It is possible to change attorneys’ attitudes about managing accounts receivables. The success of this effort depends substantially on finding the right person to take on the key task of managing those receivables.
Avoiding the Pitfalls
More and more firms are creating an accounts receivable manager position. But they face obstacles in motivating attorneys to have confidence in the manager – and entrust in the manager their uncollected accounts.
One mistake that firms make is promoting a valued employee from within. Typically, it is a senior secretary, a member of the accounting department or some other long-time employee who the firm is unsure how to use effectively. While it is virtuous to reward employees, this approach does no one any favors and sets the employee up for failure.
- He or she lacks experience and, therefore, credibility, in collecting successfully.
- If the collection work is simply added to an employee’s other duties, the collections inevitably take a back seat.
- The position is perceived by the attorneys as a clerical one, and emphasis gets placed on clerical duties, such as changing mailing addresses, processing reminder statements and getting copies of invoices for the attorneys, rather than on the professionallevel collection of receivables that is so vital to the firm.
Making the Most of Your Manager
To maximize the value of the accounts receivable manager, your firm should seek an individual either with experience in a professional services environment or as a bank loan officer or a corporate/credit officer of a Fortune 500 company. Equally important — and, admittedly, harder to identify — he or she should possess the professional savvy to understand law firm culture and thrive in it. Though it is highly unlikely that your firm will find someone with appropriate skills and actual law firm experience, you do want to find someone who does “get” how things work in a law firm.
In addition, he or she should:
- Be a self-starter, able to work independently.
- Have the ability to understand and adapt to the law firm culture.
- Have strong people skills with an emphasis on building strong relationships.
- Be comfortable with technology as a tool essential for getting the job done.
- Be prepared to face and overcome rejection, both from clients and attorneys.
- Be able to understand which collection techniques work for different situations.
- Be able to analyze problems and find solutions in all areas of accounts receivable management for every practice area.
- Recognize that there is little leverage in collecting aged accounts receivable.
Ensuring Success
Key to the success of the accounts receivable manager is the ability to interact with the attorneys and the clients. He or she must be able to discuss payment obligations with clients without hurting the relationship the client has with the firm. He or she must be able to work oneon- one with the attorneys, as one professional to another. He or she must be able to inspire the confidence of the attorneys.
Even before the accounts receivable manager has started the job, it is the firm’s obligation to ensure that expectations are clear. All involved should agree on the job’s responsibilities, objectives and appropriate methodologies for making the collections. The manager should be a professional and should be treated as one by the firm. Both attorneys and staff should understand the nature – and level – of the job. And everyone should be in agreement about how success will be measured.
In order to figure out who you need to hire and how to help that individual succeed, you may need assistance from Client Connection, outside experts in accounts receivable management.
Selecting and empowering the individual who is given responsibility for managing your accounts receivable in-house can make all the difference in the ultimate success of your collection efforts. Choose this member of your team wisely.
At Client Connection, we know how to manage receivables, and we would be happy to share a little of our knowledge with you. Client Connection assists law firms of all sizes throughout the United States by furnishing accounts receivable management services, developing practical receivable programs and training law firm staff in effective collection methods. Learn more at our web-site at: http://www.clientci.com/
Client Connection
www.clientci.com
Monday, April 2, 2012
Thursday, March 1, 2012
NOT MY JOB: How Law Firms Give Responsibility – Or Fail to Give Responsibility – for Accounts Receivable Management
At most law firms, everyone shares responsibility for accounts receivable management. Which, of course, means that no one, ultimately, has complete responsibility. Attorneys’ idea of managing receivables commonly involves not doing anything at all, casually mentioning them to clients or writing a mildly worded letter when they happen to have a chance.
Ask many law firms, and they will tell you that it is the attorneys’ job to contact their clients. While it’s true that the attorneys are given some support in these efforts, typically that support is too little and too unfocused.
What about making accounts receivable management the responsibility of the controller or chief financial officer? They have many other responsibilities, which will not permit them to focus the needed attention on accounts receivable. In addition, the reality is that accounts receivable are more a question of practice management than financial management.
Perhaps the practice head should be responsible? While many firms do require practice group leaders to take responsibility for managing the receivables in their group, these leaders often give too much professional courtesy and latitude to the billing attorneys to handle collections their own way.
What about the billing and collection or finance committee? Many such committees exist in name only. Sometimes the committee members do not care to serve on them. Typically, they lack focus and direction. They have no game plan and insufficient information on which to act. They are not well-positioned to demand accountability. Even when they are equipped to act, too frequently they concentrate on analyzing problem accounts or offenders and give short shrift to taking decisive action.
Taking Responsibility
Following are some clear-cut actions your firm should take to get its arms around its accounts receivable:
1. Understand the status of all your receivables. Classify them. Consider these five categories:
• Collection efforts being pursued with the assistance of the firm’s accounts receivable manager
• Collections efforts being handled by the responsible attorney
• Problem/doubtful accounts in which receivables are very unlikely to be collected
• Receivables that are in bankruptcy
• Collection efforts being handled by an outside third party
2. Focus on collection efforts being handled by the attorney. If an attorney chooses to take personal responsibility for collections, understand why – and what actions that attorney will take to ensure the bill is paid. Hold him or her accountable – that is, if you determine that the firm’s culture and management style allow for true accountability. It is just as much the firm’s responsibility to make sure the attorney does what he or she says as it is that attorney’s responsibility to do it.
3. Establish a real working billing and collection committee, and give it the authority to make decisions and compel action. The committee must meet monthly, at a minimum, and committee members should be assigned specific responsibilities and asked to report back to the committee. The committee should be headed by a true firm leader, preferably a member of the management committee, someone who can and will hold the partners accountable for their actions (or lack thereof). The committee must be given all the information that is classified in (1), above.
4. Understand what obstacles are preventing collections. You might be surprised to discover how many bills go unpaid by clients for simple, logistical reasons, such as invoices lost in the mail. In the case of institutional clients, there may be no contact person listed or the individual responsible for approving the bill has left the company. There may be insufficient explanation of the services rendered, and the client needs clarification, or bills are sent without cover letters explaining payment terms. For non-institutional clients, there may simply be cashflow problems. Don’t assume that if an invoice is unpaid, the client is unwilling to pay it. Also important, however, is recognizing that some of the obstacles preventing collections are the individual attorneys themselves.
