It’s Your Money—Go and Get it: Tips for Collecting on Your Outstanding Receivables
As the end of the year approaches, many attorneys find themselves in the uncomfortable and laborious position of trying to figure out how to collect outstanding receivables. This particular aspect of the practice is not the glamorous life that many attorneys dreamed of when they passed the bar, but it is absolutely critical to their business and their bottom line. An attorney’s end-of-year goal should be to not leave any money on the table.
When a client reaches out to their lawyer and says that they don’t have the funds to pay their balance due (or they just simply refuse to pay their bill), law firms will typically (1) enlist the services of a debt collection firm; (2) keep the outstanding balance on their books and hope that the client pays someday; or (3) write-off the debt at the end of the year. Many lawyers, fearing unwarranted reprisals from their clients (and cutting off possible referral sources), are wary of option one. The second option, while charmingly optimistic, is not likely to yield good results for the attorney. In my experience, most firms will utilize option three above and just write off the balance at the end of the year.
But is there a better option other than just absorbing that debt? All hope is not lost on collecting from clients whom you thought would never pay their outstanding invoices—even those receivables that have been left sitting unpaid for the better part of the year. The key to knowing how to collect outstanding receivables is to first understand the best approach to handling receivables in general.
Also called “A/R,” meaning Accounts Receivable, this term in the legal world refers to balances left unpaid by an attorney’s clients. An “Aged” Account Receivable is typically a client who has not paid their bill for a specified length of time - let’s say they haven’t made a payment in 120 days by way of example. Depending on the age of the receivable, you will need to tailor how you attempt to collect the payment.
So what should happen when a client will not pay their invoice? What if you know first-and that a marital estate is out of money? How are you supposed to squeeze blood from a turnip? Are these unpaid invoices even worth chasing down?
The simple answer to the above: do not give up! There are still some creative ways available to you to collect on these accounts. The e-book, Finish Strong: How to End the Year on Better Financial Footing, provides you with a step-by-step outline of how to collect outstanding receivables—from assembling a contact list to email templates to what technology you should employ in your quest to collect.
In addition, you will be given some tips and tricks to start off the New Year with better, more streamlined practices. The hope is that you will never have to utilize the tools presented in this e-book past the end of this year. You should use the tools presented therein to put as much money in your pocket as possible this year, and then take appropriate measures to make sure you don’t end up in the same receivables deficit as the current year.
Download the e-book for free at https://www.lawpay.com/support/resources/e-books/law-firm-cash-flow/
I hope you take advantage of the lessons that I (and many other attorneys) have learned with regard to collecting on outstanding balances. And remember, this is money that you already worked for, so get after it!
Attorney at Law; Legal Content & Compliance Manager at LawPay