Preventing accounts receivable

by PAUL MCLAUGHLIN
Practice Management Advisor
The Law Society of Alberta

Part 1

What can you do when you find that your expectations about getting your bills paid aren’t shared by your clients?

The context: improved client service

In this new era of legal consumerism, clients view a high quality legal services as a given. They consider how their lawyers deliver the services to be just as important as what they deliver.

In these new times, lawyers need to build strong relationships with their clients without sacrificing their professionalism. And that means addressing service delivery problems like tardiness in the production of work, failure to return phone calls and emails, obscure drafting, insensitivity to the non-legal dimension of legal issues and failing to keep clients fully informed.

If you don’t address the service issues, you can forget about solving the collections problems.

The three types of non-paying clients

There are three categories of non-paying clients: clients who don’t pay, clients who can’t pay and clients who won’t pay. They have different characteristics and require different approaches.

Clients who don’t pay

Nonpaying clients are sending a message, but you can’t tell what the message is from the bare fact that the bill hasn’t been paid. There may be a perfectly innocent explanation, or there may be a deeper problem.

It’s up to you to take the initiative to find out what your client’s nonpayment is saying to you. The purpose of the first contact should be to simply find out why the client hasn’t paid. Your message should be that you attend to your financial affairs with the same diligence as your legal work. Of course, this will be more convincing if your client believes you have given their work high priority.

Sometimes, don’t pay situations arise from the way you administer the billing process. You may want to be more flexible on when you bill, how you send out the bills and how you allow clients to pay. For example, you might want to take credit or debit card payments–the small discount for the service charge is not a significant cost when weighed against the huge cost of nonpayment.

If you think the client has a sincere desire to pay, you may agree to accept payment arrangements, but keep track of promises because you want to know as soon as possible if you are really dealing with a can’t pay or a won’t pay client.

Clients who can’t pay

Some clients can’t pay their legal bills because they simply don’t have the money or other resources. They present insoluble collection problems and you should be careful not to waste resources trying to collect the uncollectable.

If you have a significant number of can’t pay clients, you have a credit-granting problem. You should revise your client intake procedures to include a determination of your clients’ credit-worthiness before you take on a new case.

I am not saying that you shouldn’t do pro bono work. I recognize that pro bono is an important part of your professional obligation. I am saying, however that you will definitely feel more fulfilled as a lawyer and will experience less frustration and anger if you pick your pro bono cases. See my April 2000 Benchers’ Advisory article, Managing Pro Bono, which is available on the Law Society website.

I am also not saying you shouldn’t accept speculative cases, which are often very interesting and can be quite lucrative. Again, the key here is for you to be in charge of the selection process.

In my next Benchers’ Advisory article, I will deal the most difficult group, won’t pay clients.

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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