5. Be proactive, not reactive. More often than not, little attention is focused on collections management until the last couple of months of the year. It is important that the effort be year-round. Some firms pride themselves on just how well they do even though the majority of their collections take place at the end of the year. We say: imagine how much better they could do if money is coming in all year long. Even if you are unlikely to change old clients’ habit of paying at year end, teach new clients that they are expected to pay timely. During the year, educate your attorneys about the vital nature of collections to the firm’s success, and the role they play in collections. Keep attention on collections throughout the year. Receivables start to age because the firm, and its attorneys, are not acting assertively and timely.
6. Purchase accounts receivable management software to organize and analyze data and generate practical reports. Learn how to use it effectively and fully. The right software can be tremendously helpful in allowing the firm to get its arms around its receivables. Keep in mind, however, that while software serves many purposes, it is ultimately the responsibility of the individual – not the software – to actually collect and manage the receivables.
7. Educate the attorneys early in their careers about the expectations the firm has for them in managing their receivables. Teach them that it is a normal part of doing business, not something they should be embarrassed to discuss with clients. Educate them before they can develop poor management skills.
8.Write off accounts if they are not collectible. Understand your receivables portfolio. It is far more productive to recognize uncollectible receivables and deal with them than to hold out false hope that they will be collected.
9. Keep management reports about accounts receivable simple yet meaningful. The information you should be reviewing is: reports by classifications listed in (1) above, reasons why the accounts are in a particular category, balance due, last payment made and how much work in process still remains unbilled.
10. Change the firm’s attitude towards collections management. Decide that it is a firm priority to do a better job managing receivables. Recognize that this priority has to be felt, and communicated, from the top. If the firm’s leaders don’t feel it – and demonstrate their commitment through their actions – no matter how many systems, reports, software packages and committees exist to deal with the issue, nothing will improve.
Do you have a question regarding your receivables? Please send your question via e-mail(info@clientci.com ) and one of our professionals will respond, free of charge. At Client Connection, we know how to manage receivables, and we would be happy to share a little of our knowledge with you. Visit us online at: http://www.clientci.com/
Wednesday, February 1, 2012
WHAT ARE YOU DOING TO IMPROVE ACCOUNTS RECEIVABLE?
Actions speak louder than words. Law firm managers can say all they want about policies, procedures and infrastructure, but results are what matter. After all the talking, what has your firm done to address difficulties with accounts receivable?
Heading toward year-end, the economic picture for law firms remains tight, so now is a good time to figure out which actions work. Focus on these five steps:
1. Reach a consensus about how much of a priority collections should take. Place the right people in the right positions — people who will roll up their sleeves and work as part of a team to achieve success. Give staff the power to tell attorneys to address their invoices, and allow them to use the firm's resources to help achieve results. Demanding real accountability is tough, but it's easier than pursuing payment of ageing receivables.
2. Take a closer look at accounts receivable more than 90 days old. Don't wait 90 days to be concerned about your account receivables. When looking at ageing receivables, many firms will notice collection problems. The reality is that these problems surfaced earlier, but nothing was done to address them.
If the work by your company has been satisfactorily performed, the client should pay within 30 days. If payment is not received by that point, it is the first sign of a collection problem. Make sure clients with a balance of more than 60 days old are routinely contacted to remind them payment is expected.
3. Start with the old and end with the new. Work on the oldest balance sheet first and move forward. Resolve the old issues — which are the hardest to address — before tackling the easier cases. Many times, law firms will acknowledge problems that are slowing down or preventing payment on certain accounts without taking the time to re-visit them and ensure collection efforts are succeeding. These accounts do take time and energy, but working on them can result in finding money for the firm.
The strongest members of your collection team should be focused on the older, tougher accounts. In addition, don't let the number of 90-day account receivables grow by neglecting to work on less substantial delinquent balances. It is surprising how significant a portion of the firm's accounts receivable portfolio is comprised of smaller balances.
4. Understand the reasons your clients are not paying. Why aren't they paying? It all comes down to problems with cash flow. However, such problems are often masked — intentionally or not — by other issues, such as poor service, bills that are higher than expected or bills that were never received.
From the start of a relationship, firms and lawyers must understand their clients in order to find the source of problems and resolve them when they do arise. Although aged receivables are part of the financial report, firms need to get a handle on the stories underneath the numbers to understand why clients are not paying.
To help alleviate cash flow issues, law firms should re-evaluate and implement realistic credit assessments of prospective clients. If clients are accepted after a suitable credit analysis, the amount of risk can be reduced by including provisions for retainers, evergreen retainers or personal guarantees when engagement letters are prepared.
5. Measure the results of your firm's efforts. You may be gathering a lot of information about your collections, but determine whether it is the right information. At a minimum, know if an account is actively being pursued and its payment status, who is pursuing the collection efforts and whether or not they are getting results, why clients are not paying, and what needs to be done to get them to pay.
Categorize receivables:
- Are they collectible? If so, when can we expect payment?
- Are they problematic? What are the chances we will get paid?
- Are they simply uncollectible?
Also, help efforts by creating reports that will show when payments can be made and frequently update information on the status of collection efforts and payments. If you have collection software, use it correctly to develop these types of reports.
Please visit our web-site for more information: http://clientci.com
Actions speak louder than words. Law firm managers can say all they want about policies, procedures and infrastructure, but results are what matter. After all the talking, what has your firm done to address difficulties with accounts receivable?
Heading toward year-end, the economic picture for law firms remains tight, so now is a good time to figure out which actions work. Focus on these five steps:
1. Reach a consensus about how much of a priority collections should take. Place the right people in the right positions — people who will roll up their sleeves and work as part of a team to achieve success. Give staff the power to tell attorneys to address their invoices, and allow them to use the firm's resources to help achieve results. Demanding real accountability is tough, but it's easier than pursuing payment of ageing receivables.
2. Take a closer look at accounts receivable more than 90 days old. Don't wait 90 days to be concerned about your account receivables. When looking at ageing receivables, many firms will notice collection problems. The reality is that these problems surfaced earlier, but nothing was done to address them.
If the work by your company has been satisfactorily performed, the client should pay within 30 days. If payment is not received by that point, it is the first sign of a collection problem. Make sure clients with a balance of more than 60 days old are routinely contacted to remind them payment is expected.
