firmly believe that when clients get cover letters with their bills, they are happy for the explanation, and appreciate the extra time that the law firm took, to be sure they were properly being communicated with about their bill. I have never once had a client ever tell me “please don’t communicate with me, please don’t send me any cover letters with my bills, please don’t tell me where I am at with regard to my financial obligations to the law firm!” Obviously, we have all heard comments that are the opposite of those last three that I just set out.

You need to train yourself to get into a mind frame that tells you “if you think it, do it!” “If you think that the client would appreciate it, do it!” “When in doubt, communicate!” Any mantra that you can use that projects to your client that you care about them, you want to communicate with them, and that you are a professional, is going to help in every area of your practice.

Next week we are going to be talking about monthly reminder letters, this is a subset of transmittal letters and cover letters, but I think you will see that the utilization of such letters not only focuses your client on the need for payment, but focus you on the need to stop doing work for your client if you are not being paid, and to increase your appropriate collection efforts.

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.