Law Firm Collections – The 10 Biggest Mistakes In Managing Their Accounts Receivable

The demands of an ever-growing legal profession require law firms to have forward-thinking management strategies to address clients’ needs. Although lawyers’ main priority is – and must be – to deliver quality service, law firms must also build their organizations to support their clients’ evolving demands, by taking steps such as opening international offices, embracing new technologies, and developing new areas of practice.

As a result of this growth, law firms will face high overhead and growing compensation demands from their professionals. Meanwhile, firms will be squeezed from the other side by clients who have high expectations yet, at the same time, scrutinize their bills.

During the course of a year, many firms find it difficult to judge how well their collection efforts are faring and how this could impact their financial pictures. Lawyers have been conditioned to take a relaxed attitude in their collection efforts, largely due to a mindset among attorneys that grants clients the benefit of the doubt and a view among clients that making payments is not a priority. Attorneys also fail to realize that clients will take advantage of their professional relationship. Thus begins a vicious cycle. Lawyers are not vigilant in getting their clients to pay and the clients, as a result, are not quick to pay. The lawyers, then, are reluctant to press their clients. And so on.

The business of buying legal services does not lend itself to such strict purchase and payment rules.

It often involves complicated transactions, equally complex business relationships, and disputed resolutions that require many hours of work at high billing rates, resulting in high bills to clients. Stopping work because a client does not pay is sometimes not an option because of ethical obligations.

The reality is that problems with collections within the legal profession are not a financial management

issue. It’s all about effective practice management, which requires attorneys and law firms to manage

their accounts receivable proactively. However good the firm’s financial staff may be, attorneys are ultimately responsible for the success – or failure – of collection efforts because they who steer the relationships with clients.

When it comes to receivables, law firms fall victim to 10 common mistakes:

1. Attorneys believe that aging receivables are not an indicator that collection problems exist. Actually, if bills have not been paid within 90 days, you have received the first sign that you may have a collection problem – and, if it is not resolved quickly, they could age further and be virtually uncollectible. Only 50 percent of receivables over 120 days will be collected, and the likelihood drops precipitously after that.

Clients reason that if the firm has waited several months to try to collect unpaid bills, they can wait to pay those bills. They assume, and with good reason, that they are in better position to negotiate discounts. The longer a law firm waits to collect unpaid bills, savvy clients realize, the more likely the bills will end up being discounted or written off altogether.

2. Law firms fear they will damage client relationships by asking clients to pay their bills. The fact is that law firms lose clients by doing poor work or by failing to deliver client service, not by asking clients to pay their bills. Efforts to manage receivables will not hurt the relationship, as long as it is done professionally. Actually, most clients are perfectly willing to pay their bills, although many are dealing with cash flow problems. Also, clients fall victim to “sticker shock,” which happens when a client expects to receive a bill of a certain size and gets a rude awakening when larger invoices arrive.

3. Lawyers avoid addressing problems by depending on the mail to communicate with delinquent clients.

Postal mail is slower and far less effective than using the telephone to address delinquency issues. A conversation allows you to have a dialogue about the bill. Besides, letters and reminder statements are easily misplaced and avoided. If the client continues to receive reminder statements after 60 days and still does not pay, chances are there is an issue preventing payment. Even a brief, non-confrontational telephone conversation should communicate to the client the urgency of your need for payment and allow you to learn quickly if there are any problems or concerns – and what it will take to get the bill paid.

4. Firms believe that accounting and collection software will cure all that ails them. Software can be an excellent tool to manage receivables, but it is only as good as the people using it. Many law

firms have developed policies and procedures to better manage their accounts receivable, but many have not properly utilized their software to help implement new systems. It takes time and specialization to fully grasp how the software can help a firm’s collection efforts. Law firm staffs are often responsible for many day-to-day tasks that leave them little time to explore and make maximum use of the functions that software offers.

5. Firms embrace alternative payment arrangements too quickly. Complex transactions may not lend themselves to a regular payment schedule, and they may cause confusion as to appropriate payment if the deal does not come to fruition. Furthermore, risky deals sometimes fail, leaving a trail of unpaid receivables.

6. Lawyers fail to recognize the point at which they should stop doing work rather than continuing to

amass unpaid bills. Sometimes lawyers become so wrapped up in their work that they do not pay

sufficient attention to bills that are not getting paid. By the time they realize clients are not paying, they have put in plenty of additional time. Someone – and perhaps the attorney is not the right person – should be monitoring payment so work does not far out-pace payment.

7. Accounts receivable management reports are not providing the right information to measure progress. Accounting departments are churning out a lot of reports concerning receivables. But are these reports answering the key questions that will allow the firm to maximize its collections? Why is the client delinquent? Is delinquency habitual for this client? What can the firm do to facilitate payment, both in the short and long terms?

8. Law firms are not analyzing the right reports to manage accounts receivable. Most firms still use

generic financial reports that have too much extraneous information to target problem offenders. Instead, firms need to generate more useful information. For instance, firms need to know if an account is being actively pursued and what the payment status is. They need to know who is pursuing the collection efforts (the attorney or the collection staff) and whether they are getting results. They need to categorize their accounts in order to know the reasons clients are not paying, such as cash flow problems, disputed fees and

services, or third-party responsibility. They need to know where the problem accounts are in order to determine a plan of action to get the bills paid.