3. Start with the old and end with the new. Work on the oldest balance sheet first and move forward. Resolve the old issues — which are the hardest to address — before tackling the easier cases. Many times, law firms will acknowledge problems that are slowing down or preventing payment on certain accounts without taking the time to re-visit them and ensure collection efforts are succeeding. These accounts do take time and energy, but working on them can result in finding money for the firm.
The strongest members of your collection team should be focused on the older, tougher accounts. In addition, don't let the number of 90-day account receivables grow by neglecting to work on less substantial delinquent balances. It is surprising how significant a portion of the firm's accounts receivable portfolio is comprised of smaller balances.
4. Understand the reasons your clients are not paying. Why aren't they paying? It all comes down to problems with cash flow. However, such problems are often masked — intentionally or not — by other issues, such as poor service, bills that are higher than expected or bills that were never received.
From the start of a relationship, firms and lawyers must understand their clients in order to find the source of problems and resolve them when they do arise. Although aged receivables are part of the financial report, firms need to get a handle on the stories underneath the numbers to understand why clients are not paying.
To help alleviate cash flow issues, law firms should re-evaluate and implement realistic credit assessments of prospective clients. If clients are accepted after a suitable credit analysis, the amount of risk can be reduced by including provisions for retainers, evergreen retainers or personal guarantees when engagement letters are prepared.
5. Measure the results of your firm's efforts. You may be gathering a lot of information about your collections, but determine whether it is the right information. At a minimum, know if an account is actively being pursued and its payment status, who is pursuing the collection efforts and whether or not they are getting results, why clients are not paying, and what needs to be done to get them to pay.
Categorize receivables:
- Are they collectible? If so, when can we expect payment?
- Are they problematic? What are the chances we will get paid?
- Are they simply uncollectible?
Also, help efforts by creating reports that will show when payments can be made and frequently update information on the status of collection efforts and payments. If you have collection software, use it correctly to develop these types of reports.
Please visit our web-site for more information: http://clientci.com
Monday, January 2, 2012
COLLECTION SOFTWARE: ARE WE THERE YET?
Navigating the Often-Bumpy Road to Software That Really Addresses Law Firms’ Collection Needs
More and more law firms have installed collection software to help them deal with their growing portfolio of receivables. And, in far too many instances, they have been frustrated by their experience. There are a number of reasons for this:
Software alone is not the answer. Many firms have believed, erroneously, that by installing collection software, their receivable problems will be solved. They lose sight of the fact that the software is just a tool, though a potentially powerful one. More important, however, is the strategy the firm adopts in using the software, and the people who are using it. Software is an aid to – not a substitute for – the personal contact needed to get bills in line for payment.
Software tends to work better when it’s turned on. A surprising number of law firms install the software but never get around to using it. Their intentions are good, but the firm culture becomes an obstacle. Many are unsure how to use collection software as a strategic business tool to help increase revenue while holding the individual attorneys accountable for collecting their aging receivables.
Firms do not fully understand what software can do for them. They are often victims of their own cultures, approaching their collection efforts with a plan that does not provide results. They are unsure what information about their receivables they need to gather and how to analyze that information.
Many firms don’t know how to determine if collection efforts are successful. They make the mistake of believing that since they have someone using collection software, they are making efficient collections. Although the day-to-day use of the software is important, even more vital is using it to provide firm management with a clear picture of the progress of collection efforts.
Software does not make up for poor decision-making. However effective a firm’s software, it can never help a firm succeed if the attorneys take on clients who will not or cannot pay. In such circumstances, the value of the software is in helping the firm identify who these clients are – and what their unpaid balances are – sooner rather than later, so as to minimize these mistakes in the future.
Firms have not realized the full potential of software. It should not be regarded as a tool solely for calendaring and note taking. That’s just scratching the surface. Firm leadership can and should use it to predict cash flow, determine if and when clients will pay, and identify which collection methodologies will work best for which clients. They should utilize it to “get their arms around” their receivables, generating specific reports that are meaningful to the firm.
Effective collection software can (and should) offer your firm all the following capabilities. What is your software offering you?
1. Classification Codes – Does it allow the firm to classify receivables by the following criteria?
• The prospects for payment: expected to be paid, possible write-off or problem account
• Reasons for non-payment: cashflow problems, bankruptcy, administrative issues or dissatisfaction with service
• Who is handling the collection: a member of the accounting department, the attorney himself or an outside consultant
Once classification codes are assigned, management can use the codes to identify which accounts it wants a collector to work at a given time. For example, it might direct the collector to focus on all accounts over 90 days with a balance over $500 that are classified as problem accounts.
2. Accounts Receivable Notes – Does it maintain current and historical collection notes so the firm can review a collector’s work? Will it allow the collector to set different parameters for viewing the receivables on the screen? For example, by age, by department, by attorney, by balance or by classification.
3. Task Schedule – Does it allow you to maintain and follow a schedule for timely follow-up with clients?
4. Payment Promises – Does it prompt the collector to put payment promises on a tasks list so he or she can make sure that payments arrive on the promised date?
5. Tasks List – Does it show all follow-up tasks and payment promises on a task screen? Does it have the flexibility to sort receivables by any criteria, including due date, balance and classification?
6. Aging – Does it permit firm management to easily set aging buckets to fit the firm’s particular collection needs? Will it allow the collector to set different parameters for viewing the receivables on the screen? For example, by department, by attorney, by balance or by classification.
7. Accounts Look-Up – Does it allow the collector to call up a client by any number of pieces of information, including client’s name, contact name,invoice number, check number, phone number.
8. On-screen Information – Does the software put the relevant invoice and payment information on screen?
9. Contact Information – Does it let you maintain, and easily update, all contact information, including phone and fax numbers and e-mail addresses?
10. Reports – Does the software allow you to create a variety of reports, including accounts receivable reports and query reports?
11. E-Mail Capabilities – Does it allow you to e-mail screens on accounts to appropriate attorneys or to firm management?
12. Exportability – Can you export collection screens or reports to a Word or Excel document?
Does your software offer these features? We suggest that if it does not, you may want to consider shopping around for software that does.
Of course, having software that offers all these capabilities is only half of the equation. It is also essential that your firm have a sound collection strategy, including workable policies and procedures, and a means for effective one-onone contact with clients to ensure bills will be paid.
