Solid cash flow practices begin with asking for at least some of the money upfront. If you took my suggestion in Part 1 and established the case budget, you should have a good idea what the costs will be. If a prospective client is reluctant to pay you a retainer at the onset of the engagement, you can easily guess what collecting will be like once you start billing them.
Get your MONEY UP FRONT
Retainer – Retainer -Retainer
- Require a retainer on all files
- Set your retainer high, you can always reduce it, but it will be very difficult to increase it
- Analyze to determine if there is an area in your firm’s practice that struggles with collections – increase the upfront retainer for that practice area
- Require a retainer at minimum for estimated advances
- Use evergreen retainers whenever possible
- At minimum collect a retainer to be applied to the final bill
- Don’t start working on the engagement until you have received the retainer and signed engagement letter
- Follow proper state guidelines – most state ethics rules require firms to place the retainer money in a trust account
What is an Evergreen Retainer?
An evergreen retainer is a retainer that stays “evergreen.” In other words, there is an agreement (in your engagement letter) that states that the client will replenish the agreed upon retainer after an invoice has been issued and current retainer funds have been applied. The client is then billed for the difference between the agreed upon “evergreen” retainer and the balance in their retainer account. The intention is that the retainer on hand never dips below the agreed upon amount. And of course, this all needs to be detailed in your engagement letter.
Remember, you train your clients over time. If you create the right experiences for your clients up front, they will come to believe that you are serious about your firm’s collection practices.