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Best practices for collection

Issue May/June 2017 By Judy Murray

This is the time of year to refocus on the financial health of your firm. It is also a great opportunity to implement new strategies for improving your accounts receivable collection preview practices. This article will summarize some best practices for law firms and introduce collection trends for 2017.

The Value of Replenishing Retainers

Typically, a client pays the law firm an initial retainer, the lawyers begin working the case, they exhaust the retainer, and before long, the client is being billed on a month-to-month basis. By incorporating an agreement to replenish the retainer in the initial engagement letter, the firm is able to pay itself immediately upon performing the work. There are numerous billing software programs that firms can use to electronically monitor retainer balances.

Don't Forget to Text

In today's fast-paced, mobile world, sometimes the easiest and most effective way to get your client's attention is by sending a text. A quick text to your client such as, "Just following up on your last invoice in the amount of 'X,'" might get the attention of a busy executive faster than mailing a letter or sending an email with an account statement.

Pay Online or by Credit Card

More than ever before, clients are comfortable using online payment options and appreciate that you offer the service. There are many credit card processing services that can be used to collect legal fees. The key is finding the one that best meets your needs. You should research and compare the fee structures of each service to find the right program for your firm.

If you meet clients away from your office to receive payment, Square is a good option for collection of retainers and legal invoices. Square can easily plug in to your mobile device to allow you to take credit card payments remotely. One caveat to keep in mind: if you are accepting a retainer payment, the funds must to be deposited directly to your firm's IOLTA account and not your operating account.

Other options for online credit card payment include Quickbooks and Paypal. The more convenient you make it for your clients to pay their invoices, the more likely you are to get paid in a timely manner.

Settle on Payment Arrangements

If it becomes necessary to accept a longer payment term than what was originally agreed to in the engagement letter, make sure to document the terms of the new agreement. This can be done by sending an email to the client with the new terms and asking them to confirm via a reply email. Don't forget to schedule regular follow up reminders to make sure the client adheres to the new time table and stays on track with payments. For example, send a confirmation email, such as: "It is our understanding that your next payment is due in the amount of 'X' by this Friday. Please confirm that payment will be received by the mutually agreed upon date. Thank you!"

Don't Be So Quick to Discount

As an attorney, it is in your nature to resolve problems through negotiation. As a business person, you need to think differently. If you have a client who knows, through past experience, that if they are slow to pay or are disgruntled about their bill, you are likely to "discount" the amount due, you are rewarding bad behavior. Instead, try to find out what is at the root of the problem. If the client is truly having cash flow issues, work out an alternate payment plan but keep the amount due intact. If the issue is related to the overall cost of the matter, it may be necessary to have an open and honest conversation with the client to make sure that they are aware of the anticipated costs so that they can plan their course of action accordingly. If your only alternative to keeping the client is taking a reduction, make sure that they are aware that it is a one-time circumstance.

It pays, literally, to constantly review your collection tactics and to analyze your approach to see what improvements you can make to your current routine. The best approach is to establish standard follow up procedures for all collections and then personalize the approach for each individual client. Be pleasant, professional and persistent. Continued, regular follow up enhances your prospect to get fully paid for your work.

Judy Murray is the office manager at Kenney & Sams, P.C., a boutique law firm consisting of 13 attorneys, located in Boston.

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