There is no getting around the fact that collections is “roll-up-yoursleeves” kind of work. Good software will make it easier.
Choosing the right software to address your firm’s particular needs is crucial. Consider seeking help in making this selection.
Do you have a question regarding your receivables? At Client Connection, we know how to manage receivables, and we would be happy to share a little of our knowledge with you.
Client Connection is the leading consulting company offering total accounts receivable management solutions to law firms. We assist law firms of all sizes throughout the United States by furnishing accounts receivable management services, developing practical receivable programs, training law firm staff in effective collection methods, placement of professional collections managers and providing cost-efficient collection software.
Visit our web-site at http://www.clientci.com/
More and more law firms have installed collection software to help them deal with their growing portfolio of receivables. And, in far too many instances, they have been frustrated by their experience. There are a number of reasons for this:
Software alone is not the answer. Many firms have believed, erroneously, that by installing collection software, their receivable problems will be solved. They lose sight of the fact that the software is just a tool, though a potentially powerful one. More important, however, is the strategy the firm adopts in using the software, and the people who are using it. Software is an aid to – not a substitute for – the personal contact needed to get bills in line for payment.
Software tends to work better when it’s turned on. A surprising number of law firms install the software but never get around to using it. Their intentions are good, but the firm culture becomes an obstacle. Many are unsure how to use collection software as a strategic business tool to help increase revenue while holding the individual attorneys accountable for collecting their aging receivables.
Firms do not fully understand what software can do for them. They are often victims of their own cultures, approaching their collection efforts with a plan that does not provide results. They are unsure what information about their receivables they need to gather and how to analyze that information.
Many firms don’t know how to determine if collection efforts are successful. They make the mistake of believing that since they have someone using collection software, they are making efficient collections. Although the day-to-day use of the software is important, even more vital is using it to provide firm management with a clear picture of the progress of collection efforts.
Software does not make up for poor decision-making. However effective a firm’s software, it can never help a firm succeed if the attorneys take on clients who will not or cannot pay. In such circumstances, the value of the software is in helping the firm identify who these clients are – and what their unpaid balances are – sooner rather than later, so as to minimize these mistakes in the future.
Firms have not realized the full potential of software. It should not be regarded as a tool solely for calendaring and note taking. That’s just scratching the surface. Firm leadership can and should use it to predict cash flow, determine if and when clients will pay, and identify which collection methodologies will work best for which clients. They should utilize it to “get their arms around” their receivables, generating specific reports that are meaningful to the firm.
Effective collection software can (and should) offer your firm all the following capabilities. What is your software offering you?
1. Classification Codes – Does it allow the firm to classify receivables by the following criteria?
• The prospects for payment: expected to be paid, possible write-off or problem account
• Reasons for non-payment: cashflow problems, bankruptcy, administrative issues or dissatisfaction with service
• Who is handling the collection: a member of the accounting department, the attorney himself or an outside consultant
Once classification codes are assigned, management can use the codes to identify which accounts it wants a collector to work at a given time. For example, it might direct the collector to focus on all accounts over 90 days with a balance over $500 that are classified as problem accounts.
2. Accounts Receivable Notes – Does it maintain current and historical collection notes so the firm can review a collector’s work? Will it allow the collector to set different parameters for viewing the receivables on the screen? For example, by age, by department, by attorney, by balance or by classification.
3. Task Schedule – Does it allow you to maintain and follow a schedule for timely follow-up with clients?
4. Payment Promises – Does it prompt the collector to put payment promises on a tasks list so he or she can make sure that payments arrive on the promised date?
5. Tasks List – Does it show all follow-up tasks and payment promises on a task screen? Does it have the flexibility to sort receivables by any criteria, including due date, balance and classification?
6. Aging – Does it permit firm management to easily set aging buckets to fit the firm’s particular collection needs? Will it allow the collector to set different parameters for viewing the receivables on the screen? For example, by department, by attorney, by balance or by classification.
7. Accounts Look-Up – Does it allow the collector to call up a client by any number of pieces of information, including client’s name, contact name,invoice number, check number, phone number.
8. On-screen Information – Does the software put the relevant invoice and payment information on screen?
9. Contact Information – Does it let you maintain, and easily update, all contact information, including phone and fax numbers and e-mail addresses?
10. Reports – Does the software allow you to create a variety of reports, including accounts receivable reports and query reports?
11. E-Mail Capabilities – Does it allow you to e-mail screens on accounts to appropriate attorneys or to firm management?
12. Exportability – Can you export collection screens or reports to a Word or Excel document?
Does your software offer these features? We suggest that if it does not, you may want to consider shopping around for software that does.
Of course, having software that offers all these capabilities is only half of the equation. It is also essential that your firm have a sound collection strategy, including workable policies and procedures, and a means for effective one-onone contact with clients to ensure bills will be paid.
There is no getting around the fact that collections is “roll-up-yoursleeves” kind of work. Good software will make it easier.
Choosing the right software to address your firm’s particular needs is crucial. Consider seeking help in making this selection.
Do you have a question regarding your receivables? At Client Connection, we know how to manage receivables, and we would be happy to share a little of our knowledge with you.
Client Connection is the leading consulting company offering total accounts receivable management solutions to law firms. We assist law firms of all sizes throughout the United States by furnishing accounts receivable management services, developing practical receivable programs, training law firm staff in effective collection methods, placement of professional collections managers and providing cost-efficient collection software.
Visit our web-site at http://www.clientci.com/
Thursday, December 1, 2011
Actions Speak Louder Than Words With Accounts Receivable
Law firm management can talk all it wants about policies, procedures and infrastructure, but results are what matter. When all the talk is done, what has your firm done to address difficulties it has with accounts receivable?
It is vital to have systems and techniques in place to help ensure law firms are set up to manage their accounts receivable. This is necessary to achieve one thing and one thing only: results.
Five key actions to focus on:
1. Reach a consensus about what priority collections should take.
Place the right people in the right positions; people who will roll up their sleeves and work as part of a team to achieve success. Give them the power to tell attorneys to address their collections and to use the firm’s resources to help them achieve results. Demanding real accountability is tough, but it’s easier than pursuing payment of aging receivables.
2. Take a hard look at accounts receivable that are more than 90 days old.
When looking at ageing receivables, many firms will see collections problems. They had such problems sooner, but did not do anything about them. If the work has been satisfactorily performed, the client should pay within 30 days. If you are not seeing payment by that point, you have the first sign of a collection problem. Contact clients that start to go over 60 days to let them know that payment is expected.
