11 Factors to Collecting Attorney Fees on a Timely Basis

One of the biggest headaches in most businesses around the world comes down to collecting fees for services performed. No hard-working attorney likes to work for free or have that terrible feeling of anxiety wondering if their clients will ever pay.

Cash flow is the lifeblood of running the firm. Positive cash flow allows you to:

• Have psychological peace of mind;
• Focus on practicing law and operating efficiently;
• Obtain discounts from vendors and gain purchasing power;
• Be in a position of strength when settling outstanding invoices due;
• Earn excellent credit ratings from financial institutions to establish lines of credit; and
• Create flexibility in making business decisions.

Most of the time, delayed payments are a result of actions by the law firms themselves. Let's take a look at 11 factors impacting the collection of attorney fees on a timely basis and how to avoid these mistakes.

1. Poor billing practices. Significant accumulation of time before a client is invoiced.
2. Poor internal structure. Lack of discipline for accumulating time and getting invoices out in a timely fashion.
3. Mailing invoices. Set a time deadline for mailing the bills. Consider electronic mailing of bills (this saves time and postage). Some clients today require e-billing. Please make sure your billing system meets the e-billing requirements.
4. No policy or enforcement for retainers and replenishment of retainers.
5. Not taking action once payments are past due. Some law firms don't take action right away or even ignore the issue that these payments are past due. Clients feel like they are safe if they don't receive any notification from the law firm that provided services. So rather than wait, contact the client as soon as possible.
6. Worrying about losing clients. You may not want to have the conversation about past due fees, but what good is a client if they don't pay? Try to create a relationship with you client that is beyond fees. Make them feel comfortable before you ask about the past due fees.
7. Weak forms of communication. Law firms should consider sending emails or calling clients directly rather than send them thru U.S. Postal services. This will speed up the clients' awareness of past due bills that have not been paid yet.
8. You cannot expect every single client to pay on time. Sometimes clients simply forget. Setup Outlook Calendar reminders to make calls to past due clients who need a reminder themselves.
9. Cutting deals for Past Due Bills. If you start giving out discounts for past due clients, you are running the risk that other clients may hear about this and also start to delay their payments. Be strict on collecting the total amount of the fees but also be flexible on the timing process of payment if necessary.
10. Try to run a report on past due clients either weekly or monthly. This will help you keep track of which clients are past due.
11. Assign the task of collections to an employee outside of just running reports (create a policy). The reports are great and will help make firms aware of past due clients, but what good are reports if nobody is following up? Assign someone in the firm to make sure they are making calls/emails to these clients that are past due. Any unsuccessful collections should be reported to the owners of the firm to see if further action is necessary.

If you are constantly running into issues with collecting past due attorney fees, try to follow the corrective actions to the problems listed above and hopefully all your client collection nightmares will go away. The key to success is too simply stay on top of it and don't delay the issues. Time is money, so lay down the law when clients are delaying their payments.

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Peter Oliva is a supervisor at Withum Smith+Brown, an accounting, tax and advisory firm with 14 offices in the U.S. For years, Withum has been assisting attorneys both in the office and in the courtroom. Withum's law firm clients range in size from sole practitioners to multi-location regional practices in the New Jersey/Pennsylvania/New York area. Withum understands the unique challenges law firm's face when running a law office. In addition to traditional accounting, auditing, and tax planning and compliance services, Withum can assist in maximizing operating efficiency and maintaining a profitable practice.