October 2016 (revised from original post) Peggy Gruenke | Originally published in Attorney at Work.
The year end is right around the corner, along with the holiday season. So, what do you really want for a holiday gift? How about getting paid for the work you did during the year and focus on year-end collections.
The holidays can be extra hectic for lawyers with the scramble to get money from clients before year-end and tax planning with your accoutant. Most law firms operate on a calendar year and are run on a cash basis, meaning work isn’t counted as revenue until clients pay. If you are a partner or even an associate, your compensation may be tied to the amount of money your firm collects on the work you billed. If you are a solo, you know all too well your compensation is directly tied to how much you collect on invoices.
Also during these last few months of the year, there’s typically a slowdown in the number of new cases for many practice areas — divorce, bankruptcy, estate planning, real estate — as people begin to prepare for the holidays and put certain personal and business matters on hold.
The result? A collections sprint as the year closes. Law firms deal with it every year — a large percent of revenue is collected in the last three months of the year. Could better collection procedures be put in place to avoid this year-end ritual? Of course! But let’s focus on tips to help you get more money in now.
The Collections Plan: Start With Over-Ripe Accounts
Now is the time to look at past-due accounts and figure out where you are leaving money on the table. The tool you will need to assist you is your “aged accounts receivable” report. I suspect this might generate one of the following reactions from you:
- Confusion, as in “Crap, do I even have this kind of report?” (Add “buy accounting and practice management software” to your holiday shopping list!)
- Panic when you see how very few past-due amounts await collection, and how little cash you have on hand. (Be happy the clients you have actually paid you. Next year, get more clients.)
- Frustration when you realize how much time collecting past-due money is going to take.
- More frustration because you haven’t set up the ability to accept credit cards for client payments. (Eliminate this frustration now and setup credit cards: Here is the link to LawPay.)
- Disappointment that you let past-due accounts get to this point.
- Relief that you have money to collect!
Putting emotion aside, here are a few things you can start on — this week — to boost your year-end revenue number. Continue reading