June 2017

Ways to get clients to pay your bills

Realization rates on law firm invoices dropped by about 10 percent – from 93 percent to 83 percent – during the 10-year period ending in 2015, according to Thomson Reuters.

Are you having trouble getting paid?

To help boost your incoming payments, ethics lawyer Michael Downey, who also teaches a course on law firm practice at Washington University School of Law in St. Louis, Mo., offers several tips in his recent ABA Law Practice magazine article, “Eleven Steps You Can Take to Get Paid.”

Here are five of his top words of wisdom:

1. Vet your clients – You likely don’t need to run a credit check (which requires the prospect’s permission, by the way) but it is a good idea to run the client’s name through a search engine to see what comes back, says Downey, adding that checking your jurisdiction’s list of prior litigation could also yield telling information about your potential client’s ability to pay his bills. 

And, when first meeting with your prospect, be sure to ask questions that will help you assess whether the client is willing or able to pay your bills. “Prospects will often share their concerns about their ability to pay, alerting you to potential problems,” notes Downey.

2. Explain the anticipated work and fees with prospects – ABA Model Rule 1.5 Comment 2 mandates that an “understanding of fees and expenses must be promptly established.” But more than just communicating your hourly rate, Downey recommends a more in-depth discussion that involves the relevant legal services you anticipate providing, how long the matter will take and how much it will cost.  The point is to create realistic expectations, because a client with unrealistic expectations often turns into an unhappy client – who possibly refuses to pay.

“Lawyers are often reluctant to tell a prospective client how much all aspects of a legal matter will cost, fearing sticker shock may chase off the prospect,” says Downey. “But a prospect who at the outset is unwilling or unable to pay will likely still be unwilling or unable to pay at the end of the representation.”

3. Develop a fee agreement that provides for interest – Of course, obtaining a fee agreement in writing that outlines the scope of work and what you intend to charge is vital. However, you might also want to offer discounts for prompt payment – and charge interest for late payments.  However, you must let the client know beforehand that interest may be charged, according to most ethics authorities.

4. Communicate the value you deliver – Beyond just handling your client’s matter, you must foster good relations with that client.  “You should try to communicate with your client regarding the matter on a regular basis, so they know what you are doing to advance their interests,” Downey advises.

5. Don’t nickel-and-dime your client – “If you are going to pass on a charge to a client, make sure that your client will consider that charge reasonable and appropriate,” says Downey, elaborating that on top of charging hundreds of dollars an hour and thousands in travel expenses, many lawyers will stick on a couple of dollars for parking or lunch.  While ethical, it may irritate the client, causing her to think you are trying to squeeze every last penny from her.

“Particularly when dealing with individuals, try to set your rates to provide fair reimbursement for your work and for the small expenses you will inevitably encounter. Then, avoid charging the client those expenses,” says Downey.

For more of Downey’s tips on getting paid, view the full article here.

ABA Law Practice magazine is a publication of the ABA Law Practice Division.

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