An attorney with any experience running a practice is well-acquainted with the typical get-tough methods used to make clients pay outstanding bills. However, these methods often embarrass clients, arouse anger, and even if they are effective in the near-term, they will ultimately destroy the long-term relationships upon which successful practices are built. Here are some constructive steps to help you avoid collection problems, encourage payment, and strengthen bonds with clients.
Give Every New Client Your Fee Schedule and Collection Practices
You might do this as part of your engagement letter or as a separate document. If you have different fees for different types of clients, then prepare a fee schedule for each client category. When you give every new client your explanation of fees and collection practices, clients understand that these practices apply to all of your clients, so they don’t take your policies personally. Also, when clients have a clear understanding of how you collect money, they will act to avoid the known consequences of late payments.
Give Clients a Reduction for Paying Your Invoice on Time
Some lawyers add finance charges to past due invoices, but finance charges usually create bad feelings. Instead, take the positive approach and offer your clients a discount. For example, you might offer clients a reduction of 5 or 10 percent when they pay the invoice within ten days rather than the typical thirty days from receipt. Write a short statement on your invoice so your clients know the exact amount of the reduction and the date by which they need to make the payment to receive the discount: “Bill, you’re invited to take a prompt-payment discount of $175, a 10 percent reduction on the current bill, if I receive your payment by Friday, July 12, 2013.”
Acknowledge the Possibility of Honest Oversight
In your first request for payment (after the original invoice), acknowledge that your client might not have received your bill and include another copy. If not paying your bill was simply an oversight, you don’t want to come on too strong when your client made a mistake. Also, write a gentle request for payment over your signature; regardless of the reason for not paying, the client should understand that the bill remains outstanding and needs to be addressed.
Personalize the Collection Effort
Once an account is past due, make sure all requests for payment are over your signature as the attorney representing the client. Clients often think their past-due balances are known only to the back-office billing clerk or an outside billing service. However, when the request for payment comes with a note from you, the client realizes you know his payment is late. To avoid embarrassment and the possibility of jeopardizing your relationship, clients often pay your invoice or contact you to request payment terms.
Send Collection Requests Frequently
Some clients think that after they receive your invoice or statement, they won’t hear from you for another month. In other words, they view the arrival of your statement as the beginning of a fixed period of time where they won’t hear from you. Instead, send requests for payment of past-due amounts every ten days or so. This keeps your receivable on the top of the pile.
Set Up Your Practice to Accept Credit Cards
If you think your client may be short on cash, paying with a credit card—essentially a short-term loan to cash-strapped businesses—will get you paid without putting added strain on your client’s cash-flow. However, be prepared to pay a percentage of whatever payments you accept by credit as processing fees to third-party billing services.