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Collection Best Practices – The Problem

I am very happy to welcome Loretta Ruppert, from LexisNexis Practice Management, as a guest writer.  As Senior Director of Community Management, Loretta works to bring together the community of product users, consultants and technology leaders and to create a resource to facilitate better communication and cooperation between these groups.  I have extended an open invitation to Loretta to guest post on this blog on any topic related to Law Firm Practice Management.  Today, she writes the first part of a two post series on what has become a growing problem for law firms and almost every other small business, expanding accounts receivable.

Over the past year I have spoken with many small (1 to 10 attorneys) and mid-sized (11 to 50 attorneys) law firms  through individual office visits, user group meetings and telephone interviews. Unfortunately, one common experience for most of these firms is the growing amount of accounts receivable. They are performing the work but not always getting paid for it. Of course this varied by the area of practice, and has mainly affected law firms who get paid by individuals and smaller companies.  However, payments are not coming in as quickly as they used to from some corporate clients as well, and often rates have been renegotiated down, affecting the firms’ profitability.  Many law firms have had to finance their accounts receivable and unfortunately banks assign very little value to receivables older than 90 days when financing accounts receivable, even for their best customers. Unfortunately, many law firm owners use a personal line of credit and lend money to the business to keep the firm afloat until they can collect.

Does this sound familiar?

To make matters worse, most law firms have a “soft” collection process that goes something like this: After billing is completed (usually monthly) law firms send out reminders to clients who had no current work but have a balance due. Law Firms tend to stick with the kind and gentle approach with the written collection communications:


Dear Client,

We show your account 30 days past due. Please find for your convenience an enclosed copy of invoice # xxx dated ##/##/#### in the amount of $#,###. If you have already sent in your payment, we apologize for any inconvenience.

If you have any questions regarding the invoice or services we have provided, please do not hesitate to call us at ###-###-####.

Kindest regards,

Law Firm

—-end of sample—-

The language tends to get a little stronger after 60 days and then again at 90. But then what? Who wants to call a client and ask them for money, this is not what attorneys were trained to do and it is not fun. 

What’s worse, are clients you continue to work for who have past due balances. Perhaps you feel obligated because you might lose the client who won’t pay you, or your fee agreements only mention charging interest on past due accounts and do not clearly define what happens if they do not pay, i.e. cease legal services, send account to collection agencies, or file small claims, etc.

Some law firms have gotten more aggressive on taking retainers before doing any work and/or developing a firm collection process. Others, depending on the area of practice, do credit checks on their clients to minimize risk of non-payment.  Both of these strategies can help you ensure that you get paid right away but what about those accounts where neither is possible or are already past due.

Tomorrow:  Collection Best Practices – Solutions

Loretta Ruppert
Sr. Director – Community Management
LexisNexis Practice Management


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