3. Work backward forward.
Work on the oldest accounts receivable first and move forward. Resolve the old issues – which are the hardest to address – before tackling the easier, newer receivables. Many times, law firms will acknowledge problems that are slowing down or preventing payment on certain accounts without taking the time and action to revisit these accounts to ensure collection efforts are succeeding. The strongest members of your collection team should be focused on the older, tougher accounts. And don’t neglect the lower-level delinquent balances. You would be surprised how significant a portion of the firm’s accounts receivable portfolio is comprised of accounts with smaller balances.
4. Understand why your clients are not paying.
Frequently, it comes down to problems with cash flow. Such problems are often masked by other issues, such as poor service, bills that are higher than expected, bills that were never received, etc. From the start of the relationship, firms and their lawyers must understand clients so when problems do arise, they can get to the source of the problems and resolve them. Although aged receivables are part of the financial report, it is the stories underneath those numbers that firms need to get a handle on, so they understand why clients are not paying.
5. Measure the results of the efforts your firm is making.
You may be gathering a lot of information about your collections, but determine whether you are getting the right information. At a minimum, you need to know if an account is actively being pursued and what is the payment status, who is pursuing the collection efforts and whether they are getting results, why clients are not paying and what needs to be done to get them to pay. Categorize receivables: (1) Are they collectible? If so, when can we expect payment? (2) Are they problematic? What are the chances we will get paid?; or (3) Are they simply uncollectible? Create reports that will show when payments can be made and frequently update information on where collection efforts and payment status stand.
Jake Krocheski is the president of Plano, Texas-based Client Connection. He has more than 25 years of experience as a management consultant to the legal profession, helping law firms develop accounts receivable management programs and client intake procedures. http://www.clientci.com/
It is vital to have systems and techniques in place to help ensure law firms are set up to manage their accounts receivable. This is necessary to achieve one thing and one thing only: results.
Five key actions to focus on:
1. Reach a consensus about what priority collections should take.
Place the right people in the right positions; people who will roll up their sleeves and work as part of a team to achieve success. Give them the power to tell attorneys to address their collections and to use the firm’s resources to help them achieve results. Demanding real accountability is tough, but it’s easier than pursuing payment of aging receivables.
2. Take a hard look at accounts receivable that are more than 90 days old.
When looking at ageing receivables, many firms will see collections problems. They had such problems sooner, but did not do anything about them. If the work has been satisfactorily performed, the client should pay within 30 days. If you are not seeing payment by that point, you have the first sign of a collection problem. Contact clients that start to go over 60 days to let them know that payment is expected.
3. Work backward forward.
Work on the oldest accounts receivable first and move forward. Resolve the old issues – which are the hardest to address – before tackling the easier, newer receivables. Many times, law firms will acknowledge problems that are slowing down or preventing payment on certain accounts without taking the time and action to revisit these accounts to ensure collection efforts are succeeding. The strongest members of your collection team should be focused on the older, tougher accounts. And don’t neglect the lower-level delinquent balances. You would be surprised how significant a portion of the firm’s accounts receivable portfolio is comprised of accounts with smaller balances.
4. Understand why your clients are not paying.
Frequently, it comes down to problems with cash flow. Such problems are often masked by other issues, such as poor service, bills that are higher than expected, bills that were never received, etc. From the start of the relationship, firms and their lawyers must understand clients so when problems do arise, they can get to the source of the problems and resolve them. Although aged receivables are part of the financial report, it is the stories underneath those numbers that firms need to get a handle on, so they understand why clients are not paying.
5. Measure the results of the efforts your firm is making.
You may be gathering a lot of information about your collections, but determine whether you are getting the right information. At a minimum, you need to know if an account is actively being pursued and what is the payment status, who is pursuing the collection efforts and whether they are getting results, why clients are not paying and what needs to be done to get them to pay. Categorize receivables: (1) Are they collectible? If so, when can we expect payment? (2) Are they problematic? What are the chances we will get paid?; or (3) Are they simply uncollectible? Create reports that will show when payments can be made and frequently update information on where collection efforts and payment status stand.
Jake Krocheski is the president of Plano, Texas-based Client Connection. He has more than 25 years of experience as a management consultant to the legal profession, helping law firms develop accounts receivable management programs and client intake procedures. http://www.clientci.com/
Tuesday, November 1, 2011
If You Don’t Ask the Right Questions, How Can You Expect to Get the Right Answers?
The fourth quarter is here, and, if you’re like most firms, you are starting to give more serious thought to collecting your accounts receivable. And perhaps, this year, you are beginning to worry a little more than usual.
Now is the right time to do a candid self-assessment to judge your firm’s attitudes about – and approach to – accounts receivable management and your ability to improve your collections. Managing accounts receivable is a continual process, one that requires persistence and vigilance. Those in management who have ultimate responsibility for collections should ask themselves the following five questions:
Are we still giving our attorneys too much individual autonomy in ensuring that their clients pay their bills?
Whether or not you have policies and procedures in place to manage your receivables, are you holding your attorneys accountable for holding their clients accountable? Although many institutional and non-institutional clients are experiencing cash flow issues that are delaying or preventing payment due to the staggering economy, attorneys should consistently keep in touch with clients regarding payment status.
Professional, consistent follow-up is now even more essential to ensure clients understand that their unpaid invoices are being closely monitored and the management of the law firm is kept informed. If attorneys cannot or do not want to make the time to monitor payment status, the firm must be prepared to have the right support in place to help the attorneys manage their accounts receivable. The attorneys play a vital role in assessing the clients’ ability and inclination to pay. They do not necessarily have to play a direct role in getting them to do so. Firms continue to be faced with an enormous dilemma: attorneys who do not choose to take the time to get their bills paid or do not enlist others to assist them.
If an attorney chooses to take personal responsibility for collections, understand what specific actions that attorney will take to ensure the bill is paid. It is just as much the firm’s responsibility to make sure the attorney takes the proper steps as it is that attorney’s responsibility to do so. Tell him or her up front that you are looking for realistic expectations about getting paid, not wishful thinking. Make it plain to your attorneys that the firm needs to get a better handle on aging accounts receivable, and if there is no chance of collecting in a given instance, they need to alert the firm.
