Client Won’t Pay: What Are You Going to Do About It?
You may recall this LexisNexis report: “Law Firm Billing Survey: Collections Conversations Leave Lawyers Uncomfortable.” Duh. In what industry is a “collections conversation” a comfortable thing?
The report is three years old, but just as relevant as when the data was spanking new. I could dive into the statistics the survey uncovers, but let’s cut to the chase: Clients are getting better at delaying payment or simply not paying your bill. The question is, what are you going to do about it?
Big or Small: You Still Have to Get Paid
I’ve read a lot of opinions on this one, from “get tough and exercise your legal options” (at the risk of sacrificing community goodwill) to “let it go and take the write-off” (do you really want the word getting out that you don’t care about getting paid?).
Most of these opinions focus on the moment the payment is late, which, in my view, is far too late to start the payment conversation. The battle is mostly lost at that point.
The way to take the pain out of payment discussions is to start having them before you do the work. A few simple guidelines will get you started:
- Include payment references prominently in your marketing. Don’t be afraid to let potential clients know you have convenient payment options. Nothing more needs to be said. Just a mention of payment options gets the conversation started. Once you’ve made payment front and center in your marketing, it’s an easy topic to bring up at the first consultation.
- Create a clear and simple financial policy. Provide a paper copy of your financial policy at the first meeting. Have them agree to it by providing a signature line. Keep it simple. Fifth-grade-level language is perfect, no higher than eighth grade. Why? Because only 50 percent of adults in the U.S. read above an eighth-grade level. Go over your policy with new clients face to face, if possible, so they know their options and your expectations.
- Prepare the client for the potential cost. If you can determine the scope of the matter and estimate the cost for your clients, then discuss it with them. Consider it your responsibility to prepare them for what’s ahead. Remember to follow the golden rule of payment: Invoice others as you would have them invoice you.
- Ask for a deposit or retainer or card-on-file. Since you are taking the time to point out the importance of payment, follow up by asking for payment. Now is the time to ensure that you will be paid by whatever option is most appropriate. If the matter has a fixed cost, collect it (or at least a healthy percentage). If a retainer is in order, make sure it’s set up before you do any work. If a retainer is inappropriate and exact cost cannot be determined, get a card-on-file. Put a line in your financial policy and on every invoice that states, “Your credit card on file will be automatically charged if payment is not received within x days of invoice.” If the client can’t pay all at once, set up an automated payment plan using a credit card. The client will appreciate the flexibility and you’ll know you are getting paid.
- Create plain-language invoices. Drop the legalese from your invoices. Complicated invoices full of legal jargon drag clients into a world they have no desire to enter. If you have to use technical terms, define them in the simplest language possible. You will build trust with your clients and that will translate to quicker payment and more business.
- Bill promptly. Do I need to elaborate? Delayed billing will get delayed payments almost every time. If you want to screw up everything we just did to help you get paid faster, neglecting your billing will do it.
Follow the Golden Rule
It doesn’t matter if you are a solo practitioner or in a big firm, clients will pay you if they have been prepared, and if your bill is consistent with that preparation and delivered in a timely manner.
Remember the golden rule of payment. If you wouldn’t pay an invoice you don’t understand and weren’t prepared for, why would you expect them to?
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