Law Firm Cash Flow

Don’t Let Dams Obstruct Your Firm’s Cash Flow – Part 3 – Communicate

 

Law Firm Cash Flow

Are you comfortable communicating with your client about money?

Many attorneys are comfortable communicating with their clients about their case, but reluctant to talk about money, from project costs to outstanding receivables. With the demand for legal services trending down, communication with your clients should be increasing.

TALK to your client

  • Be selective up front. Don’t take on clients who seem reluctant to pay a retainer or accept the terms of your engagement letter.
  • Listen for behavior clues. Are they complaining about a previous experience with an attorney? Are they sharing their financial hardships? Are their expectations realistic?
  • Don’t be a rate “gifter”
  • Set the client’s expectations up front. As discussed in Part 1 of this series, use an engagement letter always and collect a retainer upfront (Part 2).
  • Don’t assume your client has read (or understood) your engagement letter; sit down and review it with them.
  • Always prepare an estimated budget for each matter, be sure to update the budget monthly.
  • Talk about the anticipated costs, both fees and expenses with your client before you start the engagement.
  • Run a credit check.
  • Ask for a personal guarantee.
  • Before starting a matter, apprise your team of the expectations, goals and budget for the case.
  • Keep your client updated. Regularly communicate with your client about where the fees and expenses stand against the estimated budget.
  • Keep your team updated. Everyone in the firm that is involved in the case should know what the budget is and how the firm is performing to the budget.
  • Remember, good clients expect to pay your bills. Call them when their balance goes past 35 days. Invoices are not like fine wine, they don’t get better with age. If an invoice is over 35 days, you probably have another 30 days in WIP.
  • Find out now, what is going, instead of waiting until it is too late to recover your fees and costs.
  • If you are not comfortable asking for money, have your accounting or collection department make the call. Afraid of what they may say, sit down with them and create a script that is comfortable for you.
  • If you are not in the business of lending, then take credit cards. Don’t worry, about the 2-3%, as the invoice ages, you will have already lost that.
  • Don’t worry, clients, who don’t pay, don’t leave. Why should they. They like free.

 

What is a Rate “Gifter”?

 

Law Firm Cash Flow

Are you discounting your rates?

Rate “Gifters” are attorneys that discount their rates up front. Sometimes they don’t have the confidence; they just don’t believe that the value they will create is equal to their standard rate. Or they may be competing for a project and feel it is necessary to drop their rate to gain the work. The client may or may not be aware of the discounted or “gifted” rate. Either way, it becomes an experience for not only your client, but the firm as well. This experience begins to foster beliefs within your firm about your firm’s billing and collection practices and these beliefs will drive future actions.

Remember, you create your firm culture by the way you think and act. Your culture creates your firm’s results.