Find the Money! How to Collect on Old AR and Avoid the New (Sponsored)

As a solo or small law firm there’s nothing worse than a cash crunch. The situation usually sneaks up on you, then all of sudden find yourself compulsively checking bank account balances, credit card statements, and avoiding social gatherings that require an entrance fee.

Life is no fun when money problems arise, so what can you do to avoid them in the first place?

In general attorneys and business owners do not monitor their Accounts Receivable (AR). Letting one client go into the red, then two, then a handful. Over time stacking up to thousands of dollars in potentially lost revenue. After which, a common misconception kicks in: that it’s impossible to collect on these amounts.

False.

The reality is you have a right to collect the fees the client agreed to, in writing. As long as you have followed a standard retention procedure, have an agreement in place, in which a fee is clearly listed and committed to by signature that is a debt that is owed to your law firm.

Now, we know it seems painful. As if you are staring at a mountain that you have to climb in a single day. Especially because it seems easier to go out and get new business than it does to collect on the old.

But, the reality is…you just need to get to Basecamp 1.

A morning’s worth of consistent attention to old AR balances can bring in a batch of small payments that will boost your cash flow for the week. A couple days later, set aside another hour, and repeat.

Once you get through your first day of calls, you will be amazed at how accomplished you will feel. Not to mention the love your clients will feel when you get them on the phone and explain that you care, and are willing to take a small payment of $100, $200 or maybe even $500 to avoid sending them to collections.

That’s right…collections.

There comes a point when your attempts to collect on old balances will be exhausted and a handoff to a reputable collections firm is necessary. Think of this option as your leverage to handle this internally, also to let your client know you aren’t messing around. Paying for your services isn’t an option. Just like avoiding jail time, or fighting for custody of their children wasn’t an option when they came to see you in the first place.

Value your services, value your time, and value your right to get paid. It’s that simple.

We coach How to Manage a Small Law Firm members and their staff on how to collect on old AR balances while avoiding the new. By instilling a few simple principles in the way they view and deliver services.

• Take the fees you charge seriously; you are running a business. Discounts diminish the value of your services, as does a lackadaisical attitude towards prompt payment.
• Your time is valuable, and you should be compensated for it. If you come to the office to give your services away for free, picture the conversation you will eventually need to have with your children about why you’re unable to pay their college tuition.
• Cut off clients who aren’t paying as soon as possible. The sooner you put your foot down, the sooner they will get the message that in order to work with you, payment is required.
• Call them out when they exhibit a pattern of habitual late payments. Do not let haphazard payments for simple legal services become a ritual of acceptance. You are stealing time away from yourself by creating more follow-up tasks, such as; reminders, additional emails, phone calls, etc.
• Separate yourself emotionally from their situation. At the end of the day, you provide a service. A very valuable commodity that has the power to repair someone’s life, give a family peace of mind, provide a financial fresh start, or keep children together with their parent(s). The more clients you work for, for free actually limits your ability to help the larger population in your community who need help, and have money to pay you.
• Document and follow the same procedure for every client. To help you do so, we are sharing our proven system for AR collection and ongoing management. Learn the sequence, and tone that works best for each sequential call or letter.

At the end of the day, there’s a pot of gold hiding in the calls you don’t want to make. It won’t kill you, in fact just the opposite. Dealing with the situation will make you and your law firm much stronger. So, take a deep breath, get the guide and power through your fears. There’s money waiting on the other side.

Download our AR Handbook which includes our recommended collections call sequence, with suggested language, a formal collections policy, procedure and as a bonus a sample collection letter.

Get the AR Handbook here.

About us:

How to Manage a Small Law firm has built its business on helping small law firm owners grow their organizations from less than $50,000 a year to millions in annual revenue. That’s a fact.

What’s more, is the law firms aren’t just making money, they are building happier lives for the owner and their staff. We believe that building a sustainable law firm doesn’t have to result in depression, guilt, or self-sacrifice. We start with your goals in mind and work backward to create a plan that works for YOU.

Questions, comments, or concerns are welcome. We are real people with real answers, and if you don’t believe us, just ask our clients. They won’t mind.

Find the Money! How to Collect on Old AR and Avoid the New (Sponsored) was originally published on Lawyerist.com.