As the end of the year approaches, law firms typically ramp up their year-end fee collection efforts. Many law firms in the United States operate on a cash basis and adhere to a calendar year, which requires fee revenue to be constructively received before December 31 to count as income for the year. Given that billing and collection metrics play a crucial role in partner compensation, there is a strong incentive for partners to maximize collections before year end. However, this process should be strategic and not rushed.

There are several effective techniques that can enhance a law firm's performance in billing and collections, ensuring a smoother year-end process.

Support from firm management

Firm management can significantly aid attorneys in the fee collection process by:

• Offering financial incentives: Provide partners with incentives to collect fees in October and November, reducing the pressure in December. These incentives are often less costly than client discounts.
• Providing administrative assistance: Equip partners with support for issuing invoices, tracking collections, and securing payments.
• Highlighting financial consequences: Emphasize the negative financial impact that poor billing practices can have on the firm.
• Encouraging client communication: Urge partners to address any potential billing concerns with clients early, ensuring that negotiations around discounts happen prior to invoicing for more effective collections.
• Facilitating client payments: Implement processes that simplify payment for clients, such as obtaining authorization to charge their credit or debit cards monthly and regularly updating them with statements reflecting payment history and outstanding balances.

Strategies for continuous improvement

To enhance billing and collections for the coming year, firms should learn from past experiences and establish proactive policies, such as:

• Clear engagement letters: Ensure that executed engagement letters outline estimated fees and payment terms clearly.
• Payment plans: Offer structured payment plans for clients who prefer them, documenting these agreements in writing.
• Retainer agreements: Request retainers that are appropriately sized for the scope of the work.
• Discussing invoices with clients: Review recent invoices during client interactions to address any questions regarding time entries or expenses, potentially accelerating payments.
• Frequent billing: Consider billing clients biweekly through year-end, as smaller invoices are often easier to pay and reduce the risk of write-offs.
• Remote time entry software: Utilize applications that enable timekeepers to log their hours remotely, reducing lost billable hours.
• Regular review of receivables: Establish a routine for assessing work in process and accounts receivable to identify what is truly billable and collectible.
• Utilizing non-lawyer support: Increase reliance on non-lawyers or outsourced providers for billable work to reduce service delivery costs.
• Proactive client engagement: Be alert to signs of payment issues, such as missed or reduced payments, and reach out to clients promptly to offer assistance.
• Revising billing practices: Adjust billing strategies for consistently late-paying clients or reconsider their retention.
• Persistence in collections: Maintain a diligent follow-up schedule through emails and calls until payments are secured, or payment plans are established.

Throughout this process, firms must remember that they are simply seeking what is rightfully owed. The key to successful communication is tone; it is essential to be courteous and understanding while also being firm. After all, effective collections are vital for the firm’s financial health, and a degree of persistence may be necessary.

If you would like to learn more about how your law firm can enhance its billing and collections processes to achieve a smoother year-end close, please contact Citrin Cooperman’s Law Firms Industry Practice or Chris Imperiale.