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Where’s the Money – Keep a Regular Billing Cycle to Keep the Money Coming In
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Saturday, August 4, 2012

By Peggy Gruenke, COO Godbey & Associates

From a previous post, not only is an informed client a happier client – they also tend to pay on time and keeping on the theme of building great client relationships to build a profitable practice – if a client gets a bill each month and pays each bill every month, you have yourself a good client relationship.
I my previous post, I described 3 types of clients in relation to getting paid: 1) Clients on retainers; 2) hourly billed clients; and 3) clients who are habitual late payers. Today I am talking about type 2 clients. These clients seem to be consistently paying as long as the invoices are getting mailed on a regular monthly cycle and there are no large chunks of previously unbilled fees showing up on an invoice. Clients don’t like these surprises and they will perceive this as a breakdown in communication.

In your initial client meeting, in addition to discussing the hourly billing method, you should be including a discussion about the frequency of invoices, when they can expect to receive their monthly bill and payment terms. Set the expectation. Spell it out in your fee agreement, and don’t cause your own collection problems by failing to explain your billing and payment policies at the beginning of the engagement. Edward Poll published an article about getting paid that is worth reading: http://apps.americanbar.org/lpm/lpt/articles/fin09061.shtml

Be consistent – mail the invoices on the same day each month. Your fee agreement should include reference to when your clients will receive their monthly invoice. This clearly communicates the expectation of being paid for your legal services. The language below can be included in your fee agreement:
• You will receive a monthly invoice around the 15th of the month. If you prefer a different billing cycle, please let us know so we can accommodate your request;
• The invoice will include both fees and out-of-pocket expenses;
• Your invoice is due upon receipt;
• Balances which remain unpaid for more than 30 days after the date on the invoice will be charged interest;
• You are expected to keep your account current and if your account is delinquent for an extended period, we reserve the right to withdraw from representation;
• For payment, we accept cash, checks, and credit cards.
A large chuck of unbilled time showing up on an invoice is a collection problem waiting to happen. The client may have paid the February invoice and now two months later, more time from February shows up on a bill. This creates 3 problems:

1. It is difficult money to collect;
2. Opens the door for the client to question this work;
3. In order to keep the client happy, these fees tend to get discounted or written off.

So, as part of your billing cycle, review your WIP monthly to avoid getting a call from a client and risking not getting paid for the valuable work you did.

A good billing process, whether you do it yourself or delegate it to staff, is vital to maintaining the great client relationship you set out to establish during the initial client meeting. One indication of a great client relationship is when the client’s account receivable is up to date. The client is happy and finds value in the legal services you are providing. Delinquent accounts generally indicate that the client is not happy and you most likely will not get paid without devoting time to getting it collected and further straining the relationship.
By the way, this is a good time to mention the value of conducting client surveys while you are actively working on the case. More about this in an upcoming blog.




 
 

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