Collections – 6 Steps of Best Practices

By on October 2, 2011

I have written several blogs about the topic of Collections in a law firm. I even had a guest blogger from Lomurro, Davison, Eastman & Muñoz, P.A. talk about collecting payments. I have spoken about how software collections “wizards” can help organize and automate the process within the firm. But, how about the actual approach of collecting cash? There are many reasons why clients don’t pay bills; reasons ranging from cash flow worries to perceived bill discrepancies.  Here are a few tips and tricks to be the most effective and gracious “collector” as possible:

1. Wizards. Not to geek out on you here, but using a Collections “wizard” will ensure that you have crossed off all the “warning” options off the list.  Being informed – knowing what has already been done – is the first step to making sure you don’t embarrass yourself, catch someone off guard or risk losing a good client (if, in fact, they are).

2. Personalize. Although there are proven ways to collect from delinquent accounts, often taking into account the type of account and possible cash flow differences can help to get a client to pay. In other words, a small account with a large balance may be handled differently from a large account with a small balance. Sometimes asking a client how they’d like to pay is much better than just the “it’s overdue, pay now” approach.

3. Call. It is often tempting to hide behind letters and emails, but often hearing a human being’s legitimate (or not so legitimate) reason for the delinquency may shed some much-needed light on the subject and the firm may be able to work with the client on some sort of payment plan. This may also help to dispel the collector stereotype and humanize the situation. In addition, a phone call can often gauge whether an account was happy with the firm’s services. Often even corporate accounts can become evasive when it comes to service satisfaction. A phone call may help to get to the bottom of a client’s feelings and why they are avoiding payment.

4. Deal with the fact that you may actually lose the client. Albeit, it is a good thing to get rid of a bad client, but sometimes a good one will jump ship if they feel alienated. This is where good “strategory” comes into place. Try to sympathize with the good accounts and weed out the bad ones as needed. If a client is low on cash, try to empathize with them and work with them as much as you can.

5. Be specific. Make sure you have deadlines set in mind. General promises often fall to the wayside and will eventually frustrate both the collector and the client. When specific deadlines are set, no one can question whether something is late or not. These agreed to deadlines should be confirmed via email and automatically scheduled in the collections software for follow-up.

6. Ask. Be sure to ask clients if they are happy with your services on a regular basis. Giving clients an opportunity to voice their opinions – whether via a client satisfaction survey or even a simple follow-up email – helps to thwart any opportunity to take dissatisfaction out on an invoice. In addition, it makes for happy clients!

Whatever tactic your firm takes, be sure to always keep firm’s reputation in mind – word of mouth travels a long way! Good luck!

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Categories: Financial Management, Law firm billing, Management, Productivity

Ingenious Tips on How to Get a Client to Pay Faster

By on March 24, 2011

This week, I have a special guest blogger, CC Drummond of Lomurro, Davison, Eastman and Muñoz. I would like to extend my gratitude for CC’s contribution. If you are interested in being a future guest blogger, please email me .

Collecting payments for services rendered at a law firm can be tricky and sensitive.  You are asking for payment for an attorney’s time and knowledge and the client, regardless of the outcome of the case, is expected to pay. Retainers will establish the rates, costs, and any other stipulations pertaining to the case. The problem is, as the fees steadily rise, so does the anxiety of the client.

There are several ways to expedite the process of collecting:

  • From the moment a potential client walks through your firm’s door they should be warmly greeted. This starts the connection between the firm and the client.  The type of relationship that is established with the client, attorney and staff, can possibly effect payments down the line.
  • Once the billing begins, if not a contingent fee matter, monthly detailed statements should be sent with a return addressed envelope for payment.  Elaborate! For example, instead of just saying telephone call .20, one should enter telephone call with ( ) regarding ( ). If the entry is .20 the client is less likely to dispute it with the added information.
  • Pre-bills must be reviewed for accuracy. Clients might find fault in additional entries, even if only one had an issue. Resolve mistakes quickly; do not make the client call 2 or 3 times trying to get it rectified. It will only bring feelings of mistrust and possibly non-payment while waiting for issues to be fixed.
  • Accept all forms of payment: credit cards, debit cards, cash and checks. Many clients are requesting their bills be e-mailed. Once they have reviewed the statement they send back, via e-mail, authorization to debit their credit card.
  • More and more companies are requesting that their billing be sent electronically. LEDES-Legal Electronic Data Exchange Standard is the format that is required. Companies can use different sites, but the format is still the same. This allows the billing coordinator to see the status of their billing and when payment will be received. Be aware, some companies do take off a percentage of their fees to use e-billing.
  • Charging interest is also an incentive for them to pay each month. It doesn’t work with all clients. Some take that as a green light that they do not have to pay in full each month. It does help at the end of the case as a bargaining tool. This may give the client the impression that they are receiving a discount when they are actually paying for the services rendered.
  • Stamp invoices that have not had a payment in over 30 days “Past Due”. Call the client as soon as payments have a lull or have ceased altogether. Communication on a personal level might have a more positive result than an email or letter.
  • Offer a small discount for immediate payment in full. 

