Collections - The Other Half of the Billing Process




So, you kind of get most of your bills out sometime every month, or two or three, and so your billing is done, right?


Guess what? Wrong.


The other half of the billing process is collections. It really does not work to send out bills to clients and then not follow up for payment, does it?


This is as important for new clients as it is for already existing clients. Clients retain the firm and the work is performed pursuant to the retainer. You have a monthly billing cycle and each client should receive an invoice, even if you are still working off the retainer. If you don’t send each client an invoice, when a client’s retainer is used up and they are asked to pay an outstanding invoice or a replenishment retainer, the first question will be, “what happened to all my money?”


Guess what – now you need to send them all the statements that showed where their money went and why they need to replenish their retainer. Believe, I know what this is like because I have had to do it with clients. Somehow the questions continue on for a while because they just don’t understand how $3500 or $5000 got spend in 3 or 4 months.


A lot of law firms carry aged receivables that are over 120 (or more) days old. These balances affect the firm’s financial analysis. And, let’s face it, when some bills are that old, especially when the case is over and if you somehow did not get the 100% result the client wanted, you probably are not getting paid.


Financial awareness – budget, cash flow analysis, income and expenses and profit/loss need to be a priority for every firm, but especially for solo/small and some medium-sized firms. Lawyers often believe that looking at these financial reports is not as important as doing legal work and bringing in clients. Maybe because there is a lack of understanding of the important things financial reports tell you about your firm. You can see this becomes a self-perpetuating problem – and everyone thinks that more money will solve the problem. So, they bring in more clients because that means more money. What they don’t realize is that month to month the income is not covering the expenses. When clients retain the firm, they sign a retainer agreement and the terms of billing is usually set forth in the retainer. You would think that would be enough. But we all know it is not because of the questions that are always asked. When a billing statement is sent to the client, they first ask what happened to my money? Or, why did I get charged court costs? Why am I being charged for emails from someone at the firm – you needed information from me – why should I pay for that? And the list goes on.


So, at the time of the consultation and signing of the retainer, take a few minutes to have a conversation about billing procedures and how often statements are sent. If you use replenishment retainers, explain how that works.


I know these are tough conversations to have with clients, especially because you do not want to overwhelm them. But if the choice is to have it at the beginning of the case, or, wait until you are 4 months in and the money is gone and now you have to get more money from the client – which will be more productive? Clients also need to know that they will be charged for costs such as filing fees and depositions.


These days almost all firms have a billing program, usually part of the case management software. While it is cost-effective and efficient to have a person who handles billing, collections and the like, everyone in the firm should know how the system works and support staff (and attorneys) need to know how to enter their time. Handling the billing on a monthly basis, and subsequent collections will enable the firm to collect its monthly receivables and leave nothing – or almost nothing – unpaid every month.


If a firm’s billing and collections is handled properly, it will mean that the firm collects 90% - 95% of its collectibles every month. No one wants to put time into a file knowing that they will be chasing down a client for payment. If handled properly with someone staying on top of the billing and collections, there will be no unpaid A/R to worry about.


Billing and collections is, for lack of a better description, something that is a science of sorts. There is a way to go about it and you need to stay on top of it. Clients also will realize that the attorney is serious about getting paid – and so they take it seriously. I have a few clients who collect $90-100k every month without fail. But the attorney allowed me to set the stage at the very beginning and so there are no problems. Invoices are sent, payment is made.


Do you have a billing/collection practice in place? Do you have someone who follows up and expects to get payment from your clients? Or, are bills sent now and then when there is time to send bills, and no one takes the person who calls to collect money seriously? Or is the person collecting for the firm have their own money problems and therefore they will identify with your client?


I have been preaching billing for years. I feel like I wrote the book on it . . . actually, I did. “From Lawyer to Law Firm – How to Manage a Successful Law Business” was #4 on the best seller list for 4 weeks.


Call me at 813-340-9569 and we will put billing and collections protocols in place, whether you law firm bills hourly or flat fee. Don’t do work on files without having a retainer on account – you are asking to get stuck holding the money bag.


Let’s do a consult and see what we can do – 813-340-9569

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