Don't Send Your Clients the Wrong Message by Not Having an Effective A/R Management Program in Place

Put a little more harshly, the reason why law firms need a strong accounts receivable management program early in the ageing proess is to prevent a domino effect of self-inflicted pain, which firms so often put themselves through by letting receivables age without having effective, results-oriented procedures in place to collect receivables promptly. Here's why:

• When law firms send out their regular monthly bills, and do not follow up promptly when clients don't pay after 30 days, the message they are sending to their clients is: "Pay when you can. Our bill is not a priority. We don't need the money right away."
• Next, with poor one-on-one follow-up with clients early on, firms lose the opportunity to determine, as soon as possible, whether or not a client can or will pay -- giving the client confidence that they are the ones who control when and if they will pay.
• Lastly, firms give their attorneys too much autonomy in collecting their bills. This leads to the question of whether your firm has a collection and accounts receivable management problem -- or a lawyer problem -- where your professionals are not taking responsibility for collecting their accounts.

Yes, there are certain clients and types of transactions that do not or cannot follow prompt payment guidelines. However, these are the exception and not the rule. Law firms need to understand that these exceptions gain traction and soon become problem paying accounts as they age. On top of that, firms gain a false sense of security that they have a pot of revenue that just needs to be paid, when what they really have is an empty trove of promises that continue not to be paid (if they ever will be).

We invite you to learn more on our web-site at http://www.clientci.com/

That's Not My Job: How Law Firms Fail to Take Responsibility for Accounts Receivable Management

When does a firm decide it needs to be more realistic about whether it is underachieving in collecting older receivables over 90 days (and whose job is it to make this happen?)? At the beginning of the year? Maybe, because with the start of the new year, firms have the time to make corrections on the previous year's collection mistakes and have time to implement a new plan. However, it's tough to get people moving in that direction after an exhausting year-end push. 

At the end of the year? Maybe, but it is going to take time to dig through these accounts and determine when and if they can be collected.

Which leaves us where we are today -- in the middle of the year, and logically, a good time to get started.  BUT mid-year is not a good time because...

Are you getting the picture? No time is ideal for handling this job. And, adding fuel to the fire is that at most law firms, everyone shares the responsibility for A/R management. Which, of course, means that no one ultimately has complete responsibility.

Individual autonomy can be a great asset when tackling problems that need fixing. But autonomy can also be a disadvantage when it doesn't help grow revenue.

Over the course of the past 5 to 10 years, law firms have strategically made large investments on the front end, attracting and maintaining strong clients only to lose profits on the back end by leaving revenue on the table, in the form of unpaid receivables from clients that require hands-on attention.

So what are you to do? You need to start somewhere, take an aggressive approach to getting information to firm leadership and keep it in front of them 12 months of the year.

Take concrete monthly steps to ensure that receivables over 90 days are in line for payment. Review whether accounts are actively being pursued and, if not, why; what the payment status is; who is pursuing collection efforts and what success they are having; why clients are not paying; and what steps are being taken to get them to pay.

Yes.  This takes time, tenacity and organizational skills.  So, if it's really not your job, figure out whose job it is and make sure they do it right. Time is of the essence: six months left in 2016 and the clock keeps ticking. Learn more on our web-site at: http://www.clientci.com/

Talk to you next month!

In One Ear and Out the Other: When Managing Receivables, Sometimes You Hear Only What You Want to Hear

The well-known management consultant, Peter Drucker, once said: "The most important thing in communication is hearing what isn't said."

Many law firms are missing the message as it relates to managing and collecting their receivables timely. Such firms still rely -- very much to their detriment -- on a culture of collegiality and camaraderie among the attorneys to set the tone for meeting collection goals. Firms struggle with how they communicate to their attorneys what is required of them. At the same time, attorneys have a knack for hearing only what they want to hear on how they should pursue clients for payment. On top of this, there are other issues that hamper firms' efforts to get paid.  Different practices may experience different difficulties.  For example, family law clients may be prone to cash flow problems, corporate start-ups may not have cash reserves and e-billing clients are selective about what they pay.

So here are three things to keep in mind to help improve communication on collections:


• Firms that talk the talk but don't walk the walk will have weaker collection results.  Because many firms believe that open dialogue between management and the attorneys will ultimately result in effective collection efforts, they do not enforce guidelines to help achieve results.  Individual attorney autonomy will win in the end -- and collections will lose -- if all the firm does is talk about, rather than act on, the message.


