Motivating Lawyers to Bill and Collect
by Joel A. Rose
A Firm's Money Pot
What mix of ingredients will help your firm's lawyers successfully bill and collect? How about money as a factor? This ingredient is an important part of the mixture. Also, you must throw in peer recognition and evaluation. And most lawyers want the added spice that comes from working in a firm that knows its priorities and values. Add these ingredients in the right proportions and your billings and collections will flourish.
Motivation is an Essential Ingredient
Lawyers will flourish because they want to succeed, but your firm's culture must stimulate their motivation to succeed. Take away motivation and your billings and collections will suffer. The key is self-motivation - the fuel that drives most lawyers to succeed. Firm management should function primarily to protect and encourage each lawyer's self-direction. Managers should interfere only in exceptional circumstances.
How do you foster this sense of personal responsibility? The best way is to encourage your lawyers to know and understand what contributions they make to five activities:
Negative Success Factors
Lawyers become better team players when they can control and influence firm policies that affect their professional, personal and economic success. They see their success as an integral part of their firm's success. Successful firms work hard to develop their success factors. These success factors are intangible and difficult to quantify, but when they are missing it is easy to identify their symptoms. Success factors are like good health; hard to describe - but get sick and the symptoms become your medical diagnosis.
Diagnose a sick firm culture and you will find ten symptoms:
These symptoms, left unchecked, will destroy the self-motivation and productivity of any firm's lawyers and staff - and eventually the firm.
Contrast these symptoms with those found in firms that work hard to build and maintain a team approach to practice. The five symptoms of healthy firms are:
Nine Essential Billing and Collections Skills
Motivation is essential to drive a lawyer's commitment to bill and collect. But without the proper skills this commitment can lie idle. Billing and collecting is a skill and not a talent. What are the skills your lawyers must learn?
First, 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.
Second, 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.
Third, every firm should set sensible written billing policies and procedures. Regularly bill every possible transaction, for example, monthly. Most mid-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 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.
Fourth, if you want to turn receivables into cash, follow-up is essential. Send a new statement when the first one is more than 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.
Fifth, 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 their firms' computers. This practice reduces errors because secretaries know their bosses files better than someone in accounting. Also, secretaries are better able to pick up on errors when lawyers make when dictating time records. This practice will streamline your billing process.
Sixth, 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 many closings. Bill your litigation files at least monthly. Some firms now bill on a continuous monthly billing cycle. It is considered a poor practice to wait until the end of the month to bill all their matters.
Seventh, 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 firms 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 you 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?
Eighth, let clients pay all larger disbursements directly to outside suppliers. Wise lawyers know that outstanding disbursements are merely interest-free loans to clients.
Finally, use financial reports to help stimulate better billing and collection habits. All partners and their associates should receive each other's work-in-progress (WIP) 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 WIP and receivables.
Aggressive Billing and Collection
Don't give up if your firm's culture does not support and stimulate a team approach. Instead, use one or more of these seven aggressive collection options: