Is Your Law Firm's Cash Flow Jammed Up

Don’t Let Dams Obstruct Your Firm’s Cash Flow – Part 1

Beavers and dams have an important place in nature, but they don’t have any place in a law firm practice.

Law Firm Cash Flow

Law Firm Cash Flow

Bad habits, poor leadership, weak or non-existent policies and procedures, lack of compliance and accountability, act like a dam and can obstruct your firm’s cash flow.   The word flow itself, suggests a movement from one point to another.   Small twigs, can build into large obstacles, impeding a firm’s cash flow. Over the next few blogs, I will be providing suggestions, best practices and thoughts to keep your firm clear of obstructions.

So where do you start? By getting those twigs out of your head!

Start with your MINDSET

  • Culture change always starts with you; you can change only yourself. Then model the way.
  • Leadership is responsible for changing the way people think and act. It is essential they establish collection policies and procedures, enforce and reinforce these polices and hold people accountable.   They must, however, hold themselves accountable first.
  • Remember, change takes time. Appreciate and support small steps – don’t expect large leaps. Practice “SSS” – Small Steps to Success, but always think big.

Improve your ENGAGEMENT letters:

Be sure your firm has a standard engagement letter or standard paragraphs that all engagement letters must contain on the firm’s billing and collection procedures and expectations. It should explain in clear language, how the client will be billed, how the fee is calculated, payment terms, and accepted methods of payment and the consequences of non-payment.

Be sure to INCLUDE:

  • Retainer requirements
  • How the client will be billed and how the fees are calculated
  • How often the client will be billed and for what (retainers, fees, expenses etc.)
  • Explanation of the firm’s client advance policy
  • Estimated budget, subject to revision
  • Rate increase policy and procedures
  • Payment terms – always Due Upon Receipt
  • Accepted methods of payment (be sure credit cards are one of them)
  • Consequences for failure to pay – such as a firm’s withdrawal and stop work policy
  • A clearly defined and agreed upon scope and goals of the representation
  • Dispute resolution procedures

 FIND out:

  • What your client’ billing requirements are up front (i.e. task codes, bill formatting, electronic filing, etc.)
  • Identify who the invoices should be sent to
  • When payable checks are run (i.e. 15th and last day of the month)
  • Identify their preferred method for receiving the invoice (email, mailed, FedEx etc.)
  • Your engagement letters comply with the ethical rules for representing a client
  • Each attorney to review the engagement letter with their client
  • Get personal guarantees when you can
  • Signed engagement letters before starting work
  • An annual review of your firms engagement letter
  • Updated engagement letters to be sent out annually to all your clients
  • Use legal jargon, be clear concise but detailed
  • Start working on a case without a
  • Signed engagement letter
  • And a retainer up front

REQUIRE:

  • Your engagement letters comply with the ethical rules for representing a client
  • Each attorney to review the engagement letter with their client
  • Get personal guarantees when you can
  • Signed engagement letters before starting work
  • An annual review of your firms engagement letter
  • Updated engagement letters to be sent out annually to all your clients

 DON’T:

  • Use legal jargon, be clear concise but detailed
  • Start working on a case without:
  •        A signed engagement letter
  •        And a retainer up front

Remember, you train your clients over time. Keep your cash flow moving, by starting with solid engagement letter practices. Visit the American Bar Association and your local Bar Associations for more engagement letter ideas.

This Post Has One Comment

  1. Pingback: Law Firm Cash Flow and Collections

Comments are closed.