Tuesday, April 13, 2010

Good habit: Manage Your Receivables

You knew this was coming. Once you have your time keeping and timely billing habits in place- the next one is to create the habit of managing your receivables. Here's how:



  1. Be clear re when payment is due. Make sure you go over this during your intake process, and include it on your statements.

  2. Review your receivables. Accounts receivables should be part of your monthly financial dashboard.  Anything over 30 days goes into 15 day increments until such time as you deem it uncollectable. Make this a standard practice and you will collect more of what you earn. Focus creates results.

  3. If a bill is not paid in 30 days, start your collection process. Don't assume a client has decided not to pay the bill, he might just be lousy at paying bills. Consider this your gentle reminder, do not think of it as a dire measure.  Foonberg suggests you use the words "Total Now Due and Payable" on the original invoice and "Total Now Due and Overdue" appropriately. Add a hand-written "thank you" note  to invoices as well.


Your collection process is going to be based on your clientele and your style. You should lay out steps on a calendar, and follow them for every client- steps that you discuss in your intake conversations.  Here's a sample collection process:



  1. After 30 days and until it is paid, a monthly overdue invoice is sent as part of the billing cycle.

  2. At 45 days, check to see if payment has been received, if not, a phone call reminder is made. This call might be made by the lawyer, or by a designated representative. The objective is to work with the individual to resolve the situation before you send the overdue invoice that will go out at 60 days.

  3. At 60 days, the lawyer follows up on the overdue invoice personally, a call or visit, with the objective of getting a commitment to pay. A followup confirmation with the payment agreement and timeframe should be sent by the lawyer. (email or hard copy)

  4. If you still aren't paid, continue to repeat the personal contact until you have either received full or some negotiated payment, or you decide to write off the amount. If you know collection is a long-shot, you have a write-off to make. The decision to go into arbitration or to take any legal action is outside the scope of this post.


The longer you wait to collect, the less likely you are to collect. It's a fact. Billing consistently and acting on unpaid invoices will ensure your clients are clear on what they owe. Uncollected fees aren't income. As soon as you start acting proactively to manage receivables, you'll improve your realization rate.  If you hate doing it, outsource it. 


The real goal is to have an effective client selection process, to manage client expectations about fees and create such high-quality invoices that your clients pay immediately. If your clients are in the habit of paying, you don't need to maintain this habit of managing your accounts receivable! Until then...