Unless you’re independently wealthy and philanthropic enough to practice pro bono law 100 percent of the time, you want to get paid for the legal services you provide. Some clients, however, are less than forthcoming with payment for a variety of reasons. Some may not have the money to pay, or they may have money but it’s not earmarked for paying you. Other clients have the funds but won’t release them because of complaints about client service, performance or outcome. And some are so disorganized that they can’t seem to pay their bills on time, or at all — at least, that’s what they tell you, along with “the dog ate my homework.” Whatever the reasons behind payment delays, collections problems are often a frustrating and confounding part of running a law firm. But if you don’t do collections well, you could be out of business.
Collections Survey Results: No. 1 Challenge?
Curious about how law firms were dealing with the collections conundrum, Orion Law Management conducted a study of its clients focused specifically on collections. The 2019 Orion Collections Survey assessed law firms’ greatest challenges and also asked respondents to share their best practices for getting paid.
The survey gathered results from all levels of law firm professionals, from C-level executives to firm administrators to billing and collections specialists and analysts. We asked “What is the No. 1 challenge your law firm has with collections?” and gave them four possible responses including:
Timing — how long do you wait until asking for the money?
Tone — how do you contact the client to get payment but avoid offending them in the process?
Policy — setting a universal payment and collections policy that will apply to all clients.
Enforcement — how do you handle approaching clients about late payments once they become overdue?
Of these four possible responses, “policy” was the most vexing collections challenge for law firms, with 57% of respondents choosing it as their greatest challenge. Second place went to enforcement at 29%, followed by tone at 14%. Zero respondents chose timing — showing that law firms struggle more with how to convey, and deliver on, their collections message rather than when to send those messages.
Best Practices for Improving Collections
The Collections Process Is Both an Art and a Science
The collections process requires a mixture of rigor and diplomacy that varies for each client. The objective is for the firm to get paid while also treating the client with professionalism and respect. The point of billing provides the client a moment to evaluate the value the firm is bringing and to then acknowledge that value by parting with money.
Law firm accounting and billing departments are responsible for collections, and it sometimes involves the firm administrator or C-level executives for the most delicate or complicated assignments. Below, several Orion Collections Survey respondents share helpful best practice tips for improving collections.
Set That Policy!
Survey results show that policy is the most difficult of all collections-related issues for law firms. Even though it’s far from easy, it’s worth investing the time and resources to establish a uniform policy. Katherine Williams, Business Manager at Fowler, Hein, Cheatwood & Williams, says that in addition to setting policy for accounts receivable (AR), firms must “be universal regarding your payment requests both in email content and expectations, and keep GREAT NOTES.”
Get Attorney Buy-In
When following up on unpaid bills, Ray Lightell, Chief Operating Officer of Galloway, Johnson, Tompkins, Burr, & Smith, says: “Make sure you get buy-in from the responsible attorney and get successful results by being persistent and professional when dealing with the clients. Generally, success breeds buy-in from other skeptical attorneys who think they are the only ones capable of dealing with the client.”
Stay on Top of Collections with Frequent Reports
It is all too easy to lose track of collection status when new projects are constantly flowing in throughout the day. However, having an ongoing handle on collections is helpful for both the billing department and lawyers. Lewis & Roberts PLLC Billing Specialist Lisa Holmes suggests: “Run reports often to keep on top of collections. The Aged AR report is great. We also print and distribute this report, by attorney, once a month so that they can also keep collections in mind.”
A Gentle Reminder at the Right Time
Left unchecked, collections can get out of control with clients having several outstanding invoices. This puts you in the awkward position of having to ask for larger amounts of money as invoice totals accumulate. For better results, steadily and tactfully remind clients of past due bills via phone or email before the amount spirals too high.
Gina Erbe, Billing and Collection Supervisor at McCormick Barstow LLP, says: “I try to stay on top of my AR by making sure I follow up on prior invoice balances when I am processing the current invoice. This reduces past due balances and keeps the AR from getting out of hand. A quick email or phone call to the client or a reminder statement gets generated at 30 days and prompts them to pay sooner than later. We also send the reminder statements out on all previous balances and stamp them ‘past due.’ This has prompted the payments to come in and the clients to call in with credit card payments. We also distribute the Aged AR report to the attorneys once a month, so they can follow up with their clients as well.”
Phone Calls Stand Out
With emails and texting prevailing for today’s business communication, the telephone is used less often. However, phone calls can be a productive approach to collection. “I start with persistent emails followed up by phone calls,” says Diane Stead, Administrator at Chimpoulis & Hunter, P.A. “Phone calls get people’s attention.”
Show Trust and Respect, Inside and Out
Tone is an often-overlooked aspect of customer service, but 14 percent of survey respondents called it their No. 1 collections challenge. Using a respectful tone when talking and also remembering to listen can improve connections between billing professionals and lawyers inside the firm, as well as between firm representatives and clients.
Darlene Maronge, Collections Analyst at Galloway, Johnson, Tompkins, Burr & Smith, says: “First, I try to get the trust with the attorneys, so they can practice law and be removed from collection process with their clients. When I have to contact a client for payment, I speak to them the way I would want someone to speak to me, especially trying to collect payments. I always listen to the client. To me, it is important to be respectful and be responsive as soon as possible regarding issues with invoices. I also keep the attorney updated with any issues that they might have to address.”
Asking for money is tough, especially when you’re trying to preserve a client relationship. The Orion Collections Survey shows that law firms have struggles with collections at the strategic, policy and tactical levels. Fortunately, there are ways to overcome the collections conundrum by explaining billing policies clearly, communicating effectively, and enforcing policies unilaterally. Technology can be a secret weapon in helping track and follow up on collections with greater consistency as well. When the collections process is a finely tuned instrument, money arrives when it’s supposed to and the whole firm benefits.