Fee collection is the lifeblood of most law practices. In my practice, where I work with small business owners, I make it a priority to collect fees—whether small or large, consultation or full retainer—on a daily basis. A close look at the calendar reveals that we have only 20 business days per month to generate new business and collect receivables; and, since most invoices are paid during normal business hours, that means we have just 40 hours a week to collect fees. Those 40 hours, compounded by the volume of emails and phone calls generated in the practice of law, leave very little time to focus on collections. When you quantify the impact of “zero collection days,” the numbers can be significant. For instance, say you collect $20,000 in gross revenue on average per month or $1,000 per business day. If you have 1 day per week without any collection activity, the financial impact is $4,000. Of course, that amount might be higher or lower depending on services and fees, but the point of the illustration is to demonstrate the importance of timely collection: the calendar day will never come back, and when a client misses a scheduled payment or you are unable to generate new business, that business day will never return.
Every single day our practices are open for business, we incur costs, and it is imperative that my practice adopts daily fee collection to maintain positive cash flow. No magic wand can guarantee a perfect track record of on-time daily collections, but here are a few strategies and policies I have implemented to collect fees on a daily basis.
1. Focus on new business development
Whether we like it or not, as lawyers we are selling legal services. To maintain a constant flow of new clients, we have to maintain a healthy pipeline of new business activity. On a weekly basis, I post my availability for new client consultations so my assistant can schedule appointments without having to check with me beforehand. It is important to make every effort to fill the calendar with new client interviews. For instance, if you have 10 available time slots per week for new client consultations, imagine the revenue you would generate if you met with 40 potential new clients per month!
2. Offer options in payment methods
When a client is ready to submit a payment, make the process easy. Let’s face it: most clients do not like paying for legal services, and when they do, it’s because they have to. In my practice, I use PayPal, RightSignature, and clients can pay via wire transfers or ACH payments. The more options available to the client, the more likely the payment will be made on time. As an added bonus, you don’t have to rely on the check being delivered by mail.
3. Enforce adherence to payment policies
It is important for clients to understand that payment dates are not suggestions and that payment is expected on the due date; otherwise, you have the right to discontinue service. When clients begin to miss payments, a cumulative negative effect occurs. In my experience, missed payments usually indicate that the client lacks necessary funds, is dissatisfied with the service, or is unhappy with the direction of their case. It is important to address these issues when they arise and resolve them as soon as possible. Open communication with the client about payment expectations can prevent headaches and conflicts in the future.
By implementing these strategies, you can keep tight control of your receivables while maintaining a consistent practice of daily revenue collection.