Who's On First?

Scrambling to figure out if your firm is accurately managing its accounts receivable is, for many firms, like the old comedy routine of "Who's on first? What's on second?  Yes, you do have good paying clients.  But what about all those accounts over 90 days that remain unpaid, that are getting older, with a smaller window of opportunity to collect as they age?  There's just not a clear picture of what's going on with those receivables. 

Collections for law firms are often all over the map: from not knowing if collection efforts are being properly performed, to being unsure of when and if clients will pay -- and even worse -- to having no idea at all what's going on. There is no excuse for this kind of A/R management problem in today's legal profession.

At minimum, you need to know an account's payment status: whether the account is actively being pursued, who is pursuing the collection efforts and whether they are getting results. If a client is not paying, you need to determine why and what needs to be done to get them to pay. Categorize receivables, for accounts being handled by attorneys and staff, to determine:

• Is it collectible? If so, when can we expect payment?
• Is it problematic? How good are the chances we will get paid?
• Is it simply not collectible?

To help build performance measures, do two things:

Give your attorneys less autonomy
Attorneys are given too much leeway in dealing with their clients during the first three quarters of the year, only to have their feet held to the fire during the year-end stretch. When looking at how you are handling over-90 day accounts, work to change the traditional culture of forgiveness. Replace it with high expectations that these accounts must be collected sooner rather than later. At minimum, give them a specific time frame to achieve results.

Evaluate whether you have the right staff
Staff must have a clear understanding of what is required to resolve payment issues for different kinds of transactions and practices. They must know -- and have access to -- the right techniques and resources for getting bills paid. They must be expected to handle collections on a day-to-day basis, but equally important, evaluated on their ability to get concrete results. Recognize collection managers as the "rainmakers" they can be. Although they are making rain in a different way than the attorneys, the value they can add to the bottom line can be equally great.

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