week I speak with attorneys who have trouble reconciling the
conflicts in the relationships they have with clients: Creditor
me on the telephone and they invite me into their offices for
on-site consultations. They tell me of their troubles
and ask me for help. I am a Practice Management Advisor
with How To Make It
Rain.com and these are my stories:
"John" in his Orlando, Florida office. He called
me to ask for help. He was working harder than ever but never
seemed to take home enough money. He thought his expenses
were too high. John was even considering letting a secretary
go whom he was sure, was taking office supplies home for her
kids. (Office supplies typically represent less than 1% of a
law firm's annual budget.)
RECEIVABLE: Clients pay us to solve their problems, we
are not supposed to pay for them!
understood the importance of screening Prospective New Clients
in a systematic and professional manner to weed-out the potentially
bad ones, he was ready to think about business. The first
thing we had to address was the ridiculous level of old
& dusty accounts receivable that were indirectly costing
him money each month...
One of the
reasons for John's unhappy condition were his conflicting feelings.
These feelings were never discussed in his professional responsibility
course during law school. Instead, John learned the
hard way how really difficult it is to serve someone as
both their creditor and their advocate.
These two roles have inherent conflicts.
decided to require all of his clients to make a lump-sum deposit
to his trust account to cover the entire cost of his services,
up-front. He discovered that more clients than he
had expected, actually had the money to do this & for the
others he now offers them the option to pay by credit card.
Now John can fight like crazy to advance his clients' interests
and protect their rights and he lets Visa or Master Card "worry"
about being their creditor.
does this arrangement remove the inherent conflict, allow John
to do a better job for his clients and eliminate costly accounts
receivable problems, it even makes the client's life a little
another attorney I've spoken to recently has been using a service
By Phone for six months to offer her new clients the
option to pay by credit card. She says she decided to offer
this option because "Contrary to what many attorneys
think, clients who have not paid their bill do feel uncomfortable
communicating with their attorney/creditor. It's no fun
for either of us to talk about a case or matter when we both
have to try and politely avoid the subject of past due bills.
This has been really great for me."
Credit Cards Will Make Your Firm More Profitable
decided to get serious about wanting to be a more profitable,
ethical and professional lawyer he made the decision to focus
first on properly managing his law firm. John realized
that despite what he had been hearing and repeating to others
for years, it really is possible to budget a case or matter
ahead of time with an adequate degree of accuracy in all
but the most complex contentious cases. Better yet,
John realized that if he over-budgeted he could always impress
the client when he returned some of their unused money.
puts John much further ahead of the game than when he used to
ask for retainer deposits at random. Best of all though,
by investing the time to budget a case in the beginning, John
now finds that he is able to be more pro-active in case
or matter management and he has virtually eliminated the worst
part of being a lawyer: Collections.
In the beginning
it was a little scary for him, but today, John recognizes that
requiring clients to make a large lump-sum deposit into his
trust account to cover all anticipated fees and costs has the
effect of dramatically increasing firm income for three main
There is less tendency to write-down the bill when you already
have the money sitting in your trust account.
There is less tendency for the client to negotiate down the
bill after it's already been paid.
Collections are far more timely, i.e. reduced (or eliminated)
accounts receivable. This improves firm cash flow and
actually reduces firm overhead.
about it: You have your own credit card bills, car
loan, line of credit or home mortgage all of which are charging
you every day for the use of their money. If your client
owes you $1,000 for three months, you are in effect borrowing
money from your own highest interest rate creditor in order
to be able to afford to loan that money to your client at no
I was recently
speaking to an immigration lawyer (let's call him "John"
as well) who used to have an a/r problem that ran into the tens
of thousands of dollars. In immigration, there is practically
no leverage because once youve put everything in motion,
you can withdraw from the case for lack of payment, but the
clients know, or at least they have a fairly reasonable belief
that theyre going to get their visa or green card whether
you stick around or not.
began the task of going back to his clients who owe him money
and requiring them to bring their bills up-to-date by charging
past-due balances to their credit cards. I could take
two months off with the money I collected. I was really pleasantly
surprised to discover how receptive my clients were to paying
their bills to me by credit card. I even got some referrals
out of it because they were uncomfortable about calling me about
a friend when they owed me so much money.
In the past,
John would do the work and send a bill to the client at the
conclusion of the representation. After three months,
he would often end up writing the bill down 10% from $7,500
to only $6,750 just to get some money flowing in. After
three months, the $6,750 really ended up benefiting John the
equivalent of only $6,402 after the discount and interest expense.
$7,500 vs. $6,402 = $1,098 or 15% reduced revenue.
let this happen in only half of his cases each year and he regularly
collected 1,500 hours per year, John could have taken a entire
month off of work and still had the same income had he
simply gained control of his A/R...
Robins - acclaimed author, lawyer and law practice management
consultant - has a challenge for you:
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going insane trying to figure out how to bill enough
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