A Positive Firm Culture Motivates Attorneys to Improve Their Billings and Collections

by Joel A. Rose
 

Money cannot be viewed as an end in itself. It is one component in establishing success, but not necessarily the most critical factor in driving an attorney to succeed. An ambitious attorney’s career objectives include contributing to the success of the firm as well as personal financial reward. Therefore, we should not focus on the ability to bill and collect, but rather on the full professional development of each attorney in the firm.

As skilled professionals, lawyers are motivated by peer recognition, peer evaluation and the opportunity to work in a firm culture with clearly articulated priorities and values. Thus, the key to effective billing and collection, as with any other refined skill, is self motivation enhanced and supported by the firm’s operative structure on both the substantive and business sides of the practice.

Management’s over-involvement in the substantive and business activities of any firm will eventually demoralize the attorneys, producing a beautiful organizational chart, but little else of measurable value.

Because self-motivation of attorneys determines more than any other factor, the success of a law firm, the firm management should function primarily to protect and encourage individual attorney’s self-direction, interfering only in exceptional circumstances. To foster that sense of personal responsibility, firm management should encourage each lawyer to analyze his or her own contribution to the firm in areas such as billings, billable hours, client development activities and enhancing the firm’s image.

It is human nature to perform better if we believe that our individual advancement is directly tied professionally, personally and financially to improvement of the firm.  A firm whose partners and associates capitalize on a common work ethic and shared values is well o its way to success.

Once a structure that breeds individual responsibility is in place, how does a firm direct that self- motivation toward attention to billing and collections? Obviously, some attorneys require a jump-start to focus on this important financial area.  Many firms publish and distribute to all lawyers, partners and associates, each individual lawyer’s aged work-in- process and accounts receivables.

While the managing partner will go over the report with those lawyers that are behind in billings and collections, it is the publishing and circulating of the report that is most effective prod to get one’s own house in order. Every attorney is concerned about “the fear of the sneer from the peer.” Everyone attempts not to be in the “lower tier” of billings and collections on the monthly reports.

Those firms that have been able to successfully publish this data on a firm-wide basis have carefully crafted a firm culture that is open and willing to communicate and show concern for the individual, in accordance with the firm’s core values that have been agreed upon and endorsed by the partners. By maintaining a firm spirit of mutual respect and team play will impact positively every aspect of the firm’s existence, including the attorney’s ability to bill and collect effectively.

A positive firm culture is enhanced by strengthening personal relationships. Practicing law is a stressful business and the lawyers need to offset the strain of rising overhead, heavy workloads and hard to satisfy clients by doing non-work related activities together. It will cost some money to do these activities, i.e., social events for the partners, associates and administrative support staff; firm dinner; picnic; participation in a “law firm sports league;” informal weekly lunches for partners and associates in a conference room that encourages all lawyers to get together; etc., but in the long run, it will be money well spent.

While the elements of a positive firm culture are intangible and difficult to quantify, the failure to cultivate one will manifest itself readily enough in one or more of the following symptoms: (1) Decreased productivity; (2) Failure of certain lawyers to bill and collect; (3) High or increased personnel turnover; (4) Hostility between individuals; (5) Lower morale; (6) Unaccountable increased costs; (7) Unwillingness to change or inability to discuss new approaches; (8) Lack of initiative or creativity; (9) Apathy and (10) Decisions failing to gather full support. These symptoms only fester with neglect and will destroy the self-motivation and productivity of the attorneys and staff.

In contrast, a concerted effort to build and maintain a team approach to the practice of law will have the following results: (1) More effective communications; (2) Heightened self-motivation and management for success; (3) Increased productivity and commitment to billings and collections; (4) Decreased stress and (5) Decreased personnel related costs due to illness  and other absences.

Questions that need to be asked to achieve a team concept include: What do you like about your work environment? What hinders your performance; Why do we not have a team-network approach? What changes do you think are necessary to achieve the oneness team  approach?

