Even Lawyers Have to Collect Their Bills: Best Practices for Increasing Realization

Once upon a time, when money grew on trees, unpaid invoices and aged accounts receivable were nothing more than a casual nuisance.  Then, of course, the economy turned, and businesses re-examined their books to search for any income source they could find. This includes law firms (see my tweet from yesterday).

Here are a few billing tips for increasing law firm collections on invoices:

1) Tell a story in your invoices. Craft time entries in a manner that tells a story and shows the client the value of your time.  Don’t say: “Legal Research on jurisdiction.” Instead, say: “Legal Research on issues related to Delaware corporation doing business in Tennessee and whether internet website justifies lawsuit filed in Tennessee.”  Which one looks like it took an hour of legal time?

2) Advise clients in advance of costly new developments. “No surprises” is the rule. If a big Motion gets filed against the client, tell the client immediately, even if you have thirty days to respond. One, the client should know about case developments, but, two, they should know that the case is getting ready to get expensive—before they receive the bill for the expensive legal work. Better to know that the client is (or isn’t) financially ready for an expensive fight earlier, rather than later.

3) Effectively manage resources. This means assigning the right person to handle each task. Clients don’t want to pay for the time it takes an associate to type, organize files, and manage his or her calendar–an assistant does a better job of those things. Clients don’t want to pay top rate for basic tasks, and they’ll appreciate the efficiency you can create by having workers with lower rates handle routine matters. Spend the client’s money like it’s your own.

4) Don’t be afraid to give occasional discounts or time write-offs. Sometimes, you’ll do work on a task that takes far longer to complete than you can justify, whether it’s a simple pleading, a day of phone-tag, or anything else that you know a client wouldn’t pay for. Be fair on the easy tasks, and the client may remember that when faced with a $5,000 invoice for that huge brief.

5) Call the Clients who aren’t paying. In this economy, a late paid invoice is probably the result of issues with the client’s cash flow. But, it could be the result of the client being unhappy with your services and/or billing. Implement a standard system by which you routinely follow up with late invoices, whether it’s after 30, 45, or 60 days. If it’s a problem with your services, you need to know that immediately. If the client is having trouble paying for your services…well, you need to know that immediately too.

6) Review your own bills to remind yourself how expensive lawyers are. In many firms, younger lawyers never see a bill until they get a few years of practice under their belt. Bill review is for the older, established “rain-makers.” As a result, lawyers don’t realize that all the 0.3s and 1.7s are real billing events, that cost real money. Nothing puts those billing entries into the proper perspective like seeing the actual monetary amounts. Ask yourself, “Were the services that I provided worth $1,200.00?”

At my firm, one of my hobbies is being a back-seat driver on the invoicing and collection tasks. It’s my area of practice and what I do all day long, and, if my firm gets it right, it means more money for me. These best practices are easy ways to increase realization on invoices. Because, in the end, if we’re not going to get paid, wouldn’t we all have preferred to spend that time at the beach?