Law Firm Cash Flow - Advice on How to Achieve a Collection Rate of 90%
By: Claude Ducloux Board Certified, Civil Trial Law and Civil Appellate Law, Texas Board of Legal Specialization, Director of Education, LawPay
As a veteran of nearly 39 years of legal practice, I know the importance of cash flow. In my quest for financial security and success, I have perused every bar journal article, attended numerous practice management CLEs, and varied my approach to billing and collections to see what worked.
Doing good work, of course, has been the overwhelming focus of my practice, and thankfully, I have had very few complaints in that department. But what I have learned about getting the money in the door promptly and securely has proven to be an art.
I am happy to tell you that last year I had a billing collection rate of approximately 97 percent, which is far above the national average for solo-small firms. But with a broad practice, there is no single magic secret to this achievement. It is a combination of excellent communication, billing discipline, and intentional follow up.
Bearing this in mind, here are a few tips I’ve put to work in my practice to help me achieve my collection rate.
First: Learn to interview in a way that will result in client confidence, reasonable expectations, and realistic time frames for completion of your work, as well as a realistic range of fees to get the matter completed.
Second: Always execute a fee agreement. Clients take things that are in writing more seriously than handshakes. Also, you should rarely start work until a promised retainer check clears.
Third: Have billing systems in place that allow you to record time daily and produce comprehensible bills with the necessary details.
Fourth: Diligently record your time each day. You will forget tomorrow what you did yesterday. A reminder hint I use when I can’t remember is to check my outgoing email each day. Your email is a terrific source of clues as to what you worked on during your busy day.
Fifth: Know how to bill accurately and amicably. Use the client’s name: “Telephone call to Robert (rather than “to client”) concerning hearing.” Then review every bill for errors or double billing before putting bills in final form.
Sixth: Send out your bills at least once per month. (I recommend the first business day, after most people have received a paycheck). If you don’t do this, clients believe, “Hmm…they’re obviously so rich they don’t need my money.” Clients hate paying you three or four months after you’ve completed the legal work, so make billing a priority. Sending out late bills is a huge management error.
Seventh: Follow up! When you are doing your bills, and you see client John Doe didn’t pay last month, immediately stop and send him a friendly email reminding him that you have not received payment and offer him the immediacy of an online payment link. This works like a charm!
Eighth: Be modern! Offer to email bills (more and more of my clients only want bills via email), and give your clients easy payment links to a provider, like LawPay. Give your clients a link to a secure payment page, allowing them to pay you from anywhere with an internet connection—even on a cell phone. Additionally, LawPay was designed specifically for the legal industry, guaranteeing complete separation of earned and unearned fees. Supercharge your cash flow by giving your clients an efficient, simple, and online way to pay for your services.
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