January 15, 2007
Law Firm Collections Efforts: Are Yours Too Little Too Late?
I was paging through an expensive resource guide for managing partners when I saw it. It was A Model Collection System, a semantic or procedural flow chart illustrating recommended collection efforts for a law firm. The chart included the following steps:
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Send the client a bill
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If there is no payment in 30 days, send a statement and letter and have the lawyer make a reminder call to the client
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If there is no payment in 60 days, send a statement and letter
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If there is no payment in 90 days, send a statement and letter
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If there is no payment in 120 days get serious about collection:
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Strong letter
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Lawyer to call client
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Refer to committee
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Pursue collection or write-off
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“It is too late to close the door after the horses are out of the barn.” Old sayings like the previous sentence are sound business advice for managing partners. Why in the world would collection efforts be directed at past due accounts? Why not close the barn door before the horses get loose and have to be rounded up?
The typical law firm, according to the Juris Economic Survey, has 76 days of unbilled time still in its work-in-process at the end of every month. It takes another 72 days on average to collect for amounts once they are billed. That is a 148-day cash flow cycle. That is getting close to half a year!
Improving collections is achieved through procedures to avoid collection problems rather than trying to solve them after the fact. How do you do that? You do it by directing your energies as follows:
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Improve intake procedures
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Bill faster—speed up your billing process
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Move routine collections out of attorney’s hands
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Work accounts before they become past due
For more on improving law firm collections, including a checklist for speeding up billing and collections, read the following previous posts:
Speeding Up Law Firm Billing and Collection
Attorneys Are the Wrong People to Collect Firm Accounts
Collection Tip – Honey vs. Vinegar
You might also reread or distribute the post on problem solving, A Problem Solving Policy for the Law Firm.
Morepartnerincome.com is sponsored by Juris, Inc. For information about Juris® products and services for increasing law firm performance and partner income, go to www.Juris.com.
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Filed under Cash Flow Issues by Tom Collins
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