• Firms need to understand that it will take time to successfully implement policies and procedures before they actually spend time creating and revising collection rules. Save yourself some time by putting the cart before the horse. Too often policies are not effective because leadership of the firm gives attorneys too much professional courtesy, allowing them to make exceptions to the rules.  It's one thing to commit procedures to paper, but it's another to ensure attorneys are following the new rules.


• Don't think that an increase in revenue or meeting budget is an indication that collection efforts are working. Take a hard look at receivables you are not collecting and how you are dealing with issues that are preventing timely payment, particularly for those receivables of more than 90 days. Such receivables are more of a challenge to collect and take more time and are often left to the side.

Find out more about Client Connection on our web-site at: http://www.clientci.com
Talk to you next month!

Confronting Common Mistakes in Managing A/R: It's Time to Face Up to Facts

All talk, no action. That would be a good description of the way some firms choose to address (or, more accurately, NOT address) their accounts receivable issues. There are various problems and stories behind A/R numbers that can delay payment, and there may not be anything that can be done about them. But do not assume that is typically the case.
Frequently, firms are not doing a good job at collecting their A/R, but they cannot admit it, or they are unsure of how to move forward or where the problems lie. Or they believe -- in error -- that they are doing a good job and the money will just begin rolling in. Take time to recognize some common misconceptions and the reality behind them:

• Most attorneys collect their bills timely and efficiently -- Actually, attorneys are most concerned about servicing their clients and are not giving a lot of thought to when they are going to get paid. Moreover, they are not held accountable for not collecting receivables and they are given too much autonomy.
• Clients understand payment obligations -- Cilents are smart. Because they realize that lawyers and law firms are poor A/R managers, it is they, rather than the lawyers, who dictate when -- and, sometimes, if -- they will pay. Be as smart as your clients and factor that into your thinking.
• Collection problems begin when receivables age past 90 days -- Yes, many clients have their own policy dictating when they pay their bills. But if you have not been paid within 30 days, you've gotten the first sign that you may have a collections problem.
• Clients will call if they have a problem with your bills -- Some clients will, in fact, be quick to call if they perceive a problem. Most, however, will not because they are uncomfortable talking about money, they are confused about the bill and services, they are unprepared for the amount they owe or find themselves unable to pay.
• Administrative staff is in place to help manage and collect our A/R -- Do they have other accounting duties and/or are they spending their A/R time mailing reminder statements, generating reports or attending to attorneys' requests? They must have the expertise, desire and time to do the job. And their work must be measured by how many contacts they make daily and how many dollars they are collecting, especially the older accounts.

Understanding and addressing some basic misconceptions won't solve all your ageing A/R problems, but it will help your firm move forward in the right direction. Learn more on our web-site at http://www.clientci.com/

AR Management - Start 2016 Strong

The business environment has evolved. Mindsets have changed, as have business practices. Because law firms are doing business in a different world, it also requires that they routinely communicate with their clients about unpaid bills to ensure timely payment or resolve problem issues. Although some clients have set rules of when payments will be made, firms must institute regular, steady, professional follow-up of unpaid bills to secure dates of when payment can be expected to help guide future follow-up. By showing clients that the firm is regularly contacting them and monitoring their payment status, they will learn that you are well-aware of their bills and that you expect payment.

At this time of year, frequent questions we hear include:

How do we make our collection efforts a priority throughout the year instead of waiting until the last couple of months?

Throughout the year, stop tolerating “good clients” who don’t pay their bills. Although waiting until year-end may work for some institutional clients, many clients require effort throughout the year. Be realistic about whether the firm is underachieving in its collections goals and has developed bad collection habits.

How should we evaluate administrative staff dedicated to managing and collecting our A/R?

Do not evaluate your staff on how well they keep the attorneys happy by getting them copies of bills and reports; anybody can do such administrative work. Instead, determine:

• What age group of receivables are they working?
• Are they successful with good-paying clients that just need reminding, or are they making collecting older, difficult accounts the focus of their efforts?
• How many direct contacts are they making daily with clients?
• How many accounts are they handling?

And, most important:

• How many actual dollars are they collecting (especially the older, difficult accounts that continue to age)?

