We are continuing to talk about the topic of “collecting” as the fifth and final area of the five areas that make up every business in the world. The other four areas are as follows: “Clients” or “customers”; “Administration”; “Getting the work done”; and “Billing.”

Just last week we talked about the topic of giving a discount to your clients for timely payment of their bills. This week we are going to talk about the concept of utilizing “payment schedules” and “post-dated checks” to get your bills paid on a timely basis.

By this time I think you realize I am always looking for an opportunity to set up some type of a system with a client so that their bills get paid on a timely basis. Yes, I am going to say it again, “happiness is a positive cash flow!”

Currently, I have a client we are continuing to do work for who has budgeted attorneys fees to be paid at the rate of $2,000 per week. This system seems to work very well for them in their business and also works very well for us in our business. We know we can count on $2,000 each and every Friday of every week from this client. For some time, we were actually doing more than $8,000 of work a month for this client and we are getting somewhat further and further behind with regard to getting our bills paid. Fortunately, we were able to solve quite a few problems for this client and the picture with regard to our accounts receivable turned around and we actually started to reduce the outstanding accounts receivable. The arrangements seem to work very well for the client because they were getting their legal needs met and keeping them in business and we were getting cash flow needs met and keeping us in business. If you can figure out a way not to get any deeper in debt with a client by running up a huge accounts receivable, that is a very good idea and you should implement any system you can reasonably think of immediately.

Additionally, I have worked out arrangements with clients for periodic payments on their bills over a substantial period of time in return for an agreement to write off a balance after a certain amount of money is paid. I have had clients pay me everywhere from $25 per month to $1,000 per month to reduce their accounts receivable in return for an agreement to eventually write off a balance after a certain amount has been paid.

I have also utilized a system of post-dated checks from clients that will allow us to deposit the checks on a periodic basis in order to make payments on a client’s bill.

I don’t have a very strong feeling about which one of these techniques is the best way to go other than for the concept of not creating any accounts receivable at all, but I have certainly never figured out a way to achieve that result. I have often stated that if you don’t have any accounts receivable, there is nothing out there to collect. This can be a good thing because you have gotten all of your money in advance, or this can be a very bad thing, because you are not performing enough legal services to really pay your bills. I have tried very hard over the years to not become so “fixated” with uncollected accounts receivable that I lose sight of the benefit of having a prosperous and successful legal practice that allows me to pay the bills for the firm, and to still have enough left over to have made a good living as a lawyer. I am reminded of an old adage, “show me a person who has never lost a case, and I’ll show you a lawyer who has never tried a case!” If you translate that into accounts receivables, you might come up with a comment such as the following: “show me a lawyer who has no accounts receivable, and I will show you an unsuccessful lawyer or a lawyer who handles nothing but contingent fee cases!”

Next week we are going to continue talking about additional payment arrangement options you may have to get your bills paid. I think you will find my comments quite helpful.

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.