November 4, 2005
Attorneys Are the Wrong People to Collect Firm Accounts
I spent a weekend meeting with law firm administrators and law firm administrative and accounting staff. I was struck by how many law firms have hands-off policy for the administrative staff when it comes to collections.
The typical firm waits an average of 4½ months before they have completed the billing and collection process—that is how long it takes to get the money in the bank. Pardon the expression but that is nuts. Attorneys are the wrong people to play the collection role. Collection is an administrative function. The professional staff should get involved only after administrative efforts fail.
Many mature law firms have learned the above lesson. When meeting with a group of managing partners a couple of months ago, one partner explained that when routine collection efforts fail, the firm still does not let the responsible attorney get involved. A second member of the firm that has no responsibility for the client or case in question is assigned the role of being the “heavy”. Will law firms sue to collect? A growing number say “yes” in spite of the countersuit risk. They refuse to leave their money on the table.
The administrative and accounting group I was meeting with agreed that collections start with client intake. That is where the firm sets the expectations for payment. Payment policy should be clear. The client should sign off including signing off on the stated consequences of late or nonpayment. I believe the engagement agreement should also clearly state who the law firm contacts to confirm receipt of the bill and who we contact in case of missing payment. This is also where you can practice proactive collection:
Require advance payment;
Require a Trust deposit;
Accept credit cards;
Automatic debit to the client’s bank account;
Installment payment agreement;
Etc.
Always remember that the majority of past due fees are attributable to clients that pay a little late. Be proactive and work collections before they become past due. When all else fails, the account gets kicked up to the professional staff. The accounting or administrative staff should never threaten. Theirs is a softer role. Persistence in asking for payment and following up when it isn’t received works in almost all cases.
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Filed under Blog by Tom Collins