PRACTICAL STEPS IN MARKETING, MANAGEMENT AND FINANCE
Eliminating Receivables to Improve
the Bottom Line
By Arthur G. Greene
D OES YOUR FIRM CONSIDER old receivables a normal part of doing business? Your managing partner and/or administrator may have come to accept
high receivables after failed efforts to convince their lawyers that
it doesn’t have to be that way. As a result, the lawyers work hard
and become satisfied with marginally adequate compensation,
thinking it is, well, the norm.
Eliminating most receivables is possible, but the effort does
take a serious commitment from all lawyers to make two
crucial changes in how they manage their practices. The first is
the way they handle the intake of a new matter; the second is
to implement consistent practices in addressing overdue bills.
Convincing lawyers to change their methods is no easy task, but
when they see the results of these recommended changes, they
will thank you for transforming their practices and making their
careers more rewarding.
Change the Firm’s Intake Policies
While collection problems arise toward the end of a client representation, they definitely signal a problem with the intake
process. If you review a firm’s collection problems, you will find
that ( 1) they are hourly matters, ( 2) the cost of the legal fees
exceeded the client’s expectations, ( 3) the lawyer never emphasized the importance of timely payments, and ( 4) no discussion
took place at intake of what should happen if the client develops
cash flow problems.
Let’s face it—a client relationship is damaged when the client
is surprised by the amount of a bill. When that occurs, often the
client is less willing and/or less able to pay the bill in a timely
fashion. Once a due date passes without adverse consequences,
the likelihood of future timely payments becomes unlikely.
Consider the advantages of the following candid discussion:
Lawyer: You know I can’t guarantee we will win the case, but the
one thing I will promise you is that you will never be surprised
by a bill I send you. If anything unexpected happens that makes
it impossible for me to live within this estimate I have given you,
I’ll give you a call and we will decide together how to address
the change in the case. That’s always better than me just making
decisions to do extra work and surprising you by the amount of
Adopt a More Effective Collection Policy
Now, if the first recommendation works, there will be no need
for a collection policy, right? Well, yes, I guess that is right.
However, it will take time before the positive results can be realized. Also, there is always the possibility of a few clients becoming a collection problem, even under the best of circumstances.
Therefore every firm needs an effective collection policy.
Firms with collection problems either lack a standard collection policy or fail to consistently apply an existing one. The
longer an overdue receivable goes without attention, the more
courage the client gains for further delay of payment. Most
lawyers make the mistake of not getting serious about addressing receivables until they are 90 to 120 days old. Ignoring the