Attorneys: Ensure You Get Paid — You Earned It!

by Brenda L. Speer on March 18, 2013

My law practice motto is: “I’d rather not work and not get paid, than work and not get paid.” Of course, this is a motto borne of my personal, unfortunate experience. Although my unfortunate experiences have diminished greatly over the years, I still occasionally find myself unpaid in part (at least that’s somewhat better than in whole, but it remains unacceptable).

The Colorado Bar Association’s Solo and Small Firm Section listserv and Solo in Colo continue to be a font of information, as well as blog-topic fodder. On the fodder side: Not getting paid was a topic of recent discussion on the listerv. On the information side: The book Collecting Your Fee by Edward Poll was a recent selection of the In the Stacks feature. I decided to check the book out from the CBA Lending Library and see how I could continue to improve my accounts receivable.

I found most of Poll’s suggestions and methods to be geared toward large firm practice with large clients who have large-dollar matters, such as litigation. This is not the reality for my practice; however, I still picked up some pointers. Following are the key points Poll extolls and my self-analysis from this concise read (approximately 75 pages, excluding appendices, with forms on CD).

Credit Check
Poll urges attorneys to do a credit check of new clients prior to accepting representation and to create a firm credit policy. As a true solo (I have no staff at present), I don’t find credit checks to be a practical solution. In addition, I don’t take on big litigation cases that would lend themselves to a credit check. In lieu, I charge for an initial consultation at a discount from my regular rate. If a client is not willing to pay for that, then the client probably won’t be willing to pay for any needed follow-on legal work. I have found the initial consultation fee to be an excellent barometer of serious, paying clients. I also request at least a 50 percent retainer of the anticipated fees and costs for a matter before commencing work.

Fee Agreement
Poll drives home the importance of a fee agreement with the client and explaining the provisions of the fee agreement to the client, especially payment terms and withdrawal from representation for non-payment. My fee agreement has these provisions, but I can improve upon them and my communication of the same to the potential client. (Perhaps I’ll have them start initialing payment provisions, in addition to signing.) I also do not undertake any work until I have a signed fee agreement and the requested retainer in hand.

Client Communication
Poll recommends that you provide clients with status reports on their cases and tell them how often you will do the same, as well as to copy them on all documents pertaining to their matter. Status reports strike me as something more beneficial for long-lived litigation, rather than short-lived transactional matters. However, I do provide clients with copies of all documents and I do communicate with them at each step of a matter, as well as let them know when they can expect to hear from me next. I do have room for improvement here though and have been thinking I should implement an informational document to have clients read and sign-off for more long-lived transactional matters, such as trademark or patent prosecution, to instill in clients the time duration and overall expense of the matter. (I tell them, they hear it, but they don’t seem to retain it.)

Budgeting
Poll advises attorneys to prepare a formal, written budget for a matter and have the client sign-off on the budget. That way, the client can also budget for the matter and won’t be surprised by the bills. Again, I’m a transactional attorney, not a litigator, so budgets don’t apply to what I do, for the most part. For the same reasons though, I do provide clients with an estimate of fees and costs for each transactional matter undertaken.

Pricing as a Two-Way Contract with the Client
Poll says your fee agreement and your client’s failure to honor it have to have consequences to the client, such as withdrawal from representation and a collection action. My fee agreement addresses both of these points and I have enforced them against delinquent clients.

Billing
Poll reminds us that you need to have a good billing system that produces clear, readable bills with detailed descriptions of the work you did for your client and that you need to bill regularly and promptly (at least once a month). I once had an attorney that did work for me personally take seven months to bill me, and the bill was cryptic at best. Sloppy, irregular, sporadic billing sends the message to the client that the work you did for them was not important and that there is no urgency in paying you. I use PCLaw software in my practice, which is an all-in-one program that provides timekeeping, billing, accounting, calendaring/docketing, and practice/client management functions. Ever since I began practicing law, I have always made time entries contemporaneously as I perform the work. If you don’t capture what you do and bill for it timely, it’s hard to get paid for it.

Accounts Receivable
Poll further reminds us that once the bill is sent, you need to track your accounts receivable. If you have a billing program, it should be able to generate aging reports for you. You need to know which client balances are outstanding and have a collection process to follow-up with past-due clients and get paid. I bill promptly and regularly on the first of the month and state on all bills that payments are due by the 10th. I have found that adding a due date has shortened client remittance time. I also provide for online payment by credit card, and that has also shortened client remittance time, as well as enabled more payments in full. Credit card payments provide a method for clients to self-finance what they owe me, rather than me becoming a credit provider. For me, the credit card processing expense is well worth ensuring I get paid on time and in full and has vastly improved cash flow.

The Collection Process
Poll tells us the final part of the billing and accounts receivable cycle is a written firm policy on and process for collections when needed, including on what date and how accounts receivable are addressed with clients. He recommends that late clients be called first and then follow up the call with a letter confirming the substance of the conversation, such as a client’s promise to pay in installments, and that these tasks be done by an accounts receivable clerk, not the attorney. I don’t have the luxury of an accounts receivable clerk, so I have to do this task myself. I usually write rather than call clients, but I’ll take his recommended phone call process under serious consideration. He says calling yields better results and forces the client to address the past due balance; whereas, a written communication is easily ignored and discarded by the client. I start following up with past due clients within five to seven days of the bill due date. Perhaps I should start sooner. I also need to improve my written follow-on documentation process with the client.

When In-House Collection Fails
Poll advises that your collection policy also address what to do with long-overdue account balances (he suggests accounts remaining uncollected despite internal collection efforts and aged 200+ days). You need to decide what amount is worth formally pursuing via a collection agency or lawsuit and on what past due date. In my personal experience, once an account is past due 90 days, the ability to collect drops dramatically. At 120 days, it may as well be written off. Quick action on past due balances is imperative if you are to get paid any of it.

In conclusion, my lessons learned and processes implemented over the eight-plus years I’ve been in solo practice are bearing fruit. Overall, I think I’m doing rather well on my billing and collections process, but I do have room for improvement. At the start of this month, I wrote off several thousand dollars of billing to one client who I determined will not be able to pay me, despite my efforts. (The oldest portion of the balance due was aged 210 days.) The client had been a good-paying client, but encountered financial difficulties and started remitting infrequent dribs and drabs. My take-away: I should have stopped doing on-going work much sooner (within 30 to 60 days of nonpayment in full) and not enabled the debt and my own subsequent loss of income.

Looking at my accounts receivable report today, I see that all but two client accounts are within less than 30 days of aging. The two delinquent accounts have just passed the 90 days mark and are about 15 percent of my receivables. That percentage of receivables is too high and too old. It is time to “dial and smile” as Poll advises, make some phone calls, and, I hope, collect what I’ve earned.

Brenda Speer has been practicing law since 1989 and has honed her primary area of emphasis, intellectual property law (patent, trademark, and copyright), through both private law firm practice and in-house legal department service. She provides legal counsel to artists, entertainers, innovators, companies, and individuals in the creative, technological, business, and real estate arts. Speer lives in Colorado Springs with her husband and her collection of books, fashion accessories, and sewing and needlework supplies. She is active in the community and one of her favorite activities is playing principal French horn with the Pikes Peak Philharmonic.

Image by Maggiebug 21, via Wikimedia Common

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