From:
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Mike
Marget
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Sent:
|
February
1, 2012
|
To:
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Billing
& Collection Committee
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Cc:
|
Management
Committee
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Subject:
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A
Recipe for Billing/Collection Success
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Attachments:
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[None]
|
Most
partners believe the secret ingredient to the law firm’s financial success is
the frenetic, all-hands-on-deck commitment to the year-end billing and
collection effort. This exercise, often dubbed “the Push,” commences sometime
in the fourth quarter, focusing first on deferred billing, then shifting into
high gear with “plea bargaining” – a series of phone calls between partners
(pleading to get paid before year-end) and clients (bargaining for discounts in
return). While this drama plays out annually in nearly every law firm,
over-reliance upon the Push can easily become a Recipe for Disappointment.
Inspired
by the television series Iron Chef America, the following is my Recipe for
Billing/Collection Success. On the TV show, celebrity chefs prepare five
dishes, within 60 minutes, to impress the palates of a panel of judges. In the
business of law, the law firm manager similarly makes use of an assortment of
ingredients, various cooking techniques, copious planning and careful
preparation to blend everything together just right and within the allotted
time, in order to achieve the partners’ highest score – i.e., by meeting or
exceeding financial expectations. While others may espouse slightly different
culinary techniques, I've had many successes cooking with the following recipe.
Good luck and bon appetite!
Step
1. Preheat your firm. Keep the temperature low during the first quarter of the
year. This is prep time. Gather your ingredients. Make your plan.
·
Everyone--
partners and clients alike -- are tired from the the just concluded year-end
collection frenzy. Any attempt to whip them into action at this stage is likely
to flop. However, don't hesitate to encourage partners to revisit continuing
clients who promised certain payments before year-end which did not
materialize.
·
Use
this time frame to distribute month-by-month budgets for billable hours,
billable hour value, fee billing and fee collections. The purpose is to set
benchmarks to ensure the firm produces sufficient billable work at appropriate
rates, to generate invoices throughout the year for collection. Set
stretch-but-realistic monthly goals. For example, if your firm historically
records 15% of its billing for the end by the end of March and 35% by the end
of June -- push those numbers up to 17% and 38%. Do the same for collections.
With luck, these slightly more aggressive projections will lessen the
dependence upon last minute/December results. These targets are your
timetable/benchmarks as the clock ticks down throughout the year.
·
After
this brief respite in January and February, begin vigorously processing
invoices and pursue collections every month until done.
Step 2. Gently begin to stir things up in the second quarter.
·
Produce
reports; talk to everyone; repeat. Which clients are falling behind early?
Which partners are slow to get back into top billing form? Never forget magicians
and lawyers are masters of misdirection. Make sure your reports lead with
issues you wish to discuss first. Use Crystal Reports or Excel spreadsheets to
reorder your typical billing/collection aging data. Separate contents into
Category 1 concerns, Category 2 concerns, and so forth. Don’t give your
partners opportunities to filibuster about on-track clients while glossing over
the problematic ones.
·
No
Iron Chef cooks alone. You can’t do it all by yourself. Good sous chef
candidates are your managing partner or a billing/collection champion who can
spur others to follow by example.
·
Employ
a food processor or pressure cooker to save time. Group therapy sessions on
Saturday mornings can be helpful and enlightening – with everyone explaining
peer-to-peer why something can’t be billed right now or won’t be collected
until…. Peer pressure is a highly motivating tool.
Step
3. By the third quarter it is time to really heat things up.
·
Break
a few eggs, as needed. Not every good lawyer is good at billing and collecting.
Step in (or have the firm step in) as appropriate. Get authorization to have a
staff member contact the client’s Accounts Payable department. If the invoice
is scheduled to be paid by week’s end, no call to the General Counsel is necessary.
On the other hand, if AP doesn’t have the invoice, it may be lost on the GC’s
desk or the GC may have a problem with the bill -- either way, this is useful
information if gleaned early and a follow-up call by partner is in order.
·
By
this date it is important to confirm clients with numerous outstanding invoices
actually have them in hand. Send reminder statements detailing all outstanding
invoices. A client can’t pay an invoice that was “lost in the mail.”
·
Watch
the clock. Verbal assurances should ring hollow. Payment plans for problem
clients should be considered. In egregious situations, recommend an increased
retainer or possibly “firing the client,” if permissible. While individual
partners tend to believe steadfastly in their clients’ ability to eventually
pay, major credit issues are best decided collectively by the firm.
Step
4. By the time the fourth quarter rolls around, every oven/every burner should
be red hot; all the fixings falling into place.
·
Blend
in the Push. Gently at first, start in late September/early October. Increase
speed as time goes by; whip vigorously from Thanksgiving through year-end.
·
Avoid
temptation to over-season things. Discounts to encourage former clients to
pay-up before year end are not bad per se and can be particularly
helpful to squeeze juice from deadbeat clients. However, use sparingly with
clients you intend to continue to representing.
·
Bring
problems to an early boil. Certain users of legal services (insurance companies
come to mind) know big, big discounts on outstanding fees is more likely to be
negotiated in December than September. Address collection issues as early as
possible; letting things simmer for too long creates a bitter taste all around.
·
Keep
track of "the clock" and know the status of each dish. Get amounts
and dates certain as to when payments will arrive – e.g., a check for $10,000
will come via FedEx on Monday; 50% of the amount due will be wired on Wednesday
and the balance on arriving five days later. Follow up is essential. If the
funds do not materialize, notify the billing partner who should contact the
client promptly and get back to you with new information.
·
Countdown
to the bell. Whether your firm uses a drawing of a mercury thermometer or
quantum mechanics to illustrate the gap between current collections and the
year-end target, the important thing is that everyone in the kitchen (firm)
knows how much is still to be accomplished and how much time remains. When the
final bell rings – whether on December 31 or December 37 – the end is the end.
After
all of the work in the kitchen, the chef has earned a fine bottle of wine – or
something stronger if you prefer. Be sure tip the waiters with praise (if not
cash) -- i.e., your accounting staff and the secretaries who interface with
partners and clients on your behalf.
After
the cleanup you can begin planning the next meal – a 12-course menu for the
year already underway. Make note of what went well with last year’s recipe and
make adjustments as appropriate. Then, you too will be able to say, “Allez
Cuisine!”
For the record, I'm not a cook,
but am a frequent viewer of Food Network and Cooking Channel programming on
those evenings when my spouse has control over the remote. mrm
Richard A. Costa, 86, passed away peacefully on Tuesday at Somerset Ridge where he resided for the past 3 years. He was the husband of the late Mary D. After H. Pylori enters your body, it attacks the lining of your stomach, which usually protects you from the acid your body uses to digest food. Once the bacteria have done enough damage, acid can get through the lining, which leads to ulcers.
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