In the area of billing and collections, specifically, there are several ways in which a firm can bring each lawyer to his or her full potential and work around individual limitations.  Some practical advice follows: (1) Allow younger lawyers to become billers early in their career on small matters. Lawyers do not acquire instant skills the day they become partners; (2) Establish a one-on- one  mentor relationship for billing purposes to allow the young lawyers an outlet to discuss how to bill and how to collect bills

At the same time, it is realistic to admit that some lawyers are just not cut out for billing and collecting. They freeze when it is time to send a bill and freeze when it is time to pursue collection efforts. My advice is to weed out these lawyers early and do not let them be responsible for bills for your firm’s key clients. The billing responsibility for your firm’s key clients should be in the hands of good billers, young or old. If a lawyer demonstrates reluctance or inability to send out bills in a timely fashion, remove that lawyer from billing responsibility. Recognizing this inability in young lawyers will save you future problems. Many managing partners have told me that not unsurprisingly, the lawyers who are bad billers and collectors remain so throughout their legal career.  Therefore, it is important to train good billers and collectors, and to weed out those who never will be, early in their legal career.

Every firm should establish sensible billing practices. One suggestion is to bill every possible transaction on a monthly basis. Many clients have a threshold approval level for the amount of bills they can pay without higher level approval. Try to be under that approval amount and monthly billing probably may l keep you under that threshold. Many of our clients are billing transactional matters in progress prior to closing, particularly if the transaction will carry on for many months.

Follow-up is also important. A great many firms send a new statement when the first one is over 30 days with follow-up letters at 60 and 90 days.  My recommendation is to call the client if the bill is not paid after 30 days. At the conclusion of 90 days, turn the account over to a partner other than the billing attorney for collection. The billing attorney has a great reluctance to aggressively pursue any of his or her own uncollectible accounts. Depending upon the amount of the receivable, if a delinquent client tenders partial payment for services, consider taking it. Too much time may be wasted pursuing deadbeats.

Bills should be informative and contain as much information desired by the client to pay them. A client who can readily understand the detailed indication of work performed is more likely to find the fee appropriate and pay promptly. Have the bills prepared in a format by the computer that can be sent to the client with minimal editing by the attorney. This eliminates – or at least reduces the “not-enough –time- to- bill” excuse.

Many of our clients have the individual lawyer’s secretary input the time and descriptions of services to the computer. This greatly reduces errors because the lawyer’s secretary generally knows the nature of the matters worked on by his or her attorney. The managing partners of several of our client law firms that implemented this procedure informed me that this procedure has streamlined their billing processes.

Billing timeliness is obviously an essential element of effective collections. Many managing partners have told me that clients pay their bills in relations to the promptness with which the bills are rendered. The sooner a bill is sent, the sooner it will be paid.

It is especially important to bill transactional matters at closing because the proceeds of the closing are reinvested at interest when the work has been accomplished. In litigation matters, billings should be sent at least monthly. Some firms have shifted to a continuous billing cycle through the month rather than waiting until the end of the month.

Clearly, the retainer is the easiest and most effective way to collect. If it is an out-of-state or small local company, many firms obtain an advance retainer. Some of our clients set up the advance retainer as a refundable retainer to be returned at the conclusion of the matter, provided all outstanding bills and expenses have been paid.

It is also wise to encourage clients to pay substantial costs directly. Outstanding disbursements are merely interest-free loans to clients. We recommend that expert witness fees, court reporter or other substantial items be sent directly to the client for payment to the provider of services.

These practices, when implemented in an environment stressing team-play and individual responsibility, ill greatly increase the effectiveness of a firm’s billing and collections. Beyond these basics, I leave you with the following more aggressive strategies, for consideration: (1) Monthly billing meetings held on a Saturday; (2) Withholding partner draws who have not satisfied billing obligations; (3) Charging clients interest for late payments; (4) Insisting on advance retainers; and (5) Weekly billing.

©1999-2015 Joel A. Rose & Associates