Law Office Management
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Spring Cleaning: Collecting Old A/R

By Patricia Yevics
Director, Law Office Management
Maryland State Bar Association, Inc.

Collection problems do not exist in vacuum. You do not have a good client one day and then suddenly "poof" he/she turns into a deadbeat. Clients who pay regularly start when you make a decision about what clients to take, your fee agreement, your communication with the client and your billing process. Listed below are some tips that you can start to use if you want to improve some of the problems that you have collecting some of your accounts receivable. If you begin to use some of these techniques and continue with them, you can improve your collections and cash flow. These tips will work regardless of whether you are a solo or in a small firm.

Unfortunately even when we do everything right , we still have a problem collecting a fee. You must be diligent when dealing with your accounts receivable. You must make certain that you review your aged a/r on a weekly basis. In small firms, everyone should understand the importance of collecting the accounts receivable.

As with billing, time is of the essence. Statistics show that an invoice over 60 days has only a 70% chance of being collected in full. After 90 days the chance of collecting the invoice in full drops to 45 % and after 120 days, it falls to 20%.


All firms should be using one of the time and billing products available for solo and small firms. Learn about the reports that are available and use them. You should be able to generate the following information from your time and billing system on all of your clients and you should review this information regularly:
1. How much each client owes you in total and on each separate matter
2. How much has been billed to date
3. What is total work in progress and how old is the work in progress
4. How much work remains to be done on this matter/client
5. What is the payment history of this client

6. Your fee agreement with the client
7. Other factors such as whether or not the client is a fantastic referral source or is the brother-in-law of the president of your best corporate client.


Concentrate your efforts on your current clients.
We all have clients and former clients that we have allowed to get too far behind. We should not allow our past errors to prevent us from making certain that we allow our current clients to get too far behind in payment.
Develop a collection policy.

The policy should be simple to administer and enforce. It should address what should be done when a client goes past 30 days, 60 days and 90 days. For 90 - 95% of the cases, the process should be automatic. It can be a simple as sending a letter after 30 days to determine if there is a problem or having an office manager contact a client. Keep in mind that you may have to have two separate policies - one for new or current clients and one for clients that have serious a/r problems. It is unrealistic to think that if a client has been a problem for some time that simply putting in a new policy will get the client to pay more quickly.

Consider taking something for old a/r if you can get cash in the door immediately.

If an a/r is over 6 - 12 months old, it is unlikely you are going to collect anywhere near 100%. Consider 50% if the client agrees to pay immediately.

Communicate with clients.
Do not avoid discussing collection of fees with clients. If you are providing quality legal services and are charging a fair and reasonable fee, you should be paid for those services. If you choose for whatever reason, to do the work pro bono, then the decision should be yours and not the client's.

Contact Clients When They are Late Paying
Have someone in your firm or if necessary a part-time person hired just for collection to contact clients when payment is past 30 days or when they do not live up to a payment arrangement. Follow up is the key. If the client knows they are going to be called they are more likely to live up to their obligations.

When Phoning for Payment, Make Certain You Contact the Person Who Can Authorize Payment
Regardless of who in your office does the phone or mail contact, make certain you talk to the right person. It is no good to talk to someone who has no authority to approve payment. This will slow the process.

Stop Work if Clients Do Not Live Up to The Fee Agreement
If you monitor your a/r regularly, you will catch payment problems early enough to withdraw from representation.

Consider Taking Credit Cards
The Maryland State Bar Association has a plan with MBNA for acceptance of credit cards. For more information, contact MBNA at 800-526-8286 and tell them you are a member of the MSBA and you want information about accepting credit cards.

Consider giving a discount for paying with 15-30 days
This will speed up cash flow if that is an issue.

Depending on the Client, Find Out When They Cut Their Checks
This works more for business clients than for individuals. Some businesses cut checks on the same day every month. If you can find out that date, make certain that your invoices are mailed to coincide with that date.

If You Agree to a Discount, get a Quid Pro Quo.
If you agree to discount an invoice to get quick payment, consider saying something like you will agree to reduce it by $75.00 if payment is made immediately.

Consider Hiring a Part Time Person to Monitor Your A/R.
This person's sole responsibility will be to contact clients. He/She will meet with you to discuss problems and then given the task of contact all clients with collection problems. This will be money well spent.

Consider Handwritten Notes on Invoices to Speed Collection
This may work to "embarrass" clients into paying the invoices on time.

Monitor Your A/R Weekly. Age Your A/R Monthly.
Today's time and billing systems make it very easy to run an accounts receivable weekly and to age it monthly. This will allow you catch problems early.

Monitor Collections and Deposits Daily
Know which clients have promised to pay and when. You can use MS Outlook to keep an automatic list of when payments are due. Enter the information and the date the payment is due and it will remind you on that date.

If You Have Employees Make Certain They Know Your Collection Policy
Employees are fully aware of those clients who do not pay. It is very important that all your employees know your policy and your firm's commitment to it.

Good management of our firms will result in quality service and satisfied clients who will value your effort and be willing to pay you for it.

On the Maryland State Bar Website are some forms that will assist with collection issues. There are three collection letters, a sample firm collection policy, a list of questions to ask when contacting clients for payment and some daily cash flow reports.

Go to Articles and print the article entitled Collection Forms. If you would like the forms faxed to you, please contact me at 410-685-7878 or 800-492-1964, ext 3039 and clearly leave your name and fax number if you get the voice mail.

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