Chasing after clients to collect money owed is no fun. That’s why attorneys often avoid the task until their coffers reach dangerously low levels. This is not a good idea. You can’t run or grow a firm without a reliable cash flow, which not only means attracting business but devising a system to collect what clients owe.
Here are 4 simple ways to improve the accounts receivable column of your ledger
Nobody likes calling clients and asking for money, especially lawyers, who can’t claim collections as billable hours. That’s why most law firms assign collecting receivables to lower-level employees, like paralegals or secretaries. Although this technique frees up partners and associates to do more productive work, it often is not effective. It’s easier to dodge the call of an assistant than it is to avoid the call of the attorney who’s handling your divorce.
If attorneys in your firm balk at getting involved with collections, you could tie their compensation to the money they actually collect, rather than what they bill. Also, tell them that every dollar collected is a dollar earned without putting in extra hours.
Clients won’t pay a bill they don’t receive, so it pays (literally) to send out invoices quickly and regularly. Don’t wait until the end of a case to bill clients, who then have no incentive to pay quickly.
It’s easier for a client to ignore one bill than regular, monthly statements that remind them of how much they owe. Monthly statements inform clients of the terms of your service, how much they owe, and when you expect to be paid. Make sure statements have easy-to-read contact information so clients can call or e-mail you with payment questions or problems.
Become Tech Savvy
Technology may not be your specialty, but today’s billing software is so easy to use that it pays to invest in a program that regularly invoices clients and keeps track of those who fall behind on payments. If such software makes you shutter, consider outsourcing your accounts receivable division. You’ll pay money to collect money, but when you consider the billable hours wasted while you chase receivables, or the wages you pay someone else in your firm to collect funds, outsourcing won’t seem that expensive and, ultimately, could pay for itself.
Our next CLE will address attorney billing practices and how to maximize your collections. Join us on July 30th, email us at email@example.com for more information!