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by Linda Oligschlaeger
Be selective about who you take as a client. Learn how to weed out clients who simply don't have the means to pay you. (They usually tell you upfront.) Also, understand the difference between clients who can't pay and those who won't pay. There are usually signals to identify clients who might not pay you down the line. Listen to your inner voice!
Qualify your clients for ability to pay. Talk with your clients about fees and how they will be charged. Ask for financial information as you complete the Client Intake Form. In some situations, you may order a credit report with the client's permission. Be upfront with your clients from the start about how they will be charged and what they might expect when it comes to expenses. It's better to know at the start if the client is willing or has the means to pay you rather than to do the work and then not be paid.
Provide a written fee agreement. A clearly written fee agreement goes a long way to refresh memories about fees. It's worth the extra effort to always offer one to every client. It clearly sets out the plan for the representation. It's also more professional.
Good service builds trust and creates value. Developing good client relationships and providing quality service is a key element in your clients' willingness to pay the bill. If you regularly communicate with your clients by promptly returning phone calls, keep them updated on their legal matter, and provide quality work, collection problems become a non-issue. Good service translates into value and that perceived value is more likely to get you paid.
Get as much money as possible upfront. Whether you're billing on a flat fee basis or on an hourly basis, collect as much as possible from the client before you start work on the matter. This is an opportunity to find out if your client has the means to pay you, or will pay you. If it's an hourly fee arrangement, clearly explain to the client that their money will be put in a trust account until you earn it.
Accept plastic. Consider accepting credit card payments. Even though the credit card company retains a small fee, it's worth it to improve your cash flow. Collection activities can be costly. Besides, most clients are accustomed to using credit cards, and it's a convenience for them. Also, be wary of a client who doesn't have a credit card. (One exception: many elderly clients do not or have never used credit cards.)
Consider charging interest on past due accounts. This might be an incentive for clients to pay if they know there is a penalty for past due accounts. However, this policy must clearly be set out in your written fee agreement and understood by the client.
Reward those who pay on time. You might consider taking a positive spin as an incentive to pay on time. Offer a small monthly discount for clients who pay within 10 days of the billing.
Bill on a regular basis. Here's the Rule...if you don't bill, they won't pay. We are all accustomed to the system of receiving a bill before we pay and clients are as well. Set up a regular routine to bill your clients on a monthly basis.
Bill monthly even if nothing is due. Even if you have received money up front that was deposited into your trust account, send your clients a regular monthly billing so they can see what work you have performed and the balance in your trust account. This avoids surprises.
Bill on the best billing cycle for the client. Who says your bills all must always go out at the end of the month? Find out from your clients when is the best time to bill them. For example, if they are paid on the 1st and 15th of each month, but they have a mortgage payment due on the 1st, consider sending your bills so that they arrive by the 12th to catch the pay period in the middle of the month. Otherwise, if you bill near the 1st of the month, you'll be waiting until after the 15th anyhow to be paid or the bill may be overlooked.
Clear billing statements. Make sure that your clients can easily understand the work that you have done for them and exactly what the expenses are. You're much more likely to be paid if they know exactly what they are paying for.
Avoid the shock! Clients don't like to be shocked when it comes to bills. For example, if you need to hire an investigator and the fees will be higher than was expected, be sure to consult with your client beforehand to avoid the shock. If you've done a lot of work on their case that month, you might prepare them for a larger than normal bill; discuss it with them before you send out the bill.
Be reasonable and accurate. Go through your bills before they are sent out. It really irritates clients to be charged very small amounts for what they will consider to be "piddly" items. Consider getting rid of those or marking them "no charge" items. Also, it's important to be certain that the billing is correct. Your client can easily lose trust in you when the bill is inaccurate. They will immediately think that your representation is suspect too.
Refill the bank. If the advanced payment has been earned, consider asking the client to replenish the amount to be held in your trust account to avoid an accounts receivable situation.
Automate your billing. Automated billing is usually much more efficient and looks more professional. It will save you and your staff lots of time, and possibly increase your revenues to capture time sometimes forgotten.
Check the no payment zone. Don't let unpaid bills go unnoticed. Check your aging accounts on a weekly basis. Remember, the "squeaky wheel gets the grease." If there is only so much money to pay bills and if you haven't said anything about not being paid, you're the "one" the client will let ride. They will pay other creditors instead because they do follow up.
Is someone in charge of collections? Someone in the office should be assigned the task of collections. It might be an office manager or one of the lawyers. If no one is minding the collections store, accounts receivable can easily get out of hand.
What's the collection routine? If you don't have written collection procedures that are regularly followed in your office, stop what you're doing right now and take care of that. Your written collections policy should outline step-by-step what your policy is regarding collecting fees and it should be followed to the letter unless you make an exception. For example, if the client's account is overdue after 10 days, a second notice should be sent immediately. If the bill isn't paid after 30 days, a designated person from the office should call the client to inquire if there is a concern. If the client is dissatisfied for some reason, it's best to catch the situation early. If the client is experiencing cash flow problems, arrangements for payment should tactfully be discussed. Perhaps this month's billing could be paid by credit card. The lawyer working on the case should be aware and make a decision if it might be necessary to withdraw from the matter. The lawyer might suggest that the client come into the office to discuss the situation. The client might have decided the costs are too high, but they haven't told the lawyer yet. It's better to find out early than to do work that you won't be paid for.
Strike while the iron is hot. When the matter is concluded, don't wait for the next billing cycle to send the final billing statement. Send the final statement while the client is still satisfied with the result and the bill is less significant. Studies have shown that the more time passes after the matter is concluded, the less likely the client will gladly pay the bill.
Ease disappointment with information. If a less than desirable result was obtained, it might be worth the time to personally visit with the client as soon as possible about what happened and tactfully review the billing statement. If the client doesn't fully understand why the matter concluded the way it did, it's less likely the bill will be paid.
Linda Oligschlaeger served as the Membership Services Director at The Missouri Bar from 1991-2012 where she oversaw the Law Practice Management Information Center.
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