Get That Bag: How to Build a Collection Process for Your Law Firm
Law firm accounts receivable can be gnarly, sometimes extending into the six figures.
Now, there are a couple of responses to that. The preferred option is to eliminate accounts receivable altogether, which can be done using epayment options, and potentially evergreen retainers combined with stop work orders.
Of course, you may not ever get to 100% collection rates – that’s a tall order – and, you may have some accounts receivable to deal with already. And so, you’ll need to establish a collection process – and, that should flow from your engagement agreement.
The components relating to money that you need in your engagement agreement, aside from your rate(s) and/or basis of your rates, would be: An escalating series of penalties for non-payment. An arbitration clause, potentially including access to a state bar’s fee arbitration board. That stop work order. This will allow you to put pressure on non-paying clients, via an internal process. And, if those systems don’t yield eventual payment, you’ll also want to have an ‘out’ clause, that will allow you to terminate the attorney-client relationship, as a last resort.
You can make all the money you earn; but, as with most business-related items, you just need a system to get there.
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The Rhode Island Bar Association offers free law practice management consulting services through Red Cave Law Firm Consulting.
To request a consult, visit the Rhode Island Bar’s law practice management page, and start running your law firm like a business.