Identify attorneys who have particular difficulty collecting their receivables throughout the year. It’s a safe bet that they will have similar problems collecting at year end. Give them the assistance they need to be successful.
Many firms can quickly identify attorneys who have difficulty collecting their accounts receivable, but this year many more attorneys than usual are likely to face such problems. This will add to the number of attorneys the management of the firm must monitor.
Is there still a stigma at our firm concerning collections?
Many attorneys still fear that their clients consider it unprofessional to ask to be paid for their services. As a result, no matter how their firms press them to follow up with their clients for payment, they do whatever they can to wiggle out of that responsibility. The stigma arises partly due to the collective memory of nasty letters and pushy phone calls. The reality, however, is that clients tend to be very receptive to appropriate contact, like respectful phone calls or e-mails.
The longer the attorney does not say anything, the less likely the bill is to be paid – and even less likely is the attorney to say anything. If the client has not paid after a reminder statement or letter, call the client because there may be a reason for the unpaid bill. Perhaps it’s a lost bill or there are questions about the services rendered. Whether they are institutional clients or not, they may be experiencing cash flow problems. It is better to find out now and deal with it than to ignore the issue until year-end. Don’t wait until the bill has aged too long before you realize that there is a problem. There probably was a problem when it was 30 days past due, but it was never addressed.
Does our accounts receivables management program fail to address the real collections issues?
Many firms have created accounts receivable management programs, but we have seen far too many that do a poor job of setting attainable goals and measuring and evaluating the success of their efforts.You may need to take a step or two back and evaluate your objectives and the policies, procedures and personnel you have in place to achieve those objectives. It is critical that the leadership of the firm understand it must first have a proper, working business infrastructure that deals specifically with accounts receivable management before it can measure the effectiveness of the firm’s collection efforts.
Sometimes the collections infrastructure has grown into an inefficient bureaucracy, with committees and attorneys focused on issues that do not lead to actual collections. This can be especially true when administrative staff has been hired or promoted to perform collections, but are not having their performance judged by their actual collection results. Just because someone is a good employee doesn’t necessarily mean they have the experience and know-how to work with clients to get bills paid. Firms need to do a better job making sure they have the right people in place to manage receivables. They need to hire true accounts receivable professionals, make expectations clear to them and give them the support and the tools they need to succeed.
Are we giving too much professional courtesy to clients?
Once again, because attorneys are uncomfortable asking to be paid, they frequently grant far too much leeway to the client in making decisions about paying their legal bills. Some attorneys go so far as to be squeamish about something as mild as a reminder notice. Clients get upset about shoddy work and poor service; they do not get upset when they are asked for payment. Actually, most clients are perfectly willing to pay their bills, although some will take advantage of lawyers who neglect or forget to remind them to pay their bills. The truth is that though attorneys may be uncomfortable with the concept of receivables management – handled either by themselves or by others – clients do understand and accept the notion and are not offended by tactful inquiries about unpaid bills.
Are we relying too much on past history to judge how collections will go this year?
Historically, it has always been helpful to gauge future collections based on past experience. While the past should not be ignored, in these times, it may be less useful as a guide to future behavior. The economic climate is very different; mindsets have changed and so have business practices. Recognize that you are doing business in a different world, and make adjustments accordingly.
Measure monthly revenue projections, but, more importantly, be realistic about whether the firm is underachieving in its collection goals. There has to be a month-by-month game plan, and it is essential that the plan be realistic. Don’t wait until the last quarter or, worse, December. Figure out whether your clients are having difficulty paying your bills now. If they are already struggling, it's unlikely to get better as year-end approaches.
The truth is that while the economy is certainly having an impact on the ability of firms to collect, if you answer “yes” to at least one of the above questions, your firm is already operating with a handicap.
As they say, the first step in addressing a problem is admitting there is a problem. First, recognize what your firm may be doing wrong in managing its receivables. Only then can you determine the steps to take to begin addressing the problems and getting on the path to more effective collections.
Client Connection assists law firms of all sizes throughout the United States by furnishing accounts receivable management services, developing practical receivable programs, training law firm staff in effective collection methods and executive placement of professional collections managers. Visit us online at: http://www.clientci.com/
Now is the right time to do a candid self-assessment to judge your firm’s attitudes about – and approach to – accounts receivable management and your ability to improve your collections. Managing accounts receivable is a continual process, one that requires persistence and vigilance. Those in management who have ultimate responsibility for collections should ask themselves the following five questions:
Are we still giving our attorneys too much individual autonomy in ensuring that their clients pay their bills?
Whether or not you have policies and procedures in place to manage your receivables, are you holding your attorneys accountable for holding their clients accountable? Although many institutional and non-institutional clients are experiencing cash flow issues that are delaying or preventing payment due to the staggering economy, attorneys should consistently keep in touch with clients regarding payment status.
Professional, consistent follow-up is now even more essential to ensure clients understand that their unpaid invoices are being closely monitored and the management of the law firm is kept informed. If attorneys cannot or do not want to make the time to monitor payment status, the firm must be prepared to have the right support in place to help the attorneys manage their accounts receivable. The attorneys play a vital role in assessing the clients’ ability and inclination to pay. They do not necessarily have to play a direct role in getting them to do so. Firms continue to be faced with an enormous dilemma: attorneys who do not choose to take the time to get their bills paid or do not enlist others to assist them.
If an attorney chooses to take personal responsibility for collections, understand what specific actions that attorney will take to ensure the bill is paid. It is just as much the firm’s responsibility to make sure the attorney takes the proper steps as it is that attorney’s responsibility to do so. Tell him or her up front that you are looking for realistic expectations about getting paid, not wishful thinking. Make it plain to your attorneys that the firm needs to get a better handle on aging accounts receivable, and if there is no chance of collecting in a given instance, they need to alert the firm.
Identify attorneys who have particular difficulty collecting their receivables throughout the year. It’s a safe bet that they will have similar problems collecting at year end. Give them the assistance they need to be successful.
Many firms can quickly identify attorneys who have difficulty collecting their accounts receivable, but this year many more attorneys than usual are likely to face such problems. This will add to the number of attorneys the management of the firm must monitor.
Is there still a stigma at our firm concerning collections?