 After every avenue has been made available to a client and they still are not paying, you may let them know their matter is going to be sent to collections. Sometimes, that’s enough to get them to at least set up a payment plan.

I wish there was one ingenious way to get clients to pay, however, if you treat your clients respectfully and personally at a time when they are having difficulty, you are more likely to have a positive outcome.

CC Drummond is Senior Billing Coordinator for Lomurro, Davison, Eastman and Munoz in Freehold, NJ. CC has been with LDEM for 12 years and prior to her position with the firm she spent 10 years in the Air Force stationed in various countries around the world. In the spring and summer, CC enjoys spending time at the beach with her 16 year-old son and, in the colder months, enjoys reading, cooking and watching movies.

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Categories: Best Practices, Financial Management, Law firm billing

What are a few days worth ….. A Lot of Cash!

By on November 2, 2010

Law firms are clearly cash machines, truly nice high margin businesses. However, they are somewhat unique in that they operate on a cash basis, collecting cash is really important. Just ask Mary (see my blog postings of July 14 & 15, 2010)

Firms can improve cash flow by implementing best practices and using technology, but what is all this effort worth? If the firm improves collections by an average of 5 days what does it mean in terms of cold hard cash?

This posting will help you understand:

  • How to calculate the Average Collection Period – ACP
  • How much additional cash can be generated by improving the ACP, and a sample Excel report  

Using the Average Collection Period
The Average Collection Period measures the time it takes for a firm to receive payments, thereby determining cash flow.


The above chart can help illustrate the effect that a change in the average collection might have on the investment in accounts receivable for your firm. Remember, accounts receivable represent money that cannot be used for other cash outflow purposes. For example, assume that the average daily billed amount is $10,000 and that your average collection period is 40 days. Now assume that you were able to reduce your Average Collection Period from 40 days to 30 days. From the illustration above, you can see that the reduction in the Average Collection Period reduces the investment in accounts receivable from $400,000 to $300,000. This reduction generates an additional $100,000 annually in cash flow.

 Measuring the Average Collection Period
The Average Collection Period measures the length of time it takes to convert your billings into cash. This measurement defines the relationship between accounts receivable and your cash flow. A longer Average Collection Period requires a higher investment in accounts receivable. A higher investment in accounts receivable means less cash is available to cover cash outflows, such as paying partners.

The Average Collection Period is calculated by dividing your present accounts receivable balance by your average daily billed amount:


The average daily billed amount is computed by dividing your annual billed amount by 360:


Using the annual billed amount and accounts receivable balance from the prior year is usually accurate enough for analyzing and managing your cash flow. However, if more recent information is available, such as the previous quarter’s billings, then use it instead. Be sure to compute the average daily billed amount correctly using the number of days actually reflected in the billed figure (e.g., 90 should be used if a quarterly billed amount is used).


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Categories: Best Practices, Financial Management, The Legal Market

Mary is a Cash Collecting “Machine” – Part 2 Get More Results in Less Time

By on July 15, 2010

Automating the Cash Collections Process – Workflow Wizards

 Hopefully you have first read Part 1 of this series and know about “Mary” and the gremlins called Workflow Wizards. In this blog post we’ll look at how Mary uses her tools to get more done without wasting time.

 Today is Wednesday, July 13thand Mary takes a quick look at her Collections Calendar, she notices that there are no high priority calls scheduled. There is a Review for Payment reminder scheduled for ABC Company and there are 125 collections letters due for new “Level 1” clients that have just appeared in Collections for the first time from the Workflow Wizard. Mary quickly checks ABC Company, clicks on the Billing-Payment History icon and notices a payment for $85,000 was received this morning. Mary knows that the Collections software will automatically send a “thank you for your payment” email to the client and there is no further follow up required from her. The Workflow Wizard has automatically updated the status of ABC Company, taking it out of Collections and canceling the remaining activities on the Collections Calendar. In this case the Workflow Wizards automatically remove clients from the collection process, saved all the history and deleted any scheduled follow-up items from the Calendar.

