Aged A/R Has Gone Too Far...Literally

Albert Einstein once said, “We cannot solve our problems with the same thinking we use when we created them.”  This reminded me of how many firms continuously carry ageing receivables that are difficult to collect. Yet, year after year, they never change their mindset about managing their backlog of A/R. By and large, law firms end up focusing on receivables that are easier and more straightforward in getting paid. When there are problem receivables -- and there inevitably are -- most firms let the receivables sit – and sit – and sit – and sit. Which is why A/R starts to accumulate over 120 days. And while many clients, both institutional and non-institutional, are much more thorough in reviewing bills that can delay payment, the larger problem still lies with law firms and their attorneys not dealing with the problem.

The fact is that most of the receivables collected during the year-end crunch are less than 120 days old. Because receivables over 120 days are usually more problematic, attorneys realize they can’t resolve them by year end. So many don’t bother. In the effort to get as much money in as possible, they focus on the more current billing and avoid dealing with unhappy clients, clients who are unable to pay, situations in which the clients did not get the result they wanted, etc. With the pressure off in the first quarter, attorneys are even less inclined to face older receivables.
 
The first quarter is actually the best time to focus on cleaning up old A/R, precisely because the pressure is less intense, and because the effort will take some time. 
Here’s what to do now:

• Take time to assess the ageing A/R problem. Evaluate your older accounts top to bottom and get a handle on which receivables need to be pursued and which really are uncollectable. Sit down with each billing attorney. Request an action plan to get the accounts collected or find out if they need help.
• Get a handle on those accounts that had a payment problem early in the ageing process and figure out why the problem was not dealt with sooner and has now left older accounts uncollectable.
• Sit down with firm leadership and provide facts about your findings. They need to have the information to tell the attorneys to address their ageing receivables and the will to hold attorneys accountable.

Whether or not your firm had a good 2014, as you look forward, you need to recognize that getting accounts collected sooner rather than later can help make the difference in 2015. Learn more on our web-site at http://www.clientci.com.

Starting the New Year on the Right Foot

• All firms should take the time and effort to evaluate if they have A/R management best practices in place. Ask whether you are doing the right job, or do processes, policies and procedures exist only on paper or in theory? The key questions to ask are:

• Do you have the appropriate governance and leadership structure in place?
• Do you have meaningful reports and information?
• Do you have a good understanding of how the attorneys are managing their A/R and if they are spending enough time on their collection efforts?
• Do you have the right administrative staff in place, and are they doing the right work the right way?
• Are you measuring their performance by results they are achieving?
• Is the firm regularly collecting its older, difficult A/R?

• The financial management sector of a law firm wants to have strong black-and-white procedures that are common in most businesses, but they are often challenged because there are so many complicated transactions and relationships that do not lend themselves to black-and white procedures. All law firms should have written procedures in place concerning accounts receivable management, and communicate their expectations on collections to the attorneys. However, the procedures need to be workable, and for those receivables that must have exceptions, these exceptions should be monitored closely and not be seen as a way to avoid firm collection policies and rules.
Also, firm leadership must step in to help attorneys understand what specific actions they must take to ensure payment, give them a time frame for getting accounts collected, and provide the right professional support to help them.

• The business environment has evolved. Mindsets have changed, as have business practices. Because law firms are doing business in a different world and making adjustments accordingly, it also requires that they routinely communicate with their clients about unpaid bills to ensure timely payment or resolve problem issues. While past collections experiences should not be ignored, in these changing times it may not be entirely useful as a guide. Although some clients have set roles of when payments will be made, firms must institute regular, steady, professional follow-up of unpaid bills to secure dates of when payment can be expected to help guide future follow-up. By showing clients that the firm is regularly contacting them and monitoring their payment status, they will learn that you are well-aware of their bills and that you expect payment. However, sometimes it becomes the attorney's problem because he or she is uncomfortable about asking for payment and grants too much leeway about timely payment.

Would you like to learn more? Visit our web-site at http://www.clientci.com/

Steady The Ship Going into Year-End - A Few Last Words Regarding A/R

Happy Holidays! As we all prepare to begin the somewhat frantic job of getting things done by the end of December, we all have our to-do list and only have a certain number of days to accomplish what's on that list. Fortunately, one thing that many of us have learned over the years is how to prioritize. At the top of the to-do list for many law firms is collecting accounts receivable to meet or exceed budget by December 31. With limited time to complete this task, it's important that we focus on certain items over which we have control.