Many attorneys still fear that their clients consider it unprofessional to ask to be paid for their services. As a result, no matter how their firms press them to follow up with their clients for payment, they do whatever they can to wiggle out of that responsibility. The stigma arises partly due to the collective memory of nasty letters and pushy phone calls. The reality, however, is that clients tend to be very receptive to appropriate contact, like respectful phone calls or e-mails.
The longer the attorney does not say anything, the less likely the bill is to be paid – and even less likely is the attorney to say anything. If the client has not paid after a reminder statement or letter, call the client because there may be a reason for the unpaid bill. Perhaps it’s a lost bill or there are questions about the services rendered. Whether they are institutional clients or not, they may be experiencing cash flow problems. It is better to find out now and deal with it than to ignore the issue until year-end. Don’t wait until the bill has aged too long before you realize that there is a problem. There probably was a problem when it was 30 days past due, but it was never addressed.
Does our accounts receivables management program fail to address the real collections issues?
Many firms have created accounts receivable management programs, but we have seen far too many that do a poor job of setting attainable goals and measuring and evaluating the success of their efforts.You may need to take a step or two back and evaluate your objectives and the policies, procedures and personnel you have in place to achieve those objectives. It is critical that the leadership of the firm understand it must first have a proper, working business infrastructure that deals specifically with accounts receivable management before it can measure the effectiveness of the firm’s collection efforts.
Sometimes the collections infrastructure has grown into an inefficient bureaucracy, with committees and attorneys focused on issues that do not lead to actual collections. This can be especially true when administrative staff has been hired or promoted to perform collections, but are not having their performance judged by their actual collection results. Just because someone is a good employee doesn’t necessarily mean they have the experience and know-how to work with clients to get bills paid. Firms need to do a better job making sure they have the right people in place to manage receivables. They need to hire true accounts receivable professionals, make expectations clear to them and give them the support and the tools they need to succeed.
Are we giving too much professional courtesy to clients?
Once again, because attorneys are uncomfortable asking to be paid, they frequently grant far too much leeway to the client in making decisions about paying their legal bills. Some attorneys go so far as to be squeamish about something as mild as a reminder notice. Clients get upset about shoddy work and poor service; they do not get upset when they are asked for payment. Actually, most clients are perfectly willing to pay their bills, although some will take advantage of lawyers who neglect or forget to remind them to pay their bills. The truth is that though attorneys may be uncomfortable with the concept of receivables management – handled either by themselves or by others – clients do understand and accept the notion and are not offended by tactful inquiries about unpaid bills.
Are we relying too much on past history to judge how collections will go this year?
Historically, it has always been helpful to gauge future collections based on past experience. While the past should not be ignored, in these times, it may be less useful as a guide to future behavior. The economic climate is very different; mindsets have changed and so have business practices. Recognize that you are doing business in a different world, and make adjustments accordingly.
Measure monthly revenue projections, but, more importantly, be realistic about whether the firm is underachieving in its collection goals. There has to be a month-by-month game plan, and it is essential that the plan be realistic. Don’t wait until the last quarter or, worse, December. Figure out whether your clients are having difficulty paying your bills now. If they are already struggling, it's unlikely to get better as year-end approaches.
The truth is that while the economy is certainly having an impact on the ability of firms to collect, if you answer “yes” to at least one of the above questions, your firm is already operating with a handicap.
As they say, the first step in addressing a problem is admitting there is a problem. First, recognize what your firm may be doing wrong in managing its receivables. Only then can you determine the steps to take to begin addressing the problems and getting on the path to more effective collections.
Client Connection assists law firms of all sizes throughout the United States by furnishing accounts receivable management services, developing practical receivable programs, training law firm staff in effective collection methods and executive placement of professional collections managers. Visit us online at: http://www.clientci.com/
Tuesday, October 4, 2011
Autumn Is Upon Us. Do You Feel That Chill In The Air?
You may be excused for mistaking that shock of cold for the approach of fall. But don’t get too caught up in images of changing leaves, football and jack o’lanterns. That chill going up your spine right about now may be the traditional autumnal trepidation that comes with the need to ratchet up collection efforts in preparation for that last frantic dash in December.
If your firm is like most, you probably have a lot of question marks concerning end-of-year collections. The economy – and, with it, the fortunes of many firms – continues to be uncertain. So there is no time like the present to make sure that 2011 turns out to be as financially rewarding as possible for your law firm, even though the economy continues to make it a lot tougher for most firms than it was just a few years ago. One way to do that is to keep the flow of new work coming in. Equally important, however, is to make sure that the firm gets paid for the work it does.
Following are 10 steps to take to help ward off that chill and make this a profitable year:
1. Identify attorneys who have difficulty collecting their receivables throughout the year. You know who they are. They are probably the same attorneys who have problems turning in their timesheets and getting their bills done. It’s a safe bet that they will have similar problems collecting at year end. Either take that responsibility away from them – or provide them with the assistance they need to be successful.
2. Generate a list of clients that have historically paid their bills during the last 30 days of the year, and try to get a sense whether these clients are again anticipating paying in full at year end. Don’t wait until the last minute to contact clients – and find out whether they will be paying your bills in full or just some invoices. At the same time, generate a list of new clients with whom you will be experiencing year end for the first time. Since there is no history, make your best determination whether payments from these clients are on track.
3. Get your arms around your receivables by determining what clients make up the largest dollar amounts of A/R. The best way to determine what size dollar accounts make up the majority of receivables over 60 days is to run various balance level reports, from $10,000 to $100,000. Then check the payment history of these clients to find out how quickly they have paid previous bills throughout the year, including year end.
4. Don’t depend too much on historical patterns of bill collections. In the past, you could safely assume that collections would increase as the year progressed. That is no longer necessarily true, especially when an unstable economy is causing many clients to adjust their payment patterns. Now, on a monthly basis, measure monthly revenue projections, and be realistic about whether the firm is underachieving in its collection goals. There has to be a month-by-month game plan, and it is essential that the plan be realistic. Remember, cash flow problems are still the number one reason both non-institutional and institutional clients do not pay their legal bills.
5. Project realistic timeframes for collecting older, more difficult receivables. You should be aware that receivables over 180 days past due have a 50% chance of ever being collected, and the percentage continues to drop as the receivables age. These types of accounts must be pursued much more diligently then just writing a letter. Firms can figure that only so much of these accounts will be collected at year end – determine the status and move on to brighter collection pastures. Some of these older clients have realized that no one has been trying to collect bills throughout the year. Work with the attorney to figure out if these clients need to be pursued and, if so, how.
