We have begun talking about the last of the five areas that make up every business in the world, and that area is "collecting." As you know the four other areas that make up every business in the world are: "Clients" or "customers"; "Administration"; "Getting the work done"; and "Billing."

The first concept that we would like to share with you with regard to the area of "collecting" is to have monthly billing.

If you are working strictly on contingent fee matters you may think monthly billing is not a good idea, but I have suggested in the past that keeping track of time in contingent fee cases is a good idea so you can determine what kind of cases it is that you are handling that make you money and which kind of cases you have that don't make you money.

For the most part, this week's tip deals with people who do some hourly rate work. My practice has always been a mix of both contingent fee and hourly rate work. I use the hourly rate work to keep the doors open on a day-to-day and month-to-month basis, and the contingent fee cases are gravy when they settle or when you try them to a verdict, and you eventually get paid.

We have previously talked about all the things you need to do in order to set up your office so you can get appropriate contracts with clients that spell out what your hourly rates are on hourly rate business. We have also talked about how you keep track of that time and how that time can be put into various computer systems that will allow you to generate a monthly bill for your client.

The computer system we have been using for probably twenty years is the TABS billing system. I believe we are now on TABS3. This computer system allows us to generate a pre-bill that we can review for all the time that is in the file that has not been previously billed. Under our system, the time that should be un-billed should only be for the month that the pre-bill is generated for. The reason for this is we try to do everything we can to bill every single matter every month. Remember, "happiness is a positive cash flow." If you do not bill your clients, you do not create accounts receivable, if you do not create accounts receivable, you have nothing to collect. I am not sure I have ever encountered in thirty-six years of doing this business a client who paid a bill that they did not get.

Because we bill every client every month, we are telling the clients on a monthly basis what we are doing on the matters they have entrusted to us to handle. Our bills tell a story about what we do for them on a day-to-day basis, who does it, and how much time is being spent. We have previously talked about how we handle those bills and so I am not going to repeat that information here.

The concept that I want to try to get across to you is that, even if there is no work done in a particular matter on a particular month, we will still send a bill to that client if there is any amount of money that is owed to us. This bill will often go out with a cover letter. The bill will show there is an outstanding account receivable, and will also show there is no current work or expenses being billed. If you want to send this bill without a cover letter, you certainly can.

We are going to discuss in more detail cover letters and reminder letters on accounts receivable next week. For the purposes of this week's article, it is important for you to understand that when you are trying to collect accounts receivable, sending out monthly bills that show the amount that is owed is absolutely imperative. Every single client that owes you money needs to be reminded of it at least once a month.

It is probably not a bad idea to take a short detour here to talk for a minute about how you can try to avoid having any accounts receivable.

The only way I have ever known how not to have any accounts receivable is to get enough of a retainer in advance so when you are finished, the retainer matches the amount of money you have actually spent in the matter. To say that this is a difficult task is a gross understatement. Recently we have been encountering a phenomena that it seems no matter what we say the retainer is going to be, we quite often spend almost double the amount on various matters. When you are capping your fees for a particular project, that can be, in particular, problematic. I have often suggested that once you set a retainer in your mind you then double it, and then tell the client that it could be double that amount. Obviously, if you get it done for less money, you are a "hero." If you get it done for more money, not only are you a "goat," but you probably will not get paid for the amount of money that you expended that runs over what you told your client you thought it would be.

One of the things I have recently tried to do is to not cap the fees for any particular project, but simply cap the fees at an amount. Once you reach that amount, you then stop work until you have entered into a new agreement with your client. Hopefully, this new agreement would also involve an additional retainer. I keep thinking the practice of law is supposed to get easier as you become more experienced and hopefully wiser, for some reason that does not seem to be the case and it just simply seems that it continues to be more difficult. I suppose one of the phenomena with regard to this is that as you become more experienced and wiser, you also deal with more complicated cases, and subsequently it becomes increasingly more difficult to really guess about what the appropriate retainer will be. Recently I had a case that, in a normal set of circumstances, should have taken about a third of the time that it did to resolve the matter, but because of some peculiarities about the attorney on the other side and that attorney's client, the matter ended up being three times more costly than it really needed to be. People seem to become more cantankerous and more combative as opposed to more practical.

In subsequent weeks we will be talking about what to do in addition to simply sending these monthly bills showing what amounts of money you are owed. Obviously, it doesn't do you any good to simply send a bill, and if there is no response let the matter sit.

Next week we are going to talk about monthly reminder letters and cover letters on monthly bills as a way to speed up your "collection" of accounts receivable.

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.