Connections for Success

 

10.05.22

Communication Is Key to Timely Client Payment
Justin L. Sylvan

How regularly do you communicate with clients? Failure to do so might cause a client to become disgruntled and slow down — or stop — payments. Being in touch with your clients regularly will help you gauge a client’s level of satisfaction with your firm’s work. And satisfied clients generally pay their bills.

Related Read: How to Handle Collections and Late Payments

Be clear

The first stage of communication comes when you ask a new client to sign a fee agreement. Make sure it clearly explains all your fees, how they are calculated and states when payment is due. Certain engagements may require an upfront retainer and will need to be communicated with the client. Be clear about the consequences of nonpayment, including your right to withdraw before any work begins.

To make it more convenient for your clients to pay, accept credit card payments or set up an online payment system. Law firms cannot take a one-size-fits-all approach as legal services can be expensive. If your clients do not have the option to pay the way they feel most comfortable, they may walk away and take their business somewhere else. Remember that clients are more likely to pay bills for smaller amounts that are sent frequently than they are if they receive one big bill for the same work.

Be consistent

It is important for your firm to establish consistent rates. Whether this is hourly billing rates by an attorney or flat fee billing rates by projects, present your rates in a format that anyone will be able to understand.

Whichever route your firm chooses to take, it is important to have an open and transparent discussion with your clients during your initial consultations about these billing structures. You can then follow up by reiterating your rates in the letter of engagement that you send to your clients, including clear and consistent messaging throughout about your billing terms, when payment is due and details about whether interest will be applied to overdue invoices. This step may sound simple, but it will set your firm up for future success. It will prove to your clients that you are transparent and will not haggle them on fees. It will set expectations for the client, so they know exactly what they are paying for and it provides a clear roadmap for how much is due and when.

As mentioned, an engagement letter and detailed documentation of work performed should defuse any arguments over fee amounts. Disputes over quality are harder to resolve. If the client’s points are valid, offer to make appropriate amends or reduce the fee. Agreeing to a discount — rather than withdrawing representation — might be a better option for eliminating the issue. This can prevent your firm from paying for collection efforts and help it avoid other legal ramifications.

Also, keep in mind that the American Bar Association’s Code of Professional Conduct states that lawyers are allowed to withdraw only if “the client fails substantially to fulfill an obligation to the lawyer regarding the lawyer’s services and has been given reasonable warning that the lawyer will withdraw unless the obligation is fulfilled.” Some state bars require that you provide pro bono work to the client to fulfill your ethical obligations.

Be firm

The second stage of communication comes when accounts become delinquent. Train your staff to respond to past-due bills quickly because the likelihood of collecting on them decreases as time goes by. If the client is reluctant or unable to pay the full outstanding amount, work out a payment arrangement.

And if it comes down to making collection calls, be diplomatic. You do not want to strain an otherwise pleasant client relationship.

Be persistent

The final form of communication comes via your written collection policy. It should specify how to track and deal with delinquent and unpaid accounts. The policy should spell out credit terms, fee agreements and collection guidelines and procedures, including when to use a collection agency.

If your budget permits, consider hiring a collection staff person to help develop a firmwide policy to manage collection efforts. Otherwise, designate someone from your staff to perform these duties. Regular and transparent communication with your clients keeps your firm top-of-mind and ensures that a request for payment does not slip into the junk inbox or is deleted entirely. 

The payoff

While you will likely never receive payment on 100% of your bills, you can get close to that realization rate. By carefully selecting your clients and cases and communicating clearly and consistently, you should see some mitigation in your delinquent accounts.

For more information, contact Justin Sylvan at [email protected] or 312.670.7444. Visit ORBA.com to learn more about our Law Firm Group.

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