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The year’s end is right around the corner, along with the holiday season. So, what do you really want for a holiday gift? How about getting paid for the work you did during the year?
The holidays can be extra hectic for lawyers with the scramble to get checks from clients before year-end. Most law firms operate on a calendar year and are run on a cash basis, meaning work isn’t counted as revenue until clients pay. If you are a partner or even an associate, your compensation may be tied to the amount of money your firm collects on the work you billed. If you are a solo, you know all too well your compensation is directly tied to how much you collect on invoices.
Also during these last few months of the year, there’s typically a slowdown in the number of new cases for many practice areas as people put certain personal and business matters on hold.
The result? A collections sprint.
Law firms deal with it every year — a large percent of revenue is collected in the last three months of the year. Could better collection procedures be put in place to avoid this year-end ritual? Of course! But let’s focus on tips to help you get more money in now.
Now is the time to look at past-due accounts and figure out where you are leaving money on the table. The tool you will need to assist you is your “aged accounts receivable” report. I suspect this might generate one of the following reactions from you:
Putting emotion aside, here are a few things you can start on — this week — to boost your year-end revenue number.
Current clients that have invoices 30 to 60 days past due will give you the highest return on investment for the time and energy you spend in these last weeks of the year. But you will need to be proactive to collect.
Low-hanging fruit would be accounts 60 to 90 days past due. These are still ripe for paying but need attention. First, identify clients that were making payments regularly, but at some point the payments stopped coming. You want to set up a procedure for touching base with them four to six times over the next six to eight weeks to try to get this money collected.
Start by adding these clients to a spreadsheet like the one below. (I pretty much think most things can be solved once reduced to a spreadsheet.) Keep this spreadsheet up-to-date as calls, emails and conversations take place, so you always have current information and can easily delegate any task.
Now the hard part. Pick up the phone and call each of these clients. You may find they have not been receiving past-due notices. If you were inconsistent in sending bills and past-due notices, it will be revealed on this first phone call. You can offer to set up a payment plan to get the debt paid over some specific number of weeks. Or, offer a discount to get the account paid in full — and make sure you allow them to pay with a credit card, right now, while you are on the phone.
Next steps after this first phone call? Follow a process like this:
This may seem like an overwhelming task, but keep in mind how much money is at stake. Need a little incentive? Take out a big sheet of paper and write down your total amount past due and put a picture of your family next to this number. Now, tape that paper where you will see it every day. As payments come in, reflect it on your piece of paper to visually keep an eye on your progress.
Some funds are out of reach, so get off the ladder. Kiss this money (that you’ll never get) good-bye, write it off as uncollectible and consider it a learning opportunity. There is good data here to use in creating better systems and habits, so spend time during the holidays looking at what went wrong. For example, ask yourself these questions:
It could be that this whole process is something you have no time or patience for. But don’t throw in the towel. Your secretary could assist you, or you could outsource the task to a local bookkeeper or virtual assistant.
Implementing these tips should get you more money faster. It’s painful, but maybe that’s a good thing — it will motivate you to put better collection procedures and habits in place for next year.
Peggy Gruenke is Chief Operating Officer at Hengehold Capital Management, as well as a law firm management specialist in operations, online marketing, technology and accounting at LegalBizSuccess. Peggy is active in the ABA GP Solo Division, a frequent ABA TECHSHOW speaker and she writes on productivity and profitability for Attorney at Work. Read more or her articles here.
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Get on the path to reducing invoicing inefficiencies and receiving payments faster.November 16, 2018 0 0 0