The 7 Golden Rules of Collections Revisited

This classic post bears repeating.th (1)

In the annals of professional liability, there is one statistical truth: sue a client to collect fees and odds are the client will sue you for malpractice.

How can you avoid this dilemma?  Be proactive!  Develop policies and procedures designed to preserve client relations and avoid collection problems before they start.  In short, follow the seven golden rules of billing and collections:

  1. Always take the time to discuss fees, costs, and billing practices.  Most nonpaying clients who file retaliation suits or malpractice counterclaims do so because they never understood what the lawyer’s services would cost.
  2. Never leave home without a written fee agreement.  Be specific and complete.  Your agreement should: (a) specify the scope and timing of services; (b) describe what the client is expected to pay for and when; (c) explain billing practices; (d) identify what will occur if payment is not timely made.  Losing a potential client who refuses to negotiate and agree to a comprehensive fee and engagement agreement is a small price to pay compared to defending yourself in a malpractice claim or disciplinary proceeding.
  3. Consider alternative fee arrangements – flat fees, fixed fees, unbundled fees, evergreen retainers, or “last month’s rent.”  Clients cooperate more fully when they are financially invested in their case.  If the client is unwilling to commit financially, the matter quickly becomes your problem rather than the client’s.
  4. Keep detailed records documenting time spent and submit itemized bills
    to clients on a regular basis.  Inconsistent billing practices disrupt firm cash flow, infuriate clients, and make collection more difficult.
  5. Be a smart biller:  (a) review “pre-bills” and statements carefully; (b) if  you make a mistake, correct it quickly and accurately the first time; (c) send statements before clients receive their paychecks – usually just before the 15th and again at month end.  If you serve corporate clients, send bills in a manner and format that works for the accounts payable department; (d) always include a due date on all statements (most clients prioritize bills based on due date); (e) offer a carrot instead of a stick.  In lieu of late fees or interest, offer clients a discount if payment is received within 10 days of the billing date.
  6. Do not allow outstanding fees to accumulate during the course of representation.  As soon as a payment is missed, call the client.  Get to the root of the nonpayment.  Is the client dissatisfied?  If a client becomes seriously delinquent, terminate the attorney-client relationship and withdraw from representation if possible.  Re-read last week’s post and comply with all provisions of Oregon RPC 1.16 as well as applicable court rules.  Read more here about the do’s and don’ts when ending representation.
  7. Offer to arbitrate fee disputes through the Oregon State Bar’s Fee Arbitration and Mediation Program or consider other alternative dispute resolution methods.

If you decide to sue a client for fees, consider the following:

  • Will a judgment be collectible if obtained?
  • Do you stand to gain or lose a substantial amount of money?
  • Are there any grounds upon which the client can credibly dispute the debt or any part of it?
  • Have you really listened to your client’s side of the dispute?
  • Was a good result obtained in the underlying case?
  • Has an uninvolved, experienced lawyer reviewed the file for possible malpractice?
  • Will a law suit result in bad publicity reflecting negatively on you or your law firm?
  • Have you offered to arbitrate, compromise or meet the client part way on the amount due?

Most collection problems can be averted at the outset of representation.  A frank discussion of fees, finances, and billing procedures will greatly reduce the possibility of disputes.

[All Rights Reserved 2016 Beverly Michaelis]

One thought on “The 7 Golden Rules of Collections Revisited

  1. Pingback: The Best Legal Blog Posts of 2016 | Oregon Law Practice Management

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