Eliminate Your Receivables

Eliminate Your Receivables

ABSTRACT

Lawyers should make a commitment to create trust in their financial transactions with clients. This means having full communication with clients regarding the fee arrangement ahead of time and demanding payment prior to or at the services being provided. A first meeting with clients should be organized in four stages:

1. Begin to establish a contact with your prospective client.

2. Discuss the factual information.

3. Inform the client of what they can expect from you. Give specific assurances to the client. You should also make promises using the word promises.

4. Create specific demands and solicit commitments from the client for example, the commitment to pay the charges within 15 days of the presentation.

DISCUSSION

Our world is a cash and carry world in which payment is done at the time of delivery of services and goods. The grocer is paid and the dry cleaner is paid, and even our favorite restaurant owner is paid. What is the reason in this world of cash and cards is it normal for many professionals, especially lawyers, to randomly provide credit? Why are lawyers so surprised when I suggest there’s another option?

Let’s take a look at the most frequent scenario in the majority of law firms. A potential client sits down with an attorney to discuss the matter and, if any would be the plan of action. In the best case, a retainer is required as well as hourly fees presented. Most of the time fees aren’t discussed, unless in special areas like cases involving contingency fees and insurance defense cases and so on. If the client engages the lawyer, the process starts and the periodic invoices are sent out. If a retainer request is made it will be added to the initial bill. after that, the client is a creditor to the firm. The firm does not give any thought to the ability of the client to pay.

What is the most common consequence of this practice? The client is charged for months later and

It could be months or even years after services were rendered, usually when motivation to pay at its lowest, and circumstances can cause it to be difficult or impossible to pay. It could be that the bill is due after the client is unhappy with the results of the case or is unhappy by the lack of communication and the relationship with the lawyer.

The attorney is now able to access account receivable. For most firms, the accounts receivable range anything from a few months up to a full year in terms of revenue. A majority of lawyers do not receive the entire amount of their fees. Consequently, the majority of them have to devote a significant amount of time in collecting what is due.

The situation gets more complicated. When lawyers hand these matters over to collect What was once a positive relationship between client and attorney, turns into an uneasy relationship. The attorney may be the client’s advisor and friend and the nextday, an ogre who is trying to extort cash. This less-than-satisfactory situation contributes greatly to the publics’ dissatisfaction with lawyers. In an earlier Gallup survey the lawyers were placed just a little lower than funeral directors in terms of popularity. They are seen by the general public as uncaring or greedy, and are viewed as unjust and morally righteous.

Many lawyers believe that the issue is with the client , the person who is not willing to pay. I don’t agree. The way games play out is dependent on the way it is organized and that is why it’s the attorney that organizes the game. Let’s place the responsibility where it should be – at the feet of the lawyers.

If the corner store and the restaurant owner are able to ask for payment at the time of delivery, then why can’t lawyers? Why do we have to endure the pain and financial burdens resulting from following the traditional method when a better option is readily available? There are many reasons. The most important one is obviously the tradition. What is the reason this custom begin? A lot of lawyers believe it as unprofessional to speak about money. We are in fact, the an official of the law.

Another reason is the fear. Lawyers are often afraid that their prospective client might leave the office and move on if they are asked to discuss terms of payment. Therefore, they are forced to take the danger of doing the work and hoping that they’ll be paid. Many companies have been unable to survive due to their inability to make their payments. Nobody can pay our bills without hope.

One of the main reasons to this practice is that many lawyers do not realize there’s another option. I’m confident that there’s another alternative to the standard fee-and-collection model.

Lawyers need to be able to demonstrate honesty to their financial relationships with clients. This includes having a clear and open dialogue with the client regarding the fee arrangement in advance, and requiring payment prior to or at time of execution of the services.

