Getting paid for your work

by David J Bilinsky

Money, it’s a gas.
Grab that cash with both hands and make a stash.
Words and Music by Roger Waters.
Recorded by Pink Floyd.

You have just finished looking through your aged accounts receivables and even through closed eyes you can see the total amount outstanding. Is it really that large? Don’t your clients like you and like your work? Why aren’t they paying their bills? You start thinking about how to take some action. You groan when you think that most businesses would simply turn over the collection of their delinquent accounts to their lawyer. Write yourself out of this one, Joan Wilder….

One of the hardest things in business is constantly having to ask people for money – at the outset of a file, during the ongoing work on the case, at the end and worst of all, after everything is over but the payment of the outstanding bill.

Here are some suggestions to try to avoid the problem in the first place, realizing that sooner or later, someone is going to slip through the best of systems.

Organize
You will need a collection system and a method to start dealing with receivables. You need to track a number of bits of information regarding your clients and their billings including: a listing of all clients with all contact information, all accounts rendered to them, all payment terms arranged, retainers taken, funds applied to the account, funds remaining in trust, interest charges accrued, balances outstanding and all collection attempts (letters, phone calls, personal visits, referrals to collection agents and the like).

Be Proactive
Prevent payment disputes and complaints before they happen by setting up a system to verify that invoices are accurate and services were delivered as promised (timeliness, results, satisfaction, within budget), before the bill goes out. If you anticipate any difficulties along any of these parameters, meet with the client in person and seek to resolve them – now rather than later. Age may improve cheese and wine but it does nothing for bad debts.

Take Plastic
Accept credit cards or debit cards. Both cards allow instant payment before the client has left the office. Any credit card fees outweigh the cost of not being paid on the account by transferring the credit risk entirely to the card company.

Get it in Writing
We all have file-opening forms and written client retainer agreements, right? Your file-opening sheet should seek to gather as much personal information as possible – home and work address and contact info (mobile, home, office telephone and fax numbers, e-mail addresses), bank, employer, driver’s licence, etc. Your retainer agreement should set forth in no uncertain terms your payment policies, retainer replenishment, interest on outstanding accounts and payment terms. Make it clear that you will ethically seek to remove yourself from any file where the client fails to honour their payment terms. Have the clients sign this retainer agreement before they leave and provide a copy for their records. If the client is unable to fit within your standard payment options, have them sign a monthly payment schedule that you and the client can both agree upon.

Be on Top
Once your system is in place, you need to review reports generated by your accounting system and take appropriate action. Someone in the office should be responsible for monitoring the system, sending out monthly statements and drawing all exceptions to your attention. Once a matter is in your hands, be decisive. Writing letters on overdue accounts is probably the least-effective method of collection. Meet your creditor in person, and be forthright in the facts – that the account is overdue, that you have a signed retainer agreement and ask how they intend on paying the bill. If the answer is not satisfactory, cut your losses and exercise your right to get off the file (ethically, of course). If your client has a concern regarding the legal work, solve it now as it will only come back to haunt you. If the account is small or it is inconvenient to meet your client, call them (and document your meeting or telephone call in writing). Use collection letters only as a last resort.

Follow-through
Completed a file? Is the bill out yet? There is a proven relationship – the more time that passes between the completion of a file and the rendering of the final account, the less the motivation to pay the account. Accordingly make it a habit to get the bill out concurrently with finishing the file. Call the client to come in for a final meeting and present the bill in person. Discuss the bill and ask for payment - in full – now. After all, if they have no complaints about the bill, they have no reason not to pay.

Make it Personal
When dealing with large organizations, find out who is the appropriate person to receive the invoice. In large entities, a bill can spend days or even weeks kicking around before it finds the right desk – and then it must fit within their payment cycle (usually large organizations cut cheques only once or twice a month). By addressing the bill correctly in the first place you can shorten delays. When dealing with any collection, don’t settle with talking to the bookkeeper – speak to the client.

Use Discounts and Shorten Payment Terms
Consider a two per cent discount if paid within 7-10 days – this works to the benefit of both the payor and payee. Furthermore, there is nothing that says that payment terms must be 30 days – consider shortening your “due” period to 15 days after presentment (the Legal Profession Act prevents you from suing a client for fees until 30 days after presentment).

Squeak
There is an old adage that the squeaky wheel gets the grease – or in our case, the money. While being cognizant of the rights of debtors, call your delinquent client as often as you can and stick to the facts (don’t badger or get emotional – remember you are trying to get something from them, not lecture them on their morals or ethics).

Draft Bills Carefully
Jay Foonberg, a prominent US lawyer, in an article How to Word Invoices that Clients are Happy to Pay states that the most important thing in wording invoices is to list every single document you prepared or reviewed. Use words such as “further” and “continued” to avoid the impression that you are repeatedly charging for work you did once – vary your descriptions to provide a flow of work over time. Don’t bill for telephone calls – confirm the conversation in writing and bill for the confirmation. Show dates on which you provided service but not hours of service (unless your retainer agreement requires you to do this). Always read your invoices carefully before they are sent. Lastly, ask your clients how they want to be charged and where they want the bills to be sent – and follow this.

Don’t flog dead horses
Your time is money – if an account is truly uncollectable – write it off and go on to new matters. Resolve to learn something from the file – why did the debt become uncollectable? Is there something that you could or should have done at the beginning that would have changed the outcome? By learning from our mistakes we can avoid repeating them.

By keeping an interest in your cash flow, you can grab the cash and truly work smarter and not necessarily harder.

David J Bilinsky is the Practice Management Advisor at the Law Society of British Columbia. He can be reached on the Internet at dbilinsky@lsbc.org. The views expressed herein are strictly those of the author and may not be shared by the Law Society of British Columbia.

This article originally appeared in the February 2002 issue of BarTalk and is reproduced here with permission of both the author and the Canadian Bar Association, British Columbia Branch.