How to Teach Your Lawyers Billing and Collection Skillsby Joel A. Rose
Motivation is essential to driving a lawyer’s commitment to bill and collect. But without the proper skills, this commitment can lie idle. Billing and collecting is a skill, not a talent. What are the skills your lawyers must learn?
1. Allow your young lawyers to bill small matters early in their careers. Make sure these young lawyers have mentors to turn to for billing and collection questions and discussions. A good young biller and collector will be a good old biller and collector.
2. Don’t try to turn every lawyer into a biller and collector. Some lawyers can’t do this work or they don’t want to learn. I have seen lawyers who freeze when it comes time to bill and collect. Know who these lawyers are in your firm and give their billing and collection tasks to someone else. Make your good billers, young or old, responsible for billing your major clients. Remove billing responsibility from lawyers who are reluctant or refuse to send out timely bills. A manager who detects an inability in a young lawyer to bill should act quickly to find the cause. Without proper training, young lawyers retain bad billing habits to the end of their legal careers. It takes training to develop good billers and collectors.
3. Set sensible written billing policies and procedures. Regularly bill every possible transaction, for example, monthly. Most middle-level managers have a limit on the amount of a supplier’s invoice they can authorize for payment. Know the amount, because if your monthly bill is under the threshold, it will get paid. Some firms consider it good practice to bill a transactional matter-in-progress before closing, especially one that takes many months to complete.
4. If you want to turn receivables into cash, follow-up is essential. Send a new statement when the first one is over 30 days old and further follow-up letters at 60 and 90 days. At the end of 90 days, remove the account from the billing lawyer and turn it over to someone else for collection. Billing lawyers are reluctant to pursue aggressively their slow-paying clients. If a client tenders a reasonable part payment on an old account, take it and run. Law firms spend too much time pursuing deadbeats. Lawyers forget “a bird in the hand is worth two in the bush” when they go to collect their own accounts.
5. Make sure your bills describe your services. A client who can easily understand the work you did is likely to find your fee acceptable and pay promptly. Most computer programs allow you to enter the details clients want on their accounts. Make sure you have such a program because, without it, you need to spend more time editing your draft accounts. These new programs eliminate the old excuse, “not-enough-time-to-bill.” In many well-managed firms, secretaries input time and service descriptions into firm computers. This reduces errors because secretaries know their bosses’ files better than someone in accounting. Also, secretaries are better able to pick up on errors lawyers make when dictating time records. This practice will streamline your billing process.
6. Remember that effective collections require timely billing. The sooner you send your bill after completing client work, the faster the client will pay. Different types of cases require different billing strategies. Bill transactional matters at or before closing because clients quickly reinvest the proceeds of may closings. Bill your litigation files at least monthly. Some firms now bill on a continuous monthly billing cycle. They consider it poor practice to wait until the end of the month to bill all their matters.
7. Ask for cash retainers. Cash retainers are essential when you deal with an out-of-state or small local company. Some firms are experimenting with refundable advance retainers. These firm refund this type of retainer at the end of a matter, provided the client has paid all outstanding bills and expenses. It is odd how some clients expect your to defend or prosecute a “great case” but are unwilling to advance you $2,000. Are you not better off without these non-advancing clients?
8. Let clients pay all larger disbursements directly to outside suppliers. Wise lawyers know that outstanding disbursements are merely interest-free loans to clients.
9. Use financial reports to help stimulate better billing and collection habits. All partners and their associates should receive each other’s work-in-progress and aged accounts receivable lists. Your managing partner or director of administration should review these reports with lawyers who are behind in their billings and collections. But the publication and circulation of these reports is the most effective way to prod lawyers into action. You should not overlook the power of “the fear of a sneer from a peer.”
Execute these practices in a firm culture where team play and individual responsibility reign and you will have cash, not work-in-progress and receivables.
©1999-2012 Joel A. Rose & Associates