Preventing accounts receivable - Part 2

by PAUL MCLAUGHLIN
Practice Management Advisor
The Law Society of Alberta

In my last article, I discussed clients who don’t pay and clients who can’t pay. Now I will discuss the most difficult collection problems, clients who won’t pay.

Clients Who Won’t Pay

Clients who won’t pay are clients who have the resources to pay and may once have intended to pay, but who now choose not to.

There are, of course, a small number of clients who never intended to pay from the moment they walked into your office–people who think the rules don’t apply to them. Often they are promoter types with grandiose schemes and a surplus of charisma, and you are just one of a long line of creditors they are quite happy to leave dangling in the wind. There is only one way to protect yourself from these con artists: recognize them for what they are and say "No!" And if you get caught in one of their webs, don’t be too hard on yourself–just don’t let it happen again.

The rest of the won’t pay clients are using nonpayment to make a statement about how they value your services, your skills and the relationship they have with you. Be very clear about this: the issue is usually not price, it’s value–not what you charged, but what you gave in return.

Trust and respect are fundamental here. The more your clients trust and respect you and the work you do for them, the more you meet their service expectations, the more likely they are to value their relationship with you as their lawyer, and to pay your bills on time to preserve that relationship.

What should you do?

You first have to determine if you want to try to save the relationship. Assuming you do, the key is to communicate. Request a meeting. If the client won’t come to you, go to the client. When you meet, remember that you are not just trying to get paid for an existing bill, you are trying to repair a relationship and turn a dissatisfied client into one who will be a source of revenue and referrals for years to come. Let the client know you understand there is a problem with the client’s evaluation of the service you provided, that you value the relationship and that you are interested in salvaging it. Let the client talk. Be prepared for criticism and don’t respond defensively. Listen and show the client you are listening.

If the client does not want to talk, ask non-defensive questions to draw out the client’s thoughts. Debrief the case and the relationship. What went wrong? What aspects of your relationship would the client like to see improved? Does the client have other problems for which you aren’t responsible?

When you understand what went wrong, you can start assessing the situation. Can you improve your services to meet the client’s expectations? Can you rebuild trust and respect? Should you continue the representation or refer the client to new counsel?

Only after you have established that improvements will be made should you discuss the outstanding fees. If you agree that your service has been lacking, reduce the bill accordingly. Ask the client how he or she intends to pay. Remember, you are trying to seek a resolution.

If you conclude that you cannot provide services to meet the client’s expectations, discuss terminating your legal relationship. Keep it civil. Offer to cooperate with new counsel. Then talk about your fee. Be firm but not strident.

Most lawyers find these discussions difficult. They fear that confronting their clients about money will taint their working relationship. It takes practice and patience to develop the skills you need to steer through the numerous shoals that lie hidden under the lawyer-client relationship.

But remember, if your accounts receivable spiral out of control, you’ll soon be out of business and you won’t be able to help all your worthy clients, the ones who willingly pay your bills.

We can’t guarantee that you will be able to completely eliminate collections problems, although we both know many lawyers who have achieved that–even family lawyers! But we can guarantee that you will be able to reduce your accounts receivable problems, notch by notch, if you apply a new awareness and commitment to your business as you strive to create a practice full of clients who want to pay your bills.

This article is based on the article How to Get Paid by Reid Trautz and Paul McLaughlin, which appeared in the Jan/Feb 2001 edition of Law Practice Management, the magazine of the Law Practice Management Section of the American Bar Association.

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