How can we overcome the backlog of our older, difficult A/R?

There must be dedicated, consistent efforts, with status reports going to the leadership of the firm to ensure progress is being made. Typically, firms focus their efforts on those clients that pay timely and avoid working with older accounts because they take time and are often not pleasant to deal with. Consistent follow-up efforts are the key to making progress with these types of accounts. Law firms are making a big mistake if they think these types of receivables will be paid without working closely with clients and letting clients know their account is being monitored.

We invite you to learn more on our web-site at http://www.clientci.com/

Law Firms May Face Worse Collections Crunch This Year

Sure, you have heard that warning from us before.

But now a recent article in The American Lawyer predicts that 2015 may prove to be a tougher year for collections than 2014 was. The article cites a report by Citi Private Bank's Law Firm Group, showing that firms took longer to convert entries on their timesheets into cash in the first three quarters of 2015, compared with 2014. The report says that revenue growth for law firms has also slowed this year, suggesting that there could be an especially large collections push at the end of this year. Gretta Rusanow, who heads advisory services at Citi's Law Firm Group, says that realization rates at law firms dropped during the years after the 2008 Great Recession, and they have not yet fully rebounded. Pre-2008, realization rates were around 94%; now the industry average is closer to 86%.

So what can you do to see that the firm is taking every possible step to ensure December ends on a high note?

• Start the month off by meeting with attorneys to determine what help they need getting their accounts collected. Don't just drop in -- schedule a meeting in advance to go over their A/R and find out how you can give them some hands-on help.
• Get payment commitments from clients who are expected to pay by year-end and the exact date when payments can be expected. This information should drive your follow-up collection effort. This is very important!
• Provide the attorneys a checklist of items that will help ensure payments are made, such as: verifying clients have copies of all outstanding invoices, determining if clients' offices will be closed the last week of December (to make sure payments have been processed before they close), providing the attorneys with routing instructions if payment is to be sent by wire, or an overnight express mail account number for quick delivery, etc.
• Get out of your comfort zone and regularly walk the halls and check in with the attorneys during December. If your firm is large or has outer offices, get others to walk the halls, too.

I know you are busy, but take ownership of what needs to get done. Get more familiar with us on our web-site at: http://www.clientci.com/
Happy Holidays!  I look forward to talking to you next year!

Recognizing When Ageing and Old A/R Have Worn Out Their Welcome

Have you had houseguests who didn't ever seem to want to leave? Once they finally vacate your premises, you swear that you will never have them back. They are something like ageing accounts receivable: if you don't watch out, they start to become a permanent fixture, with no intention of going away.

When receivables get too old, the typical response in law firms -- especially at year-end -- is to ignore them rather than take action to collect them. Sometimes firms with sizable numbers of old receivables have a false sense of well-being, believing that they can expect a lot of potential revenue. Firms wait and wait and wait to pursue these older, difficult accounts rather than facing up to problem A/R and making the most of what they can. Remember -- once receivables hit 120 days past due, they have a 50% chance of being collected -- and the likelihood of collection drops off dramatically after that. 

Consider these 4 steps January through December:

• Honestly evaluate the age of the balances of the receivables and the stories that go with them, and decide on your plan of action. Is the receivable over 120 days or is it really over 360? Acknowledging and understanding the problems and determining how collectable the receivables are will help determine if the firm has the resources and time to pursue them.
• Decide whether it is productive to focus on all the old receivables or to concentrate on those over a certain dollar amount. Be realistic and establish a cut-off, depending on how high the majority of the balance levels are for the receivables.
• Tell the attorneys that you are counting on them to be truthful about the likelihood of payment for their receivables, putting aside posturing and wishful thinking. At the same time, be thorough. Understand when the last time was that the balance was discussed with the client. But remember, clients are smart; they are not going to write a check if they are not asked to. You may be surprised to locate found money if you put some effort into it.
• Determine if you have the right people in place to help you move the ball forward. Consider whether you need experts to help deal with the backlog of older receivables and make recommendations for preventing these problems in the future, in line with the firm's management objectives, practice areas and client types.

Learn from your mistakes. Determine why clients did not pay, and start making corrections to help minimize these problems in the future. A successful law practice requires clients that pay their bills. Write-offs won't help. Learn more at our web-site at: http://www.clientci.com/