 Mary needs to send out 125 highly specific mail-merge collections letters and personalized Reminder Statements. She clicks on her Mail-Merge Workflow Wizard and selects a predefined business rule that states “for all clients/matters where the AR balance is both over $2,500 and

30 days past due” and where the “matter is classified as a Wills and Estate matter.” This business rule will send a Collections letter or personalized Reminder Statement to the collections contact for each client. Mary just clicks “run” and within a few moments the screen

shows that 85 mail merge letters are waiting to be printed, and 40 emails with letter attachments are queued to be automatically sent out. Mary knows that each client file shows which clients get hard-copy letters, which get emails with statements attached and which clients never get letters through the automated Workflow Wizard. She also knows that some clients specify that image copies of the outstanding bills accompany any letter or Reminder Statement which will be automatically generated by the system. Upon completion, the Workflow Wizard logs a note into the client file indicating the collections letter was sent today by Mary Mailing Wizards automatically generate customized mail merge collection letters, reminder statements or emails based upon firm defined business rules.

 Mary remembers how difficult all of this use to be.

Before Workflow Wizards Mary wasted time trying to determine who to call, had no set pattern, mistakenly called clients who had just paid and found it difficult to track past collection activity. In addition she had no way to email or send out collection letters. Needless to say, the firm was frustrated too not meeting their collections forecast. Mary now likes her job and is highly motivated to exceed the firm’s expectations. She is proud to run her report each week for the Executive Director showing her collections activities and best of all, the RESULTS.

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Categories: Best Practices, Financial Management, Practice Management, Productivity, Technology, The Legal Market

Mary is a Cash Collecting “Machine” – Part 1 Where does She Spend her Time?

By on July 14, 2010

Automating the Law Firm Cash Collections Process – Workflow Wizards 

The environment for law firms today is quite stressful, rates are under pressure and clients aren’t paying. Resources are tight and the staff is always overworked. Thank goodness the firm has “Mary”.  Mary is the firm’s only collections person. She has other responsibilities, of course, but she is literally a cash collecting “machine”. She is so well organized and has “trained” the clients so well that the firm has substantially reduced its accounts receivable. Clients pay bills within 45 days and the firm has consistent and predictable cash flow. Law firm administrators find it increasingly difficult to manage the collections process with relatively little staff and old fashion tools like spreadsheets. By automating the cash collections process with Workflow Wizards, a firm can simplify complex tasks, increase productivity and most importantly, improve cash flow. Workflow wizards are like little gremlins that run on your time and billing server first looking at your firm established  business rules, then scurry through the database to automatically carry out the rules, in this case collection rules.

Collection Workflow Wizards can:

  1. Select clients that need attention and assign collections activities.
  2. Determine clients that no longer require attention.
  3. Automate the sending of collection letters or emails and set further follow-up activities.

The first challenge is to maximize efficiency. Of the 2,500 clients that show up on the firm’s AR report who should Mary start calling?

Here is what Mary does.

After settling in with her first cup of coffee, Mary checks her Collections Calendar for today Monday, July 12thand notices 15 new “first” calls and 6 new “high priority” calls have been scheduled. These collections calls were automatically generated when a Workflow Wizard last searched through the accounts receivables database and compared the results to the firm’s business rules. Clicking on the first high- priority status call, Mary quickly scans the previous collection notes which includes a list of past calls and collection letters and then proceeds to call the client contact at ABC Company. She quickly checks the client’s current financial information and notices there is currently over $25,000 in unbilled fees and $85,000 in AR over 60 days. Mary is trying to collect the $85,000 from ABC this week. While speaking to the client contact and reviewing past collections calls and the open balance that are easily stored in the system.  ABC Company agrees to issue a check for payment in full before the end of the week. Mary logs this in the collections notes, clicks on the email icon and confirms the discussion in an email message to the client. Mary also quickly enters a follow-up review in her collections calendar for two days later to insure the payment has been received.

In this case a Workflow Wizard determined a client met the criteria for a “high- priority” status, and inserted a “first call” into the collections calendar. The client is now labeled as “in collections”.

Mary  just loves her job and her gremlins.

We’ll look at more Workflow Wizards in my next blog posting.

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Categories: Best Practices, Financial Management, Productivity, Technology, The Legal Market
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