6. Identify bills to determine their collection status. Categorize receivables as either: (1) collectable, (2) problematic, but potentially collectable, or (3) have no realistic chance of getting collected.
7. Keep bills coming regularly and consistently. Remember that clients, too, are enduring the tougher economic climate. They may be delaying payments as a result of their own cash flow problems. Don’t exacerbate the problem by neglecting to send bills out timely. If the lawyers are too busy – or disorganized – to get their bills out on time, give them whatever assistance they need. Clients will delay payments if bills are not received when they expect them and do not logically provide the information they need to put the bills in line for payment by year end. Also, if they have a particular problem with a bill – they will wait for you to call rather than calling you to discuss it.
8. Look at the right reports – and review them regularly. Use your collection software to its full potential, not merely as a sophisticated follow-up calendar. Your software should help you compare work in process to accounts receivable to recent payments in order to determine a true payment history and what needs to be done.
9. Make sure that the collection committee – or whomever your firm has given responsibility for this work – has clear objectives and direction. For example, they should know that it is their responsibility to speak to delinquent clients directly to find out the status of payment rather than simply reviewing reports and gathering information for the attorneys. Both those with direct responsibility for collections and those overseeing these efforts (perhaps a collections committee) should be in agreement on which clients they are pursuing and the dollar amounts they are working to collect.
10. The person responsible for performing collections should meet one-on-one with the partners to determine the status of their A/R and exactly what they are doing about it. These meetings should provide vital information for the management of the firm to determine the true collection status of the receivables. Remember, partners in charge of managing collections also have a busy practice and require administrative staff that have a solid rapport with the attorneys to gather this information.
Client Connection assists law firms of all sizes throughout the United States by furnishing accounts receivable management services, developing practical receivable programs, training law firm staff in effective collection methods and executive placement of professional collections managers. Call 1-800-236-8232 or visit us online at: http://www.clientci.com/
If your firm is like most, you probably have a lot of question marks concerning end-of-year collections. The economy – and, with it, the fortunes of many firms – continues to be uncertain. So there is no time like the present to make sure that 2011 turns out to be as financially rewarding as possible for your law firm, even though the economy continues to make it a lot tougher for most firms than it was just a few years ago. One way to do that is to keep the flow of new work coming in. Equally important, however, is to make sure that the firm gets paid for the work it does.
Following are 10 steps to take to help ward off that chill and make this a profitable year:
1. Identify attorneys who have difficulty collecting their receivables throughout the year. You know who they are. They are probably the same attorneys who have problems turning in their timesheets and getting their bills done. It’s a safe bet that they will have similar problems collecting at year end. Either take that responsibility away from them – or provide them with the assistance they need to be successful.
2. Generate a list of clients that have historically paid their bills during the last 30 days of the year, and try to get a sense whether these clients are again anticipating paying in full at year end. Don’t wait until the last minute to contact clients – and find out whether they will be paying your bills in full or just some invoices. At the same time, generate a list of new clients with whom you will be experiencing year end for the first time. Since there is no history, make your best determination whether payments from these clients are on track.
3. Get your arms around your receivables by determining what clients make up the largest dollar amounts of A/R. The best way to determine what size dollar accounts make up the majority of receivables over 60 days is to run various balance level reports, from $10,000 to $100,000. Then check the payment history of these clients to find out how quickly they have paid previous bills throughout the year, including year end.
4. Don’t depend too much on historical patterns of bill collections. In the past, you could safely assume that collections would increase as the year progressed. That is no longer necessarily true, especially when an unstable economy is causing many clients to adjust their payment patterns. Now, on a monthly basis, measure monthly revenue projections, and be realistic about whether the firm is underachieving in its collection goals. There has to be a month-by-month game plan, and it is essential that the plan be realistic. Remember, cash flow problems are still the number one reason both non-institutional and institutional clients do not pay their legal bills.
5. Project realistic timeframes for collecting older, more difficult receivables. You should be aware that receivables over 180 days past due have a 50% chance of ever being collected, and the percentage continues to drop as the receivables age. These types of accounts must be pursued much more diligently then just writing a letter. Firms can figure that only so much of these accounts will be collected at year end – determine the status and move on to brighter collection pastures. Some of these older clients have realized that no one has been trying to collect bills throughout the year. Work with the attorney to figure out if these clients need to be pursued and, if so, how.
6. Identify bills to determine their collection status. Categorize receivables as either: (1) collectable, (2) problematic, but potentially collectable, or (3) have no realistic chance of getting collected.
7. Keep bills coming regularly and consistently. Remember that clients, too, are enduring the tougher economic climate. They may be delaying payments as a result of their own cash flow problems. Don’t exacerbate the problem by neglecting to send bills out timely. If the lawyers are too busy – or disorganized – to get their bills out on time, give them whatever assistance they need. Clients will delay payments if bills are not received when they expect them and do not logically provide the information they need to put the bills in line for payment by year end. Also, if they have a particular problem with a bill – they will wait for you to call rather than calling you to discuss it.
8. Look at the right reports – and review them regularly. Use your collection software to its full potential, not merely as a sophisticated follow-up calendar. Your software should help you compare work in process to accounts receivable to recent payments in order to determine a true payment history and what needs to be done.
9. Make sure that the collection committee – or whomever your firm has given responsibility for this work – has clear objectives and direction. For example, they should know that it is their responsibility to speak to delinquent clients directly to find out the status of payment rather than simply reviewing reports and gathering information for the attorneys. Both those with direct responsibility for collections and those overseeing these efforts (perhaps a collections committee) should be in agreement on which clients they are pursuing and the dollar amounts they are working to collect.
10. The person responsible for performing collections should meet one-on-one with the partners to determine the status of their A/R and exactly what they are doing about it. These meetings should provide vital information for the management of the firm to determine the true collection status of the receivables. Remember, partners in charge of managing collections also have a busy practice and require administrative staff that have a solid rapport with the attorneys to gather this information.
Client Connection assists law firms of all sizes throughout the United States by furnishing accounts receivable management services, developing practical receivable programs, training law firm staff in effective collection methods and executive placement of professional collections managers. Call 1-800-236-8232 or visit us online at: http://www.clientci.com/
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