Here are a few tips to help your firm achieve its year-end collection goals:

• Take the time to meet with those attorneys who may need assistance to determine what help they need getting their accounts collected (I'm sure you know who they are). Don't just drop in -- schedule a meeting in advance (not to last longer than 30 minutes) to go over their A/R and find out how you can give them some hands-on help.
• Put together a list of clients that are expected to pay by year-end and the exact date of when payments are anticipated. Ensure each attorney receives a regular progress report and alert them if the commitment date has passed without receiving payment so they can make appropriate follow-up contact as December 31 approaches.
• Provide the attorneys a checklist of items that will help ensure payments are made, such as: verifying clients have copies of all outstanding invoices, determining if client offices will be closed the last week of December (to ensure payments have been processed before closing), providing the attorneys routing instructions if payment is to be sent by wire, or an overnight express mail account number for quick delivery, etc.
• Just as important, regularly take the time to walk the halls and check in with the attorneys on their progress during the last few weeks. Your visits will remind them of what they have to do.

Best wishes to you and your firm from everyone at Client Connection for an enjoyable holiday season and a prosperous 2015. We look forward to sharing our monthly tips with you again starting in February 2015. Please visit our web-site at http://www.clientci.com.

"Bringing Home the Bacon" - Now is the Time to Rally Collection Efforts

Successful entrepreneur Mary Kay Ash once said, “If you think you can, you can. If you think you can’t, you're right.” 

When approaching year-end collection efforts, we know what needs to get done. However, getting there is often another issue. While we all have 52 things on our plates to accomplish by December 31, year-end collection efforts still remain a priority for law firms. It takes time and effort to walk the halls and open the lines of communication to determine when and if receivables will be paid by year-end, yet it must be done. This is the time of the year when firms must engage in consistent and continuous communication to ensure clients are being contacted and payment commitments are being recorded.

Here are a few things to remember:

• Start knocking on doors and schedule time to talk with attorneys – No, I’m not saying send an e-mail and wait for attorneys to respond (or, more likely, not respond at all). Having face-to-face and one-on-one meetings can get attorneys to start dealing with collections and delegate collection responsibilities over the next two months. In a matter of 15 to 30 minutes per attorney, you can put together a game plan for the receivables that need to be collected by year-end.
• Help attorneys examine trends and patterns that will identify clients with payment problems – When meeting with attorneys, take time to review clients’ billing and payment histories, including the dates and amounts of last payments. Some clients may be dictating to the firm their payment terms simply because the attorneys have not properly taken control of the collection efforts. 
• Give the attorneys a few tips and ask that they provide you feedback when talking to clients  - If the attorneys offer to write letters to their clients, beg them not to. Inform them that collection efforts this time of year require direct and diligent contact. Ask your attorneys to provide realistic projections of how much they expect to collect by year’s end. Offer to provide any assistance they need, but also let them know that the firm’s leadership will not turn a blind eye on collections mismanagement.
The countdown to year-end begins!
Learn more on our web-site at http://www.clientci.com/

It's October. Do You Know Where Your Receivables Are?

Where has the year gone? Yes, no matter how you look at it, year-end has snuck up on us again. The last quarter of the year is front and center, and we are again faced with year-end collection efforts. How did we get here? It doesn't matter! Let's just get moving.

Here are a few essential questions and answers to help you get accounts collected before December 31:

