A Call to Duty: A/R Management Committees Must Be Willing and Able

If ever there was a committee that could offer the firm real value in the form of increased revenues, it is the one that deals with receivables and collections. Law firms should know that collections for legal services do not follow clear-cut payment rules. They require a process that must be followed diligently. 

Clients are changing the way they evaluate their legal bills; many no longer simply approve bills and send payments. Therefore, an effective A/R management committee should  play a real leadership role and be given legitimate clout to make necessary changes as it sees fit in order to improve collection results. This includes implementing best practices for law firm A/R management, such as the following:  Its meeting agenda should focus on reviewing accounts and discussing collection efforts to determine if progress is being made.

• The committee must meet monthly, have a clear agenda for its meetings and be prepared to take as long as necessary at the meeting to perform its duties.
• The right people must be on the committee – people who will devote the necessary time and perform the requisite follow-through when working with the various attorneys.
• It must have reports that detail the status of collection efforts and be able to monitor the collection progress (i.e., ensure the “ball is moving forward”).
• The committee must take a 'roll up your sleeves' approach and spend time reviewing collection efforts for certain accounts at certain balance levels.
• If the firm has collection policies in place, the committee should help ensure these policies are being implemented. If no policies are in place, the committee should make recommendations to help ensure collection efforts are consistent and timely.

If your firm is too small for a committee, ensure that firm leadership understands its role in collections oversight and the need to stay proactive in working and monitoring the collection efforts of both attorneys and administrative personnel. Learn more at our web-site: http://www.clientci.com/

Don’t Underestimate the Need for a Strong Law Firm Accounts Receivable Management Program in 2013

Is your firm facing the never-ending challenge of a backlog of ageing accounts receivable? Can that backlog be reduced and managed to prevent this problem from continuously recurring? The answer is yes. But it is equally important for your firm to understand why this continues to happen and what it must do to efficiently manage and collect receivables over the course of the year to help enhance revenue growth.

Just as firms are finding that they need to change how they deliver their services, communicate their strengths to their clients and position themselves in the legal market, they also need to change the way they manage receivables in today’s evolving legal environment. Managing receivables needs to be about taking a proactive approach to collections, but many firms have not embraced the strategies necessary to ensure they get paid timely – or at all – for their services. Firms must see managing receivables as a true part of their revenue enhancement growth and ensure that their collection efforts are actually working.

Start actually managing your receivables rather than simply expecting payments to be made. Law firms are accustomed to looking at receivables information only on a superficial level, instead of spending time looking beneath and beyond the numbers to determine when and if payment can be made. Now is a good time to take a new approach.

Perform a self-evaluation to figure out what you are doing right – and what you could be doing better. Do a thorough self-assessment of your A/R management practices and procedures. Take stock of what you are doing – and why – and evaluate what is and is not working.

Many firms that have prided themselves on having the right infrastructure in place discover that what they have is flawed; some discover they really don’t have much of an infrastructure at all. Look at everything, including how your firm historically has managed its receivables, to determine where changes need to be made.

An important aspect of this is assessing whether you have the right people, with the right skills, in place to do the job. This is two groups – the attorneys and the A/R staff. Even firms that have procedures in place will not understand the progress they are making unless there is an evaluation system so they can review the progress of these two groups. Also, determine if actual payments are being made from their efforts, including payments from the old, difficult accounts that you have allowed to age too long. Understand that everyone managing receivables must be held to high standards of accountability to ensure progress is being made.

Understand why clients are not paying their bills in a timely way. Clients have changed their views and expectations of legal services. They are also changing the way they evaluate their legal bills, and many are no longer simply approving bills and sending payments. There has been a growing tendency toward ageing receivables in the legal profession because of the various transactions and relationships that do not lend themselves to strict payment terms. However, firms must now also address all the reasons why clients are not paying that underlie the A/R numbers, and continually work with clients to get their bills paid.

Why aren’t clients 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, even bills that were never received. From the start of the relationship, firms and their lawyers must understand their clients so that, 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 all the stories underneath those numbers that firms need to get a handle on, so they understand why clients are not paying.

