What’s Your Collection Rate? How to Kick Start Your Cash Flow in 2019
As a veteran of nearly 39 years of law practice, I know the importance of cash flow. I have perused bar journal articles, attended numerous practice management CLEs, and varied my approach to billing and collections to see what worked. What I have learned about getting the money in the door promptly and securely has proven to be an art.
I’ve often reviewed my year-end billings and determined that I have maintained a 97 percent collection rate. But, there is no single magic secret to this achievement. It is a combination of excellent communication, billing discipline, and intentional follow up. Here are a few tips you can use in your practice to help boost your collection rate in 2019.
Interviewing the client
Few lawyers are ever trained to carefully, thoughtfully, and intelligently listen to the client. The result of a thorough interview should be reasonable expectations by the client, and by the lawyer, using these steps:
- Determine whether the client’s needs and expectations can ever be realistically satisfied.
- Give the client a road map of what the most important next step will be, and the decisions that may arise thereafter.
- Ensure the client understands the cost and the law firm’s expectation of payment, discussing frankly how the client plans to pay.
- Exercise your own good judgment as to whether this client is credible and a good risk. If stories don’t make sense, and you’re not the first attorney who has attempted to help this person, alarm bells should be ringing.
Communication during the case
Nothing protects the lawyer and firm more than vigorously updating the client throughout this process and controlling the narrative of events as they progress. The single biggest complaint against lawyers in the United States is, “my lawyer won’t return my call.”
Failure to communicate not only can get you in trouble with the bar, but also affects the client’s willingness to pay your bill. Instead, create confidence and protect yourself by sending frequent, even if short, messages and updates to the client. Remember, you are, after all, a team!
The client satisfaction curve
Clients are most likely to pay you immediately following the final achievement of their goals. But their interest in paying you later drops off exponentially:
Day 0 – Case settles. Yay! Client very happy. Get your client the bill today!
Day 30 – The client already is alarmed that the cost is more than the fantasy they hoped it would be.
Day 60 – The client is convinced you are deliberately overbilling and becomes angry.
Day 90 – Client thinks they didn’t even need a lawyer and could have handled the matter on their own. Arrivederci, legal fee!
Billing the case
Effective billing includes all of the following elements:
- Don’t bill for stupid things like office supplies. Stupid billing only makes clients angry, offended, and more likely not to pay you in a timely manner.
- Save your time entries daily. Good lawyers don’t need to spend more than five minutes per day with a good, basic billing system.
- Make it easy to get paid! Nothing has supercharged my own collections more than giving clients the opportunity to pay immediately with a credit card.
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