9. Law firms are not spending enough time focusing on older, aging receivables. As a result of the growing legal profession, most firms continue to bring in new business while maintaining strong realization and focusing on more current accounts receivable. Firm management may be so busy building the firm for the future that it is ignoring the reality that a lot of receivables are slipping through their hands. They do not fully realize that increasing collections with payments from aging receivables is a fast and effective way to put more money into the partners’ pockets.

10. Law firms are not making collection staff or departments accountable for producing results. Many law firms fail to evaluate their staffs’ performances in collecting aging receivables. The collection staff is, therefore, left with little guidance as to what its collection responsibilities should be – and this does not necessarily include addressing and pursuing older, more difficult accounts. Collection staffs often end up being responsible only for monitoring payment of ongoing clients, sending reminder statements, or providing accounts receivable reports to attorneys. Although these duties are important, they do not address the more fundamental issues concerning collecting for complicated transactions and for client relationships that require more individual attention.

Take the time to honestly evaluate your receivables collection and management efforts. By understanding – and overcoming – some basic mistakes, lawyers can become far more effective in managing their receivables.

Attorneys – Legal Information On Filing A Lawsuit

The constitution was put in place to protect your rights as a human being, occasionally people are treated wrongfully and need to protect their own rights. You do this by filing a lawsuit against those who have wronged you. Filing a lawsuit has many steps to take to accomplish what you want so knowing those steps is the best way to approach your case.

The very first step in filing a lawsuit is filing the original complaint and the issuing of a summons. These two things will outline what it is that has happened to you, who it is you are filing the lawsuit against, and also what you are wishing to receive from the court system as a sort of relief or payment for your grief. After these two things are filed and issued the clerk of courts then informs the person that is being issued the lawsuit of the suit. After informed the defendant is informed of this they will give their answer to the summons which will most likely be an acceptance of the lawsuit or a countersuit where they will claim that the matter was actually caused by the prosecution.

After the defendant has filed their answer with the courts the case is officially opened and the discovery process begins. The discovery process is when both sides will begin to gather evidence to back up their side of the matter. This evidence must be registered and exchanged so that both sides are protected in a lawful way and may not be ambushed by hidden evidence or a secret withheld witness.

At this point something called a pretrial conference may be held with the judge that will be presiding over the lawsuit. The pretrial conference is set in place to minimize delays in the courts and is usually set around a week before the trial actually starts. The pretrial conference is also used so that a settlement may be negotiated if that is what both the prosecution and the defense want.

After all these different steps have happened the trial is able to begin. Witnesses are able to be questioned from both the prosecution and the defense. And the evidence is presented from both sides so that the proper outcome may be decided. The judge will then give the jury instructions on how to deliberate on the matter. The jury will then decide and the case will either reach what is called a verdict or a deadlock.

Do You Know Qualities of the Best Law Firms?

How do you know that your attorney will provide you with confident legal representation? A responsible legal attorney will ensure that he will do the best for you.

Here’s a look at the Qualities of the Best Law Firms:

Effective Leadership

An effective leader is one of the key factors in determining a successful law practice. A good leader will have a commitment to serving its clients, and a vision for the firm’s direction. He will have a desire to find the best people, believing both in the clients and the brand of the firm. Effective leaders have a good understanding of the legal work, an awareness of the employees’ total job satisfaction, and overall satisfaction of its clients. Good leaders always remain cognizant of the factors such as success and growth associated with the firm.

Compassion for its Clients

The best law firms have qualified attorneys that listen to the clients concerns, and show empathy towards their situation. They are also concerned towards their overall goal through representation by the firm. Some attorneys look at their clients and see the opportunity to bill the total fee they will earn for a huge settlement. These attorneys lack the basic ethical consideration and compassion for its clients. The attorneys of the best law firms always act in the best interest of the clients and take good care of them. Some law firms even recruit brand new attorneys and start the legal process afresh with them.

Focus on a Specific Area

It is the quality of the best law firms to focus on a particular area of law. Laws are complex these days and these can change depending on the new case handed down by superior courts. The best law firms are aware of recent changes in their area of specialization. They can change strategy and become the power to their clients by exhibiting their knowledge in a particular area of law. A lawyer who claims to practice in all areas is not the right choice. With a narrow focus, a lawyer can represent your case instantly.

Organizational and Transaction Skills

Any attorney firm who wishes to be successful must possess skilled lawyers. The possession of exceptional organizational and transaction skills will enable the law firm to distinguish themselves from the other firms. These skills may vary with the different fields of law. The technical knowledge of lawyers will enable them to succeed. Moreover, this will assist them in retaining clients and winning cases. The practicing attorneys should have a mastery over the rules of evidence, which is an essential part of litigation. A client wants an attorney with a firm and confident determination. With confidence in their law firm, a client’s trust will increase and finally the potential of repeat business is huge.

Honesty and Persuasiveness

The best law firms never misguide their clients with an incorrect answer. Appeasing a client with false statements will cost the firm at the end. Honesty is totally important in maintaining client relations and should be of extreme importance. A lawyer must possess the skills to persuade a judge and the client, and in this situation, the power of persuasion is important. The idea of persuasiveness is the ability to understand and identify the concerns of the audience. It is the attorneys who can interpret the law in order to remain successful.

Clearly Defined Fee System

To avoid any future complications, good law firms always put in writing and explain to the client the method of billing. Many billing disputes arise only due to discrepancy in the understanding of the client regarding the fee matter. A clearly explained fee agreement in the first intake helps to avoid many of the post case disputes.

There a lot of law firms available to select from, however when picking out the best of the lot, it is important you verify the qualities of a professional one. The qualities of the best law firms have been discussed above to enable you to choose the right one.