The entire issue of charges and payment terms should be discussed in detail with each client in the initial interview or whenever is possible with clients who are already clients. If possible, fees must be stated prior to services rendered . Whether the client pays the full amount in advance or in installments or in periodic installments. The arrangement is in a manner that the payment prior to the time spent. When it is impossible to set a price because due to ongoing projects, an advance payment not a retainer is required in a sum sufficient to cover at minimum one month, and most likely two months of services. The advance deposit is to be put in an independent “deposit account”different than the attorney’s “trust account.” It is important to inform clients that bill is due at the end of each month , and the attorney will settle the bill from the money that are in the “deposit account.” The client is expected to pay back the money that was taken out of this account by 15 days.

If properly executed, this arrangement can create the perfect situation for the attorney , and generally the client, too. When bills are mailed out at the close of each month, the company has the option to send a check right away to pay in full. If the client fails to refill the account within fifteen days, a meeting is possible with the customer, long before getting months behind on payments.

Do you think it’s too promising to be real? Yes, I tried it for 18 years as a practitioner and in 99.99 percent of the cases, it was successful. A large majority of my clients have made the switch to this method with similar outcomes.

What can it learn from you? First, you must recognize the fact that your current system does not work. And, secondly, be open to adapt. If you’re able to meet these standards I would suggest that you conduct your first session with a customer in four phases , as the following:

Phase One: Develop an ongoing relationship with your client. It is often ignored or omitted, yet it’s a crucial step. The things you’ll be capable of accomplishing in the future with your customer will be a direct reflection of the quality and depth that your connection. Be sure to make the connection personal. Talk about small things. Take an interest in the responses for your inquiries. Don’t, I repeat, not continue until you feel that you’ve created a certain degree of trust.

Phase Two: Talk about the details. What is the reason this client came to you? What’s the situation concerning? Do you think this is a case that you’d like working with? Are you confident to manage the case? If you’re confident that this is the client you would like and that it’s appropriate to be the one to represent them Let the client know of your decision and get the client’s permission to agree to represent them.

Phase Three Third Phase: Explain to the client what is expected of you. Give specific guarantees to the client and make use of”promise” instead of “promise.” You could, for instance, make a promise to the client, such as “We guarantee to respond to your phone calls within 24 hours. We will provide you with copies of any documents we produce or receive. We will keep you up-to-date with the progress we make regarding this issue. We pledge to represent you as we would like to be treated. We will provide you with a an honest and precise report of all the expenses and services. We guarantee to handle your case in a way that will reduce your costs while providing the highest quality legal representation we can offer you.”

Create yourself a list of your promises, and create them to be powerful. While it could be dangerous, I would recommend it for a number of reasons. 1.) It will result in accountability for you; 2.) It will greatly improve your relationships with your client and, 3) It gives you the authority to request that the client also fulfill their commitments.

Phase Four The final step is to ask the client whether there are any questions. Then, make promises that you would like to see from the client. For instance, you can request the client to return all calls within 24 hours, and to be always available and at all times to help you in the work you do for your client and to ensure that you know the truth , the entire truth and nothing less than the truth, and that you receive any documents you need, etc. The most important thing will be that your client supports your efforts to run the business professional way.

Now, you’ve created the framework to present your fee agreement in which you specify your deposit requirements as well as your procedure for sending out prompt periodic invoices. Make sure that all bills are paid within 15 days of their presentation. It is also possible to let the client know that this arrangement enables you to manage your practice in a manner that is professional, will save you time from chasing deadbeats and the resulting necessity to increase fees to cover the bad financial obligations. If the client is willing to pay for the bill, and to pay them on time is the result of being able to dedicate all your time practicing law and being in a position to keep your costs to an absolute minimum.

Try it. I can assure you that it works. You will not only dramatically increase the amount of fees you earn and contribute to giving back a sense of trust in the profession of law.

A SUMMARY

Making effective agreements for fees with clients is the duty to the legal professional. If the lawyer is prepared to accept the responsibility, they can substantially increase the percentage of the fees they receive in addition to making significant contributions to returning the integrity needed for the law profession.

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