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If you don't bill, you can't eat. But even if you're racking up 30 billable hours a day, that work will be meaningless if you can't get clients to pay.
Sure, you can put liens on delinquent clients or even take them to court, but often your firm's collections practices can be drastically improved by enhanced at your internal practices first. Here are 11 ways to improve.
We were inspired to think about collections by a recent post by Michael Baker over on Attorney at Work. (Baker is a CPA as well as a lawyer, so he's not unfamiliar with collecting.) Baker mentions making four internal changes to start improving collections:
1. Bill Regularly. Quick, regular billing can improve your collections and make sure you're not wasting time on work for a client whose bills for past matters are long past due.
2. Identify Inefficiencies and Bottlenecks. Backer recommends creating flowcharts and timelines of your billing and invoice process to find out where things are going wrong.
3. Look at Your Invoice Formatting. You'll want to make sure your invoice clearly states what is due and when, and has contact information if clients have questions.
4. Set Goals. Put together monthly invoice targets and hold yourself accountable for meeting them.
Those four are a great start, but we've got some tips to add. To really get your collections practices up to par, add these seven changes to your list.
5. Check Creditworthiness. You don't need to run a credit check on every potential client -- but you can. At the least, you should ensure that prospective clients have the ability, and the willingness, to pay before taking them on.
6. Demand Cash Retainers. The Michigan State Bar reminds us that all lawyers should follow the three main rules of criminal attorneys: get paid up front, get paid up front, and get paid up front. Having clients put down cash retainers can guarantee that at least some of your work will be paid on time, should payment be hard to collect later.
7. Enclose a Self-Addressed, Stamped Envelope. Really. A client may set aside a bill -- and then forget about it -- if they have to go searching for stamps and envelopes. Make paying as easy as possible by removing as many barriers as possible.
8. Make Your Bills Clear. We're not talking just clear amounts due and "pay by" dates. Breaking down your services for the client can help encourage faster payment as clients will know exactly what work they're handing over their money for.
9. Follow Up. Don't wait until your own bills come due to crack down on client collections. If a bill isn't paid after 30 days, a follow up should be sent out immediately, with past due notices coming regularly after that.
10. Charge Interest. A minimal amount of interest can add a sense of urgency to an invoice. You'll need to make sure interest is present in your fee agreement, though, or make sure that your state bar allows attorneys to alter fee arrangement to add interest charges for future work.
11. Put the Best Billers in Charge. Some attorneys sit on invoices for two months -- or longer -- before sending them out. Some rarely follow up. Put your best billers (be they attorneys or support staff) in charge of collecting from your most important accounts to make sure they get paid in a timely fashion.
Meeting with a lawyer can help you understand your options and how to best protect your rights. Visit our attorney directory to find a lawyer near you who can help.