Make sure you are looking at the right information. Most firms understand the payment pattern of clients and expect certain delays, which they can accept. But too often they let these exceptions magnify to begin a growth trend of ageing A/R. Law firms tend to lose sight of the numerous reasons clients have for not paying timely. This is often coupled with a reliance on sophisticated A/R management software, but a failure to build the right reports, ones that measure progress and evaluate the efforts being performed by the lawyers and staff. Remember – software is a good tool to have, but it won’t collect your receivables and should not be viewed as the solution to your collection problems.

Most firms have gotten used to looking at an abundance of financial information and ageing reports to evaluate their progress in managing receivables. Although some of this information is good, many reports do not show when payment can be expected. At minimum, you need to know if an account is actively being pursued, what the payment status is, 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 to determine who is handling the collection efforts, when can you expect payment, whether it is problematic, how good the chances are that you will get paid and whether particular receivables are simply not collectible.

Don’t let receivables age too long. Although many clients are taking longer to pay their legal bills, ageing receivables are a moving target, one that must be monitored and managed closely to prevent ageing from going too far. So often firms see receivables build up over 90 days and decide that they have a collection problem. More often than not, the truth is they had a problem much sooner but never addressed it. The problem of receivables not being managed adequately is magnified because this applies to many accounts, not just a handful. Ensure that clients are contacted early in the ageing process, and that follow-up is consistent and professional. This keeps open the channels of communication and will help your firm determine early if there is going to be a problem getting a bill paid.

Don’t underestimate the payment power of small balances. All balances are fair game to be pursued. In the past, many firms have had a tendency to focus collection efforts on larger balanced accounts. However, the beauty of pursuing small balances is that there are many to pursue and often clients will have the cash flow to pay off those lower amounts without feeling they are straining their budget. Depending on the size of your firm and the nature of its practice, small balances can range accordingly.

Institute a workable program to manage accounts receivable now – long before year-end approaches and the pressure starts growing to show that progress is being made. Accounts receivable management should be a large part of your firm’s revenue enhancement plans, and the firm’s leaders must be proactive in evaluating current efforts and making necessary changes. Stop managing your accounts receivable as you have in the past and move forward to implementing solutions that are required in today’s legal profession.

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

The Ides of March Receivables Are Upon Us

Spring is around the corner and now is a good time to address those older accounts that have been hanging around since last year going nowhere.  

There are many reasons why ageing receivables continue to occur that firms need to address. Behind most receivables over 90 days past due is a story about why the account has not paid – including cash flow problems, complicated relationships that have stagnated and many more.  Make the time early in the year to help take some of the pressure off collections efforts for the rest of the year. It is never too early to help ensure your firm’s financial success!

Here are a few tips for addressing your receivables early in the year, so that you see better results sooner rather than later:

Urge firm leadership to be decisive and step in to take action – Management must work through receivable issues and not just accept attorney statements like: “I’m working on it” or “I’m in contact with my client about this.” It’s time to change these old habits. You need to make it clear about the goal of the firm to collect its receivables timely, as well as the firm’s expectations of its attorneys. Although there needs to be a fair amount of latitude with certain client relationships, firms must be careful not to give an inch and see it turned into a mile.

Give the leadership in your firm something to work with – Whether it is a senior lawyer who oversees all A/R efforts or a committee, provide them with useful information about collections efforts, including who is responsible for specific collections and what progress is being made. Information about A/R must look behind and underneath the numbers to find out the true story of payment probability.

Project realistic timeframes for collecting receivables – If it appears that a given receivable will not be collected by the deadline, let management know. Most importantly, let the attorney know that you are letting management know. Throughout the year, firms should be tracking payments, so they know as early as possible if payments are not going to be made, and they can determine why and what can be done.

We all know the old saying: money never sleeps. Now is the time of the year for a wake-up call. Learn more on our web-site at http://www.clientci.com/

The New Year Is No Longer So New.

