Take a Break from the Holiday Rush
Asking Clients to Pay on Bills
It's that time of year again. No, not the holiday season, the time for partners to put on a big push and ask clients to pay as much as possible - and sometimes just to pay anything at all - on bills that have been left outstanding for months. Clients, of course, know the routine and they agree to pay on their large bills in order to wangle discounts because they know the remuneration system for partners is based upon how much has been collected by the end of the year. It's a flawed system to say the least, and one only necessary because too many lawyers neglect the fundamental requirement of monitoring and enforcing collections throughout the year.
Collecting on Accounts Overdue
Here's a radical suggestion for avoiding the "holiday rush" in 2012. At a point in the year of your choosing, rather than letting your receivables age and making little effort manage and collect them because it takes too much time to do otherwise, make the time - "stop working" and focus all your energy on collecting the accounts that are overdue. Even if you don't work for 30 days on any new legal matter, and focus all your energy on collecting accounts receivable, the amount of money you would bring in could be the equivalent of many months' revenue.
A "Stop Work" Order Could Help
This, of course, puts the situation too extremely. After all, lawyers are ethically bound to assist current clients whose matters require attention and to consider representing potential clients who ask for assistance. But for any lawyer, the order of practice priority is to get the work (marketing), do the work (production) and get paid (collections). And here's where a "stop work" break can help.
Balancing the Sides of Your Practice
For too many lawyers, a lack of balance more often overweighs the marketing and production sides rather than collections. They equate financial success with work done, measured in billable hours. The road to disaster is continuing to do marketing and production with the same clients, extending credit rather than collecting fees in the hope that these clients will give you more work. If the client hasn't paid the fee for the last matter while you begin work on the next, you have in essence extended a no-cost loan to the client. Just as most banks will not carry you in the hope that you will pay on an outstanding loan, it makes no sense to do the same thing with your clients on a vague hope of being paid as expenses pile up.
Focus on Collecting What You Bill
A practice halt to focus on collections should be a one-time remedial tactic, one that you must make sure you have enough cash in hand to afford. The real cure is obvious. Vigilantly focus your energy on collecting what you bill. To do otherwise means financial disaster, not to mention that it makes for a stressful year-end holiday season.
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