Tools of the Trade: Get the Cash in Hand
By Lee S. Rosen
She is standing at the reception desk with wallet in hand. She wants to pay your fee. It is imperative for the success of your practice that her fee makes its way into your bank account. Unfortunately, sometimes the “simple” act of a client paying her lawyer is more complicated than it needs to be.
Three general principles are most important when it comes to accepting payments:
1. Not only must you follow the ethics rules of your state, but you must stay informed about the changes to those rules. Nearly every year, a new ethics opinion relates to fees. For example, credit card payments have received considerable attention from regulatory authorities in the past year. With the rapid changes in technology, you simply must stay on top of ethics rules revisions.
2. Create a detailed manual for your staff, outlining your firm’s procedures for accepting payments. The last thing you want is for a client to be ready to pay with no one available to handle it. Set forth your payment rules in writing so that everyone on your staff understands the procedures. Then keep the manual easy to grab so that your staff can quickly follow your step-by-step instructions. In our office, we keep the manual next to the credit-card swiping machine.
3. Update your manual regularly. Technology and machinery will evolve, the bank may change its phone number, or a new ethics rule may emerge. This information is central to everything you do, so keep your manual current. Without the means to get paid, you have no practice.
Even beyond these safeguards, however, accepting payments can be surprisingly complex. Let’s look at the problems that can arise with different forms of payment.
We all love cash. In family law, we often receive initial funds from people who want to make sure a spouse doesn’t find out they’re hiring an attorney. We must be especially careful about ethics rules and banking regulations in such a case. Make sure you know exactly how much cash you can receive without filing a report. Otherwise, you might be accused of money laundering.
Another problem is what to do with cash when you cannot get it to the bank right away. You might receive the funds after 5:00 p.m. on a Friday, you might occasionally meet with a client on the weekend, or you may simply be short-staffed on a particular day with no one available to go to the bank. You must have a secure place in which to keep cash in the meantime. At our firm, we have a small safe for this purpose.
Next, determine which account is appropriate for the deposit. Does the money belong in your operating account or your trust account? Review the rules of your state. Always present your client with a receipt for the cash and have the client sign it. Then keep it on file to record the transaction.
Surprisingly, checks are still the number one way lawyers get paid. In my firm, we have a machine that allows us to swipe the check and have the money immediately credited from the client’s account into our account. As a result, we do not have to take the check to the bank; we simply put it in the client’s file. (The exception is a certified check, which may need to be physically deposited at the bank.) Our bank charges about 25 cents per check for this scanning service, which is certainly worth it because funds are immediately available with no need for a staff member to leave the office.
Another service that may be helpful is a check guarantee service. These companies promise that every check is good, even if a stop payment is issued. Of course, you must pay for this service, but it can be helpful if you fear check scams. In Canada, attorneys have been targeted with bad settlement checks. If they cut checks to their clients before the settlement checks clear, they are out of luck. In North Carolina, we are prohibited from issuing funds to clients until we have a guarantee that the check has cleared our trust account.
These days someone can fax you a check, and with very simple software, such as Checks by Fax Software or Chax, you can recreate that check and deposit it via an electronic scanner. This is just one more way to accept a check from your clients. Of course, a wire transfer is yet another way. All you have to do is provide your account and routing numbers. As technology continues to advance, there will undoubtedly be more convenient ways to process checks and new ways for thieves to scam the banks. So, again, keep track of the news, and change your procedures accordingly.
Our firm takes MasterCard, Visa, Discover, and American Express. We want to make it as easy as possible for our clients to pay us. Credit cards are, by far, the trickiest method of payment, however. Credit card companies charge for each transaction, and these fees can be complex. For example, American Express charges more than most, but others charge a fixed fee and/or a per-transaction fee. Generally there are two layers of fees, even though they’re charged as one—one fee from the actual credit card company and another fee from the company that processes the transaction. One thing many businesses fail to realize is that these fees are negotiable. We renegotiate every year with our credit card companies to get a better deal. Don’t miss out on these savings.
When you take a credit card payment in person, print out a receipt, and have the client sign it. Do not send these receipts to the credit card company, but keep them in the client’s file as a record of the transaction. Some consultations are conducted on the telephone, but bear in mind that you pay a higher fee to the credit card company if you do not swipe the card. The companies compensate themselves for the added fraud potential, so it’s very important that your staff know to get all of the necessary information from your clients when taking credit card payments by phone. These include the credit card number, the three-digit security code, the expiration date, and also the billing address. Without any one of these pieces of information, you will probably end up paying a higher fee.
Finally, be aware that clients can seek a refund from the credit card company if they are not satisfied with your services. You will receive a notice of a “charge back,” and the funds may be debited immediately from your account. It is important to be familiar with the agreement between you, the credit card processors, and the banks.
PayPal is an online service that is used by people all over the world for bank transfers and credit card payments. PayPal takes a percentage of each payment you receive. Our firm has negotiated a better rate by working directly with the credit card companies. Again, check your state’s ethics rules before using PayPal or any such service.
On our firm website, we include a page that allows a client to make a secure payment. It automatically transmits credit card information to us without any of the normal e-mail security issues. With this method, we can send the client a bill via e-mail, instructing them to pay online or come into the office with payment or call with credit card information. The e-mailed bill includes a link to our website where the client can make the payment online. Since few of our clients use this method as yet, we don’t have a way for the charge to go through automatically on the computer. Instead, we enter the credit card information manually. Eventually, this will change.
If you decide to accept online payments, remember to send the client an e-mail confirmation. Otherwise, your client may worry that the payment has not gone through. It also goes without saying that you must keep impeccable records of your clients’ payments. You may find yourself answering inquiries years after the transactions have taken place. We use QuickBooks for tracking all financial transactions, but numerous other options also are available.
One Last Thing
Many attorneys are uncomfortable asking to be paid. Remember that you offer a valuable service to your clients and you are absolutely entitled to payment. In most instances, you and your client already will have discussed the fee, so your client will expect to pay you. We have found that most of our clients automatically pull out their checkbooks or credit cards at the end of the consultation. If a client does not, however, you must raise the subject. This is especially true if you see clients after hours or before your staff arrive in the morning. If you are hopelessly uncomfortable discussing money, make sure that someone else is around to handle it for you.
Whatever methods you employ, the bottom line is that you need to make it easy for your clients to pay you and foolproof for your staff to take those payments.
Lee S. Rosen practices family law with offices in Raleigh, Durham, and Charlotte, North Carolina. His firm site is Rosen.com. He blogs on family-law practice management at DivorceDiscourse.com.
Published in Family Advocate
, Vol. 32, No. 2, (Fall 2009) p. 8 and 45. (C) 2009 by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
© Copyright 2010, American Bar Association.