• What role should firm leadership play at year-end?  Firm leaders need to be able to tell the attorneys to address their collections, but also understand the need to provide them with other resources to help them achieve results during the last quarter.  Assess whether you have in place the right people, with the right skills, to do the right job.
• How can firms overcome the backlog of older, difficult A/R to be collected by December?  Because the older receivables require more time and effort, you had better start now.  Do not allow your lawyers to delude themselves into thinking that they are going to be paid unless the firm clearly makes the effort to pursue the older accounts.
• What information should we be paying particular attention to at year-end?  Detailed reports should answer key questions: whether accounts are actively being pursued, what the payment status is, who is pursuing collection and what success they are having, why clients are not paying, and what steps are being taken to get them to pay.
• How do we proactively pursue receivables at year-end while respecting attorneys' concerns about hurting client relationships?  Remind your attorneys that many other business partners are contacting their clients for this reason, so it is entirely reasonable for your firm to do the same.  Law firms lose clients by doing poor work or by failing to deliver client service, not by asking clients to pay their bills. 
• What problems do law firms experience at year-end concerning the slowdown in payments?  Cash flow problems and clients hoarding cash are the main reason why clients do not pay or pay slowly.  They understand that they can ease their cash flow problems by delaying payment or by not paying at all.
There’s a chill in the air – but don’t make the mistake of waiting to get your collection plan in place until it is freezing cold in December.  Get going! You may be surprised what you can accomplish – if you start doing it NOW!

Learn more on our web-site at: http://www.clientci.com/

Talking the Talk, Walking the Walk

If you can "talk the talk" about accounts receivable, that will help you "walk the walk" to ensure payment.

The famous management consultant, Peter Drucker, once said: “The most important thing in communication is hearing what isn’t said.”  In A/R management for law firms, many collection problems are a result of not knowing why receivables have not been paid, only to try too late to resolve payment problems that could have been avoided. Firm leadership has ultimate responsibility for collections, but to do their job, they need to know all pertinent and meaningful information; armed with that information, they can take the necessary action to ensure the firm is enhancing its revenue as much as possible.

As we all know, “managing” accounts receivable is critical to cash flow management. However, just as important to the success of a firm's A/R program is devising appropriate methods to understand why clients have not paid, determining if and when payment will be made and discussing the right protocol to stay on top of collection efforts to ensure progress is being made. 

Consistently discussing collection efforts and A/R issues may not lead to all accounts being collected timely. After all, law firm receivables are filled with complicated transactions, relationships and client engagements that do not lend themselves to a black-and-white collection time frame. But information is a valuable commodity when it prompts questions about what has to be done to move the ball forward. The lack of information can be a detriment when firms want to know why payments have not been made. Too often, firms wait too long to follow up with accounts and discover either that there is nothing they can do to collect those accounts or that they must make a drastic discount just to salvage something.

Even if you think your firm is doing a good job communicating about collections efforts, select some older accounts to learn what progress is being made. It may make you speak up!

Learn more on our web-site at http://www.clientci.com/.

Ending the Summer With Your Eyes on the Fourth Quarter

It’s August, and the dog days of summer are upon us. No matter how we look at the weather – it’s hot! With this in mind, it’s often a time of the year when you are trying to take those last few days of vacation, while knowing that there are those ongoing projects on your desk waiting for your attention. One of those is addressing the question:  how do we improve our collections efforts going into the last few months of the year?

Although it may be too soon to gear up for the year-end “push,” it is a good time to start thinking about how you can help your firm achieve its 2014 collections goals. Because of the changing economic landscape within the legal profession over the past few years and the enhanced billing and payment requirements by clients, it would be beneficial to ensure your firm is up to the year-end task now instead of waiting for December surprises. Here are a few things to think about:

1.    Start reviewing now those older, difficult receivables over 120 days and determine how much will be paid by year-end – These receivables will require more time and a much more concerted effort to work through, process and set payment expectations by December 31. Determine who -- if anyone -- is working these accounts, and ensure they are giving them the priority necessary so that they are paid by year end. Help your firm “find money” from these older accounts.

2.    Talk with the firm’s leadership to help plan and clarify how the firm wants to approach collections going into the last quarter and the last month. Assess how the firm has done things and consider whether changes need to be made this year to address the backlog of A/R. As you know, planning is so much easier and productive when your firm is not holding everyone's feet to the fire at the eleventh hour. Help the firm stay on course with its collection efforts by having someone who is forward-thinking keep his “eye on the ball” -- with the "ball" being the firm's financial goals -- in the last quarter.  And….

3.    As a part of these discussions with the firm leadership, highlight where receivable problems stand now and what must be achieved to correct these issues and stay on course over the next few months.

At many law firms, everyone shares the responsibility for accounts receivable management. Which, of course means that no one ultimately has complete responsibility. Help your firm take ownership now to ease the burden over the next few months.

Keep the air conditioner on high! Learn more on our web-site at http://www.clientci.com/