4 Questions to Ask to Help Your Firm Get Its Arms Around Its Accounts Receivable at Year-End

Collection strategy for law firms is often a hectic experience at year-end:  from not knowing if collection efforts are being properly performed to being unsure if and when clients will pay.  Many firms find it’s easy to fall back on the approach they have used year after year at year-end -- accelerate collections during the last couple of months  – because that’s the way they have always done it.  But did this approach get the results that the firm really wanted?  Are the obstacles of collecting A/R at the end of the year becoming tougher to overcome?  Are your attorneys becoming less open to new approaches -- or turning a blind eye altogether to more productive A/R management techniques?

This big question is – will those ageing receivables that are on your A/R reports now continue to be there in 2020?

As Client Connection has noted before, the business environment has evolved: mindsets have changed, and so have business practices. Because law firms are doing business in a different world, they also need to ensure timely payment and/or address payment issues. Past collections experiences may be worth considering, but in these changing times, they may not be wholly useful as a guide.

Ask these four questions about what you did in the past -- and what you may need to change this year:

1. What role should firm leadership play at year-end? Firm leaders need to not only tell the attorneys to address collections, they must be diligent in ensuring attorneys are actually making progress. They need to establish clear expectations about what has to be accomplished with collection efforts now and through year-end. Leadership must also provide the right resources to help the attorneys and assess whether the firm has in place the right people, with the right skills, to do the right job.
2. What information should we be paying particular attention to during the last two months of the year? Detailed reports should answer key questions: whether accounts are actively being pursued, what the payment status is, who is pursuing collections and what success they are having, why clients are not paying, and what steps are being taken to get them to pay.
3. How do we proactively pursue receivables at year-end while respecting the attorneys' concerns about hurting client relationships? Educate your attorneys that many other businesses are contacting their clients for this reason, so it's entirely reasonable for your firm to do the same. Law firms lose clients by doing poor work or failing to deliver client service, not by asking clients to pay their bills.
4. How can firms overcome the backlog of older, difficult A/R to be collected by the end of December? Because older receivables require more time and skill, you had better start now. No firm should delude itself into thinking that it is going to be paid unless it proactively pursues older accounts.

Would you like to learn more? Visit us at: https://clientci.com/

The Fourth Quarter is Here. There Is No Longer Time to Wait.

Too many law firms continue to think that collecting their receivables is an easy process – all you have to do is remind clients to pay and they will.  We at Client Connection have been telling you that A/R management and collections is all a process that must be followed regularly and consistently throughout the year in order to achieve the right results.  Now we’ve reached the fourth quarter, when the rubber meets the road.  Listen to what others are saying about receivables.

Gretta Rusanow and Jeff Grossman of Citi Private Bank’s Law Firm Group recently published a report entitled “Law Firm Margins Tighten as First-Half Expenses Outgrow Revenue.”  They anticipate that “it will be a challenge for the industry to see a repeat of 2018’s strong performance in this year’s results,” but they expect 2019 to be a good year compared to earlier post-recession years. A survey of 191 firms saw revenue growth of 4.1% in the first half of 2019, but attributed that growth largely to the rise in lawyer billing rates. Soft demand, they say, has reduced revenue growth, but so has the lengthening of the collection cycle, which they report as a prolonged trend.  Changes in client bill payment behavior have been causing the collections showdown, and causal factors include e-billing systems and greater scrutiny around bill review, as well as changes in payment terms.

Citi’s report concluded that “collecting on increased inventory levels will be key.”

Separately, Thomson Reuters Peer Monitor Index reported that law firms collected 89.2% of the bills clients had agreed to pay, in the third consecutive quarter of decline. 

Said a September 19 article in Bloomberg Law, “Declining realization is a long-term trend that has a pernicious, often unspoken impact on law firm finances.”  That article concluded, “So you keep raising rates, but if you can’t bill it and you can’t collect it?  It’s ridiculous.”

At Client Connection, we want to make sure that the message comes through loud and clear:  pay attention to your accounts receivable and take action in a timely and thorough way.  Be realistic about whether your firm is underachieving in its A/R management goals and efforts.  And if your firm has developed bad habits, now is the time to overcome them. Learn more on our web-site at: https://clientci.com

Keep Looking Underneath Those Ageing Receiveable Numbers for Reasons Why Your Firm Has Not Been Paid. You May Be Surprised What You Learn!

While clear, fundamental accounts receivable management is common in most businesses, law firms are often challenged to be paid timely because there are certain clients, transactions and payment arrangements that do not or cannot follow prompt payment guidelines.  However, recognize that these are the exceptions and not the rule.  Moreover, law firms need to understand that these exceptions have the potential to gain traction and become problem paying accounts as they age.  On top of that, firms sometimes have a false sense of security that they have a heaping pot of revenue that needs to be paid, when what they really have is an empty pot of promises that continue not to be paid (if they ever will be).