The New Year Is No Longer So New.  Time to Face Up to the
Accounts Receivable Challenges of 2013

Now that we are well into February, it is time for you and your firm to figure out where you are -- and where you need to be heading in the months remaining this year. Planning seems to be difficult for most firms, especially when it comes to accounts receivable management, but it is vital if you want to increase collections and reduce receivables.

Ask yourselves the following questions: 
• What are our accounts receivable goals for 2013?
• What information do we need to have a firmer grasp of the status of our accounts?
• How do we know if our current collection efforts are effective? Or are we just assuming that, since we have initiatives, they are working?

Now, early in the year, is a good time to assess your efforts, figure out who has which responsibilities and evaluate how well they are doing them. The bottom line question: what steps can we take to reduce the duration of receviables? Learn more on our web-site at http://www.clientci.com/.

Yes, Virginia, There are Older Receivables that Can Be Collected in December

With only a few weeks left in the year, your firm should now be in a position to implement its year-end collection efforts. The newer (and, therefore, easier) receivables are the accounts that we tend to gravitate to in December to ensure those accounts are paid. But firms should not forget about the older, more difficult accounts that have not paid during the course of the year.

Often law firms will acknowledge problems that are slowing down or preventing payment on certain accounts, without taking the time and action to re-visit these accounts to ensure collection efforts are succeeding. The truth is, however, that working on these types of accounts can not only result in found money for the firm, but also will free the firm from carrying these accounts into the next year. Have the stronger, more experienced members of your collection team focus on the older, tougher accounts. Also don't let the number of over-90-day accounts grow by neglecting to work the smaller delinquent balances. You may be surprised how significant a portion of the firm's accounts portfolio is comprised of accounts with smaller balances.

Managing accounts receivable and collection efforts is a step-by-step process, requiring the right processes and the right people in order to see results.

Happy Holidays to everyone from all of us at Client Connection. We wish you a happy and successful 2013, and we look forward to continuing to offer you helpful tips and ideas in our e-mails and newsletters. Learn more on our web-site... http://www.clientci.com

Do You Feel That Chill in the Air?

You may be excused if you confuse that shock of cold for the arrival of Fall.  That chill going up your spine right about now may be the annual autumnal trepidation that comes with the need to ratchet up collection efforts in preparation for that last frantic dash to December.  If your firm is like most, you probably have a lot of question marks concerning end-of-year collections.  There is no time like the present to make sure that 2012 turns out to be as financially rewarding as possible.  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 has a solid rapport with the attorneys to gather this information.
Learn more on our web-site - http://www.clientci.com/

Value -- and Evaluate -- Your Non-Lawyer Rainmakers

With law firms heading toward November and the year-end crunch, now is a good  time to evaluate whether the firm  has the right administrative staff, and determine whether they are doing the right work the right way. Although firms may think they should wait until after year-end, now is the best time to start building the evaluation to help the bottom line.

• Are these staff members reporting weekly  on the accounts for which they are responsible, including the age of the accounts, how much they have collected and what they have in line for payment? 
• Do you know how much they are working on actual collections, as compared to other duties less important to their primary  purpose  (i.e., generating reports, sending out reminder statements,
providing information that the lawyers request)? 
• Are they knowledgeable enough to provide the right reports and management information to the firm that will explain the progress of collection efforts?

Staff much be held to a high level of accountability, but for different reasons than the attorneys. If the firm chooses to have staff contacting clients directly, the staff must not have too many other responsibilities that keep them from dedicating themselves to this mission. Beware of staff that prefers doing clerical work to making telephone calls to clients.

Your collection team member must have  a strong understanding of different kinds of transactions and different  practices, and what each requires. They must know – and have access to – the right resources for getting bills paid.  They must be expected to  handle collections on a day-to-day basis. Equally important, they must be evaluated to insure that they are providing concrete results. 
Recognize collection managers as the “rainmakers” they can be.  Although they are  making rain in a different way than the attorneys, the value they can add to the bottom line can be equally great.