Collections Issues & Getting Paid

Legal Industry

Conventional wisdom says that client satisfaction is highest right after a representation has successfully concluded – and it goes down with every passing day. Satisfied clients are more willing to pay their fees than dissatisfied ones, so lawyers have long been advised to send invoices immediately after a case settles, a contract is signed, or the jury hands down its verdict.

Inevitably, though, all law firms will have some clients who simply don’t pay, or don’t pay on time. They’ll have others who routinely question the bill and ask for a discount. These collections issues are not only bad for cash flow, they take up staff and attorney time that could be better spent doing work for clients.

And attorneys may feel they have little recourse against deadbeat clients. While other businesspeople might not hesitate to sue a nonpaying client, it’s generally believed that lawyers who push clients too hard on payment are just inviting a malpractice suit.

Here are some ways to avoid nonpaying clients and handle collections issues when they arise.

Have clients sign an engagement letter that clearly explains your fees and their obligation to pay them. Discuss your fees and your payment expectations at your initial client meeting. Be clear about the amount you charge, whether the fee is hourly or fixed and the costs that your client will be responsible for. Explain how you bill for your services and when payment must be made. Put all of this information in an engagement letter that both you and your client sign. Many malpractice claims arise because of vague or nonexistent engagement letters, so make sure yours is crystal clear.

Have a sufficient retainer. Have your clients deposit a retainer at the start of your representation so you are assured of getting paid each month. If the retainer falls below a certain amount, ask the client to replenish it.

Beef Up Your Client Screening Process. During the client intake process, be aware of signs that a potential client may be a collections problem. One is the “tire kicking” client who calls your office to ask what you charge, or who tries to haggle over your rate. Another is the client who doesn’t want to pay a retainer. Learn what the red flags are and use your client intake process to identify and screen out potential problem clients. You can also consider checking your potential clients’ credit ratings.

Send Invoices Promptly and Regularly. A regular billing cycle shows that your firm is serious about finances and payment. If bills aren’t sent on time, clients can get the message that they don’t need to pay on time either. When a matter concludes, send the final bill right away, or make payment due at the final client interaction. Make sure the lawyers in your firm submit their time promptly, and use a combination of bookkeeping staff and practice management software to ensure that invoices go out on time.

Make it easy for clients to pay. Accept credit cards, and consider setting up an online portal that allows clients to pay their bills online. Younger clients in particular are far more comfortable with transacting business over the internet than with writing checks and putting them in the mail.

Reach out to your clients who haven’t paid. There are many reasons that clients don’t pay. It may be simple oversight or a cash flow problem. The client may have moved and never gotten your invoice, or may have questions about the amount you charged. Reach out cordially to these clients by phone or email and offer to discuss the bill with them. Some may pay up because of this gentle prod. Others may tell you they have cash flow problems, allowing you to negotiate a payment plan.


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The information provided is not intended to be legal, tax, or financial advice or recommendations for any specific individual, business, or circumstance. TowneBank cannot guarantee that it is accurate, up to date, or appropriate for your situation. Financial calculators are provided for illustrative purposes only. You are encouraged to consult with a qualified attorney or financial advisor to understand how the law applies to your particular circumstances or for financial information specific to your personal or business situation.

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