(Read Part 1, Part 2, Part 3, and Part 4)

7 out of 10 law firms who come to us are frustrated with clients not paying them on time (statistically speaking, that’s probably you). Out of those 7, all seven are missing one or more of the requirements for an airtight system (a possible two for two) that yields high timely payment rates and minimal collections cases.

Julie and I were working together to develop a comprehensive accounts receivable aging process for her firm and when we finally got to the end of the project and were ready to pull the trigger, she started to hesitate. We were on a video meeting so I could see her sit back in her chair and rest her hand over her chin. I could tell her wheels were spinning. “I can’t believe I have to do this, why won’t my clients just take me seriously and pay on time”? “Julie”, I paused. “People will take paying your invoices seriously when you take getting your invoices paid seriously”. The hard truth is, your clients need to see that you expect them to follow through with compensating you for the valuable services you have taken the time to carry out for them. And if they chose not to, that you will follow through on perusing payment. For some clients it’s as simple as forgetting to send the check between soccer practice and feeding the family. A process with some core values serves as a simple and fair reminder of their financial obligations to your firm.

Step 1: Clear it up on the first date

Be transparent and forthcoming about how you bill for your services. Give your client an opportunity to ask any clarifying questions. Nobody likes surprises when it comes to money, don’t be that guy/gal.

Your client should understand:
#1 How they can pay
#2 When payment(s) are expected
#3 Exactly what happens if payment is not received timely (we’ll cover that in a bit)

Step 2: Cover your butt

If you haven’t discovered a flat rate approach to most, if not all, of your services you should get going on that. When you understand your pricing structure you can begin to secure payments up front in the form of retainers. Make sure you’re requesting enough in retainers and make sure you know when to ask for additional funds. If you’re really in high demand, request credit card info for all prospect consultations so if they decide to no-call-no-show, you reserve the right to charge them a $25 cancellation fee. Time is money and if you value your time, show your clients how seriously you take your time.

Step 3: Show some initiative and don’t be just a bill

Sometimes clients don’t pay because they feel that they were not given good service and they’ve become spiteful and resistant. More often than not, the root cause is lack of client communication. In some cases, it takes a long time for you to perform services for a given client. Check in on your clients in the meantime! It’s so easy to do and takes minimal time for the peace of mind it will give your clients in knowing that you are keeping them in the loop. Don’t give them enough time to get upset and call your office looking for answers. Offer the answers up. Then when it comes time to pay the bill, they don’t get frustrated because they haven’t even heard from your office.

Step 4: Take yourself seriously

When you take what you do seriously, people see it. When you take getting paid seriously, your clients should see it in the form of invoice reminders. Depending on the software you use to invoice clients, this process will look a little different from firm to firm. Some softwares are wonderful at automating this process so it takes less time to keep up with. Here’s an example of an accounts receivable aging process:

30 days past due – Client pays a flat $25 late fee
60 days past due – Legal services stop until paid in full (yes, that’s right, don’t spend one more minute)
90 days past due – Letter of intent to collect (more on that below)
120 days past due – Off to collections you go

It’s not what you say it’s how you say it

Now, with this 90-day letter of intent to collect. When people think of this they automatically think about an intimidating letter demanding payment. That’s not what this is. This letter is a final attempt to make sure they really don’t want to pay because you’re about to take this thing seriously. You don’t have to be intimidating to do this. Here’s how I like to word these:

Hey There Mrs. Client, 

It’s been a pleasure working on your case and we’re pleased with the progress so far. Unfortunately, we had to stop work due to outstanding invoices. Are you receiving the invoices we’re sending you ok, or would you prefer a different delivery method? (Give them the benefit of the doubt, not being accusatory)

Your account is due to move on to collections, and I wanted to make sure you had a final notice. Please reach out to discuss alternative payment arrangements (provide contact info) to avoid your account moving into collections. If we do not hear from you by (specific date), your account will be scheduled for collections.

Sincerely,
Person who will come for my money if you take me there

See, not mean rude or demanding, actually more of an “I’m taking time out of my day to reach out to you, so you are aware as a courtesy because I value you as a client”. If anything deserves a system in your practice, it’s a system to get paid. Besides, you’ve got bigger things to worry about!