August 28, 2013

How to Get Paid

Law Practice Magazine | September/October 2013 | The Finance Issue

AS A LAW PRACTICE ADVISOR, I often meet with practitioners who are disgruntled because they are having trouble getting paid by their clients. Without a tangible product in hand, clients may not feel motivated to pay. Attorneys must therefore learn how to define and sell their value proposition to clients. This can be difficult because lawyers deliver services by using their knowledge and expertise. But this value should not be overlooked, and attorneys must be confident in knowing that they provide value to their clients and, just like any other profession, they deserve to get paid for their work. While there may be times when getting paid is completely out of your hands, you can take a number of steps to help ensure that you get paid for your work, seven of which are outlined on the next page.


Not only should your clients choose you, but you should choose your clients. This means that you should not accept just anyone who walks through your doors as a client. You must do your due diligence. This not only impacts whether you get paid. Avoiding problem clients may also prevent disciplinary complaints and malpractice suits.

Using a grading system to select clients is one excellent method for vetting problem clients. Just as teachers judged you in elementary school, you’ll want to grade your clients: A, B, C and D. Your A client is your ideal client, whereas your D client raises the notorious red flags. When you grade your clients, consider criteria such as ability to pay your fees, reasonableness, credibility, honesty, emotional stability and the complexity of the legal issues involved. Note, however, that you need to avoid criteria that could be deemed discriminatory, so pay attention to state or local ethical dictates and court opinions. For example, a woman litigator’s decision to represent only women in divorce proceedings was deemed unlawful sex discrimination. Red flags are triggered by people who are argumentative, have unreasonable expectations, are unable to pay your fees, have engaged other attorneys before you, give you a bad feeling or were referred to you by a source you do not trust.

Once you have thought through your grading system, put it in writing and follow its dictates before engaging a client. You can collect information about a potential client through your intake form, an initial consultation and/or a referral source. Referrals should come from trusted sources and from those whom you have educated about your target clientele. If you decide not to take a case, be sure to send the potential client a nonengagement letter confirming that you will not represent that individual or business in the matter.


Unless you work for a nonprofit legal aid or services organization, your clients will (or at least should) expect to pay you for your services. When you first meet with a client, do not avoid discussing money; tackle that elephant in the room before it becomes a problem. Broaching the subject of money up front sets expectations for the client and helps alleviate the fear of asking to get paid down the road. Having a written fee agreement is beneficial for a plethora of reasons, including for getting paid, and indeed, it is required in many jurisdictions. Your fee agreement should lay out attorney and client expectations, detail your billing procedures and provide the consequences, should the client fail to pay you for your services. You should take the time to explain each of the terms of the fee agreement to your client. Having a written fee agreement that you review with the client will not only help the client to better understand your relationship and the nature of your services, but it also provides you with a written set of collection terms to fall back upon should your client fail to pay.


Whether you bill by the hour or use an alternative fee arrangement, collect something up front. This could be a retainer, advanced deposit or flat fee. Payment up front demonstrates both the client’s ability to pay you for your services and investment in his or her case. If the potential client does not have any funds to pay you at the onset of your engagement, he or she likely will not have funds to pay you down the road.


It is often reported that the more time that passes without payment from a client, the less likely you are to get paid. Therefore, you shouldn’t let too much time pass without requiring a payment. Billing with some regularity—for example, at least monthly—helps your clients know when they will need to pay, so they can be more prepared to do so. Send your client a professional invoice that is clearly and conspicuously labeled as such and that includes a due date for payment. Some firms use a colored envelope to set their invoices apart from other mail. Your bills should explain the work that you did for the client in a way that the client can understand. Don’t use abbreviations or legalese. When your clients understand and value the work that you have done for them, they will more likely be motivated to pay you for your work.

It should go without saying that to get paid what you are owed, you must track and record your time. If you are billing at the traditional rate, failing to record your time for a mere six minutes per day can result in thousands of dollars lost over the course of a year. Track your time contemporaneously with your work. The most efficient way to track your time (contemporaneously) is by using an electronic system that integrates with your billing program. Many such programs are available, some with applications for mobile devices that can track calls, texts and email.


Maintaining good client communication is essential to getting paid. If your relationship goes sour or you completely lose track of your client, odds are you are not getting paid. Sending regular reports via phone or email to your clients regarding the status
of their cases and the good work you are doing will help demonstrate your value and thus help your clients feel better about paying your fee. Keeping clients apprised of their cases may also minimize excessive phone calls and email received from them. Further, generating status reports is a great marketing tactic; clients who hear from you regularly may be more inclined to send you referrals.


Be proactive about getting out of cases when you are not getting paid—and when allowed by your state’s ethics rules and court rules. Rely on your written fee agreement to get out when your client does not meet the expectations delineated in that agreement. If your client is or becomes insolvent, they will likely have other creditors in addition to you, and it is unlikely you will ever get paid. If you plan to depart from a case involving potential litigation, make sure to seek and acquire leave of the court prior to terminating the client relationship.


The foregoing tips are meant to prevent, or at least minimize, the necessity of hiring a collections agency and/or suing for fees owed. But if you find yourself struggling to collect your fees, you may need to take more severe measures. Before you take those measures, be sure to have, and follow, a firm collections policy that details how you track client payments and handle situations in which the client is delinquent with payments. As a last resort, you can hire a collections agency to help you collect your fees. And, if all else fails, you can sue your client to recover your fees. When embarking upon these measures of last resort, be sure to weigh all the risks and associated costs.