Do not fool yourself into thinking that your A/R management and collection efforts can succeed until you understand which moving parts need closer attention and adjustment.   Change can be difficult, especially with so many other priorities to attend to when managing a busy law firm, but the bottom line is the bottom line.  It requires all hands on deck to ensure that bills are in line for payment --or can determine what has to be done to get them in line).  Determine:

• Whether accounts are actively being pursued at critical ageing points or follow-up efforts are stagnating
• What the payment status is, what can be done to speed up the process and what the chances are of not being paid
• The time commitment, skill level and level of motivation of those pursuing unpaid bills, and what success they are having, especially with older accounts
• Why clients are not paying, and what steps are being taken to get them to pay.

There can be a false sense of security that collection efforts are working when revenue is rising and budgets are met.  Therefore, it’s critical to take a harder look at receivables that are not being collected and how you are dealing with issues that are preventing payment -- particularly for those receivables over 90 days – that can tell a whole different story. Would you like to learn more? Please visit our web-site at https://clientci.com/

Stop Making Assumptions and Start Asking Questions About Your Firm's A/R Management Efforts

Client Connection has been helping law firms with accounts receivable management for over 23 years. So now seems to be as good a time as any to take stock on how well law firms are progressing with their accounts receivable issues and the challenges they face in making improvements.
Let’s start by going beyond false assumptions. Let’s ask questions we need to answer – because you know what happens when you assume...

Learn more.  Click here to read our recent newsletter.

Timing is Everything When It Comes to Improving Your Firm's A/R Management Efforts

The first part of the year is critical for evaluating how your firm can do better to manage and collect its receivables.  But if you wait for changes to happen to how your firm manages its A/R, you will lose time and the opportunity to start improving how your firm can add to its bottom line. 
Time is not on your side when you have unpaid receivables ageing and you don’t have a strategy for how to begin.  However, you know it needs to be done.  Henry Ford once said, “Don’t find a fault, find a remedy.”  While the year is still relatively young, we recommend you take these three steps to get started:

1. Take the lead to determine how well your firm is doing with its A/R management – At most law firms, everyone shares the responsibility for accounts receivable management – which of course, means that no one really takes full responsibility.  Take the time to assess how things have been done at your firm and ask these questions.

• How are we doing with managing our A/R?
• What do we need to be doing differently?
• Do we have the right resources to make improvements?

2. Next, understand what is going on in your firm – Have you allowed your clients too much leeway to pay at their own discretion?  Does the culture of your firm permit attorneys to go it alone in deciding how they manage their receivables (or, in too many cases, NOT manage their receivables)?  Do you have processes and administrative A/R management functions, but neglect to measure if they are succeeding in accomplishing payment?

3. As a result of your observations, educate the leadership of the firm where improvements can be made – Leadership can sometimes be at a disadvantage when trying to determine how to improve A/R management and collections since they are flying at 40,000 feet, overseeing the direction and vision of the firm and don’t have their ear to the ground assessing why the firm is under-achieving in this area.  Provide them with insight on receivables the firm is not collecting and best practice solutions to improve collection results, especially with ageing, difficult-to-collect A/R.


Law firms that address and actively work at getting results from their collection efforts early in the year will see a real payoff at the end.  For those that do not – it will be a long year.

If you are attending the ALA 2019 Annual Conference & Expo in Grapevine, Texas this month, please stop by Booth #910 to say hello.  We would be happy to answer any questions you may have about your firm’s accounts receivable management. And please feel free to visit our web-site at https://clientci.com.

Thaw Out Your Accounts Receivable Management Strategy for 2019

The great American poet, Robert Frost, once said, “You can’t get too much winter in the winter.”  That may be up for debate this winter, considering the record-setting cold temperatures in many areas of the country.  However, the cold conditions we are experiencing should not freeze our thinking about where changes need to be made to your firm’s accounts receivable management.  While your past collection efforts should not be ignored, in these changing times, it will serve your firm well to see what changes are necessary to manage your A/R in 2019.

Your collection efforts can’t succeed unless you understand which moving parts need closer attention and adjustment. Change can be difficult, especially with so many other priorities to attend to, but ageing A/R can often be difficult to deal with. The firm must take a position and have clear thinking on its A/R management efforts to ensure bills to clients are in line for payment (or what needs to be done to get them in line). To begin, start evaluating:

• Meaningful information to determine the status of payment. Financial numbers are beneficial, but the stories behind those numbers will give you a clearer picture of the progress on your collection efforts.
• Whether invoices are actively being pursued at critical ageing points. And if not, why?
• What the payment status is and what can be done to speed up the process. Promises to pay often lead to more promises -- and no results.
• The skill level of those pursuing collection efforts and what success they are having -- especially with ageing A/R.
• Why clients are not paying timely, or not at all -- and what steps are being taken to get them to pay.

There is often the misperception that a backlog of ageing receivables will turn into timely payments -- and money will roll in simply when the firm needs it to.  This faulty logic hinders your ability to maintain a healthy revenue stream.  Unless habits change, firms should not expect to increase the likelihood of getting paid as receivables age. 

Now is an excellent time to take action.  Help your firm make changes in your processes and practices to help enhance revenue by converting your backlog of A/R inventory.  Don’t freeze-up! Learn more on our web-site... https://clientci.com/