Collecting your money

Every attorney has suffered the disappointment of working hard for a client and then battling to collect the money for legitimate fees earned. Worse still, there are times where you simply have to write fees off. This can be demoralizing and if it becomes a pattern, it can literally kill your business. Naturally this issue affects businesses of all sizes and this article will outline the simple techniques and processes that have, in our experience, made collecting money from clients, so much easier.

How you start influences how you end!

It is no good only focussing on how to deal with outstanding accounts. By this stage it is most often too late and you are already looking at diminishing returns, however good your credit controllers are at collecting money.

The process of successfully collecting money from clients starts with the first meeting:

• Be clear on the mandate and your terms - sometimes (especially in hard times) you are so happy to have a client instructing you, you don't even want to discuss the "ugly" business of how much your services will cost. Do not bury your head in the sand now and hope that it will all turn out ok, because it will NOT.
  
  
  • Don't commit to a final fee or even a fee estimate no matter how simple you feel the matter will be OR no matter how hard the client pushes you. Just tell the client what you do know - the hourly rate you intend charging and the fact that you will account to the client every month. Set the expectation that you require the bill to be approved and paid before you can continue. Explain that this provides mutual protection (he may want to pull out and you don't want to be doing work which he will not or cannot pay for).
    
    
  • If you do "fixed fee" work, it is vital that you record actual time spent on these matters so that you have some science to how accurate your "fixed fee" is over time. Many attorneys mistakenly believe that "what you lose on the swings you gain on the roundabouts". We have found many times over that this is a fools paradise. It is also often the case that these "fixed fee" arrangements devalue over time as they are not revisited enough and end up being eroded by inflation as well.


• When you open the matter; you should set the fee arrangement against the matter so that you and your staff merely have to record what you have done and don't get confused as to which rate was agreed to.
  
  
• Record fees as you go along. Don't miss things or you end up losing money for no good reason?
  
  
• Make sure you can automate the production of Invoices. If your staff has to spend a lot of time manually drafting up invoices/fee note advices at month-end, you will never keep all of your promises to all of your clients, in terms of accounting to them monthly. By not getting all your accounts out on time, you run the risk of the account "bloating", which makes it difficult for the client to pay.
  
  
• Ideally you should send statements to clients which show all movement; payments etc on their accounts. Invoices are for work done and Statements give you the opportunity to communicate with the client. This also allows you send multiple invoices in a given month and then summarise the position via a Statement.
  
  
• Do not make the mistake of "handing off" the invoicing process to your accounts team. Why on earth should accounts do the invoicing?
  
  • Do they have the relationship with the client?
    
  • Do they know the intricacies of the mandate?
    
  • Do they understand when it is the right time for the client to pay? Will they be able to handle the client with care if he gets upset?
    
  • Managing fees from a central point (like in the accounts department) adds zero control to the process and merely results in duplication. The illusion of control exists when you believe that accounts will somehow do a better job of recording fees and then invoicing them? Examine the logic and you will find that accounts will only post what your personnel tells them to post. They will only invoice (quite blindly) whatever you have put through to them - so where is the added control? All I see is unnecessary duplication and month-end administration bloat!


• Wherever possible, try to keep fee earners (with the help of their support staff) invoicing clients. This way it will be a lot easier to control the collection of the money.
  
  
• With the correct systems in place, it should be a very simple process for fee earners and their support staff to render accurate invoices, on time. The accounts team should be focussing on the big picture by drawing reports showing the outstanding invoices by department/fee earner and then "managing" the entire firm in a coordinated effort to collect the money in the most efficient way possible.

1. On inception, a matter is opened in GhostPractice. Based on an agreed mandate, some key settings are loaded on that particular matter. These are selected via a simple drop list or tick box and take no time at all, with many options available to suit different matter types. The beauty is once you have selected the matter settings, raising fees becomes simple and quick. Here are the options you will have on each matter:
   a. What tariff will be referenced to bill the client (High Court; Magistrates Court or Non-Litigious Tariff).
   b. What is the fee arrangement on this matter (Party and Party; Attorney Client; Attorney Own Client or Fee Earner Rates)
   i. If Party and Party or Attorney Client, will the client be charged a surcharge above the tariff or be given a discount below the tariff?
   ii. If Attorney Own Client or Fee Earner Rates; you can choose between a range of 4 rates (High; Normal; Low and Subsidised).
   iii. Note: Each person in the practice is loaded with 4 different hourly; page and folio rates and you can also configure your own "fee codes", should you not wish to use the standard tariff codes provided.
   c. Finally you select how you would like this particular matter to be handled from an Invoicing perspective:
   i. How often (Daily or Monthly)
   ii. Automatic or at your discretion?
   iii. Invoice automatically only if there is trust money available on the matter?
   iv. Send an automatic Pro Forma if there is no trust available?
   
   
2. After selecting the above settings (please note you can set Department and Client Defaults to speed up the process), you are now ready to easily record fees on all your matters:
   d. To record consulting; telephone fees is simple because all the settings are linked to the matter. All you need do is record very simply what you did.
   e. To record fees for documents and emails could not be easier. You generate the email or letter from within GhostPractice and the system prompts the user for the number of pages/time or merely records an automatic unitary fee as the settings or fee code dictates.
   f. If you receive an email in Microsoft Outlook, you click one button IN OUTLOOK to save the email to the matter, and a fee is raised in the same way without you ever having to leave Outlook.
   g. You and your staff can all bill for what you have done, as you go along in the matter.
   
   
3. At any point in time, but usually at month-end, you can have the automatic invoices generate via the system OR produce invoices on-demand. The key is it does not take any extra or duplicated effort. Merely select the matter and all transactions not yet invoiced display on once screen. You are taken through an easy to use 6 step wizard which gives you various options on how you want this particular invoice to look!
   
   
4. If you are not sure how the client will react to the account or anticipate some negotiation, you can run off a Pro Forma account and submit this to your client. The fees will remain as unbilled and have not yet attracted VAT. If you then conclude negotiations and the client agrees to pay, you can make the necessary amendments easily and quickly yourself and render the invoice to be paid!
   
   
5. All invoices are stored electronically against the matter. This is very handy when the client uses that "old chestnut"…"I seem to have mislaid the invoice, do you mind sending it again?" With GhostPractice you can call up his/her matter; click on the Invoice and send it via email while you are still on the phone with the client….no reason not to pay now!
   
   
6. A monthly statement is also emailed to the client as follow up to reflect a summary of outstanding invoices; as well as any payments they have made and the status of their account.

• Standard Age Analysis: This report should (as it does in GhostPractice) have multiple filters so you can view the analysis by fee earner; department or client. You should also be able to sort by the age of the debt and the amount outstanding so that you can focus on clear problem areas first.
  
• Age Analysis Including Unbilled/Pending: It is important to evaluate how long fees have remained in the system without ever having been invoiced to clients. Depending on the department and type of matter, your accounts should have clear criteria as to what is acceptable and what should be "chased up" with the respective fee earners and departments.
  
• Unbilled Fees and Pending Disbursements by Matter: This is a more detailed report showing all matters which have Unbilled Fees and Pending Disbursements (i.e. fees and disbursements raised but never invoiced to the client). This report shows detail as well as any trust balances that may be on the respective matters.
  
• Pro Forma's Generated but not Invoiced: It is important to keep an eye on matters where the fee earner has generated a pro-forma for the client and never actually converted that Pro-Forma to an Invoice.