Successful collection of a fee involves more than taking remedial action after a problem arises. While traditional collection policies may be necessary, they do not enhance the lawyer/client relationship and will never represent a good solution to the problem. The real answer is taking a comprehensive approach, with the goal of avoiding the problem altogether.
Lawyers who collect fees without issues have:
- Good client intake methods,
- An ability to set and manage client expectations,
- A knack for keeping clients thankful,
- An ability to communicate value in the bills they submit,
- An incessant focus on meaningful client service, and
- A clear policy for addressing collection problems
Get it right and you will avoid collection problems.
Let’s start at the beginning. The initial client meeting has more to do with the successful collection of bills than any other factor. At this meeting, the client’s expectations are set of the process, the likely outcome, the timeframe involved and the cost. Failure to set client expectations at this critical time is the primary cause of uncollected fees.
Law firms should have a policy on the standard topics to be covered at intake. Develop a checklist to assure that all lawyers in the firm conduct meaningful discussions with clients about objectives, risks, the plan for going forward, and the cost.
The discussion about fees must be clear and candid. The lawyer should provide an estimate or range and agree to call the client if anything occurs that will affect the estimate. Let the client participate in any decision about whether to expand the intended work, which would result in unexpected fees. If the additional work is necessary to achieve the desired result, the client will likely agree to the extra fees. Having the client participate in the decision means the client will never be surprised by the amount of a bill.
Let the client know that if payment of a bill becomes a problem, the client should call you. It is important to let the client know if you offer payment by credit card as an option to defaulting on the bill. All of these subjects should be covered in the intake discussion.
The initial client meeting is when the lawyer will be in a strong position for a clear and candid discussion about the costs involved in pursuing the matter. Once the arrangement is set, the client may have the upper hand. As a result, the lawyer should be candid in the initial meeting and request the desired fee arrangement and/expected fee deposit.
The requirement of a fee deposit serves two purposes. First, it secures the prompt payment of fees, once the lawyer’s bill is rendered. More importantly, it tests the client’s willingness or ability to pay for legal services. Any hesitation by the client is a clear warning sign.
The client needs to be fully apprised of all the ramifications of moving forward with representation. The lawyer’s goal is to be sure the client’s enthusiasm for proceeding hasn’t masked some harsh realities involved in going forward. Have a heart-to-heart discussion to determine if the client is prepared for and comfortable with the realities of the anticipated legal action and the financial commitment involved.
Keeping Clients Thankful
Getting off to the right start with a client takes effort and skill. However, the bigger challenge is delivering on the expectations created and keeping clients content, during what may be difficult and stressful times. Lawyers who are able to keep their clients thankful will earn the best rewards for the work they perform.
Surveys show that what clients want their lawyer to care about them and their legal problems. Care and concern score as more important to most clients than the result achieved or even the amount of the fee. There is an important lesson here. Provide personalized care and service and clients will be thankful and appreciative of your efforts, regardless of the difficulties that may be inherent in their legal problems. Clients who can see that their lawyers are genuinely concerned are relatively content and are more likely to pay their bills on time.
Use the Billing Process to Communicate Value
The lawyer’s monthly bill for services is a communication tool. To maximize this tool, it must convey to the client a sense of accomplishment and value provided. Replace shortcut time entries that portray mechanical functions with more meaningful entries that reflect accomplishment and value. It is not difficult to picture a client receiving a bill containing mechanical time entries and being disturbed by the cost of the project. On the other hand, the client reading the more substantive descriptions is better able to appreciate the work that has been done for the cost.
Focus on Client Service
Unfortunately, following that right start during client intake, it is all too easy for the lawyer to lose the confidence of the client. Let’s count some of the ways:
- Fail to return a telephone call promptly
- Be late with a promised document
- Overlook a promise to do something
- Delay giving the client bad news
- Forget or put off telling the client about a development
- Send a bill for an amount that surprises the client
These events may seem minor to the lawyer, who is trying to balance the demands of a busy practice. To the client, the failure will be a defining event and will affect the lawyer’s chance of payment.
As the matter proceeds, client communications become critical. Key ingredients include:
- Keep the client informed of what you are doing
- Contact the client periodically, regardless of what is happening
- Alert the client to any changes in the plan or the risks
- Alert the client quickly to anything that might affect the amount of the fee
- Deliver bad news immediately
- Return phone calls within two hours or have your secretary return the call and tell the client when you will be available
- Set aside time in the evening or on weekends to return pending phone calls
- Make certain the descriptions in your bill effectively reflect the value of the services rendered
It is incredibly easy to do something that disappoints a client and causes them to lose confidence in the lawyer or the process. That loss of confidence must be avoided at all costs.
Adopt a Collection Policy
What about a collection policy? If the recommendations about good client intake and managing expectations, etc. are employed, a collection policy may seem unnecessary. However, it will take time before those recommendations can be realized. Also, a few clients may become a collection problem even under the best of circumstances. Therefore, every firm needs a collection policy.
Most firms with collection problems lack a standard policy or fail to consistently apply an existing policy. The longer an overdue receivable goes without attention, the more courage the client will gain for further delay of payment. Most lawyers make the mistake of not addressing receivables until they are in the 60- to 90-day range. Unfortunately, at that stage the client is conditioned that timely payment does not seem to be particularly important. The best approach is for the firm’s policy to address overdue receivables in quick order and consistently.
Find the Magic: Payments by Return Mail
Magic? It may sound a bit supernatural, but it is not all that hard to get return mail payments from most clients. All it takes are clients with realistic expectations and lawyers meeting those expectations, while regularly showing concern for the clients.
Think back to some of your best client relationships. What do you remember about them? You may remember that payments of your legal fees came back by return mail. The bill was hardly out the door, and there was the check! It was probably so unusual that the immediate payment continues to stand out in your mind. That prompt payment of your fee also likely didn’t go unnoticed. You began to treat that client a little better than the slow-pay clients. You probably returned that client’s telephone call more promptly than the others. And, you may have tended to lowball the time when filling out your timesheets. The client frequently expressed appreciation for the services you rendered and you probably expressed thanks for the prompt payment. It was a good situation all around.
What was it that caused the client to pay so promptly? Most likely, the client understood the process and had realistic expectations as to outcome and cost. You had done a good job at the initial client meeting and the case had progressed as expected. To the extent any changes occurred, you kept the client involved and gave advance warning of those changes. The client was satisfied and appreciated your services. This represents the dynamic that you want to replicate, over and over and over.
Arthur Greene is a Principal with Boyer Greene LLC, which provides management consulting services to law firms.