Issue link: https://epubs.iltanet.org/i/30285
More than ever, there are a lot of demands on law firms and their billing practices. Clients are more closely scrutinizing their bills. They hire outside firms to review bills, looking for errors. They require electronic billing to make it easier to analyze and potentially reject entries. With so much pressure from clients to get their bills reduced, you can’t afford to lose money just because some clients can’t or won’t pay. You’ve heard “an ounce of prevention is worth a pound of cure,” which is certainly true when it comes to collecting payment for services rendered. Too often there is a misconception that the collections process begins after the bill has been rendered to the client. Unfortunately, that is where many law firm collections policies begin — after billing. The common collections policy starts with sending a statement after a bill is 30 days past due, which is then followed by a letter at 60 days and then 90 days if the bill remains unpaid. This is when many policies allow a call to be made to the client. However, by this point it might be too late to get the bill paid. And, if it is indeed too late, what can be done? Professional liability insurance carriers generally recommend that you not sue a client for non-payment as it will likely trigger a countersuit of malpractice. Plus, services have already been rendered, so there is no leverage with the client. It’s a no-win situation and another write-off for the firm. CHECK THE CLIENT’S CREDIT The collections process should actually begin during client intake. However, too often everyone is in a hurry to open the file and get working, so they fail to observe even one of the most basic principles in credit: Check the creditworthiness of the client. You would never get a loan from a bank or credit from a retailer without going through that process, and so it should be with law firms. It is an essential step in determining the ability of the client to pay. There are several tools to help determine closely scrutinizing their bills” “Clients are more the creditworthiness of a potential client. For a public corporation, audited financial statements should be available to review. In addition, there are credit bureau resources such as D&B that can be used to evaluate private businesses. Of course, with start-up companies or individuals, the search can be much harder. However, don’t underestimate the use of the Internet to help in providing information on this class of clients. The key is to take some time and do the necessary research so that you are familiar with the potential client and can more easily assess the risk the firm is taking. REDUCE THE RISK Risk versus benefit is a common analysis. One way law firms typically help reduce risk is to ask for a retainer. This is particularly true when dealing with a start-up company or sole proprietorship. Setting the retainer amount is an art in and of itself. Ask for too much and the client might walk away; ask too little and you www.iltanet.org Financial Management 7