Cash Flow and Billing Considerations
October 11, 2014
Because cash flow is critical to the survival of every enterprise, billing in all modern enterprises, profit, non-profit and professional, is a serious and timely matter.
Except for occasions and practices where mile-stone billing is appropriate, I advise attorneys, who are serious about getting paid, to bill at the same time of the month every month. For attorneys, timely billing is particularly important because collections are often more of a problem for attorneys than other professions and businesses.
In my experience, it is important for clients to know their attorney is as serious about the business part of their operations as they are about their professional services. Timely billing conveys that message.
Calendar Month Billing:
In addition to timely billing, I recommend that attorneys always bill for a calendar month rather than any other time period. In my experience, clients find it easier to understand a bill that is for a calendar month.
When discussing bills with a client, it is much easier if all work for one calendar month is on one bill. When a client talks about a September bill they are thinking about all services performed in September and they expect those services to all be on one bill.
Some attorneys think they get paid faster if their bill arrives before the end of the month. If they do, I have not been able to document that fact. My feeling is that any increase in cash flow is offset by negative client relationships due to confusion as to what legal services were performed and when they were performed.
A bill from an attorney needs to communicate four things:
2. Minimum payment due
3. Total amount due
4. Date payment due
1. Communicating Value:
Communicating value is very important in the legal profession because most attorneys do not produce “a deliverable” and most clients are not present when the attorney is performing services for them.
Most attorneys spend a lot of time doing things for the client that are hard to connect to a value for the client. Thoughtless billing items like “Attempted telephone call” and “Review file”, “Meeting with associate” do nothing but annoy most clients.
It is important to connect services performed to value received.
Example of non-contextual non-value billing:
“Attempted phone call” .06 $21
“Talk with associate” .12 $42
“Attempted phone call” .06 $21
“Phone call with Jack Turner” .50 $175
Example of contextual – value billing:
“Number of phone calls, attempted phone calls and meetings with associate counsel to negotiate with the City of Cerritos the responsibility for cutting back trees at 31 Cedar Road.” 2 hours $500.
Watch the words. Some words are more value packed than others.
“Negotiations” is more descriptive and communicates worth better than the word “Discuss.” People can discuss football but they negotiate property disputes. “Negotiations” when appropriate is better than “Meeting”. “Phone call versus “Phone conference”. One describes the activity the other describes the value of the activity.
2. Minimum Payment Due:
If an attorney wants to be paid on time and in full, that attorney will either have to forego some business or offer payment terms to clients the clients can afford to pay.
Client Payment Plans:
It is important to discuss clients’ payment realities so the attorney can accommodate as much as possible to those payment realities. Not recognizing payment realities does not change those realities.
Payment plans can make the difference between a satisfied and a dissatisfied client. When a client can pay on time and in full the client feels good about the professional relationship. The reverse can be true if a client cannot pay in full. Providing payment plans is a win – win situation and makes for satisfied clients.
3. Total Amount Due:
When billing payment plans, it is very important to always present the Total (full) amount due on the bill so there is no confusion that the client, when paying a minimum payment, is paying the full amount due. This oversight can create trouble between the attorney and the client. I have seen these situations go to arbitration and the attorney almost always loses.
4. Date Payment Due:
I recommend clearly stating the Payment Due Date on the bill. That date is usually 20 days from the bill date to give the client time to pay and give your office time to receive the payment and post it before the next billing date.
I advise against using “Payment Due upon Receipt”. This phrase has no meaning and does not communicate when a bill is considered overdue.
An exact payment due date not only communicates to your client when payment is due, but it also communicates to your client and your office when the client’s payment is overdue. An overdue payment notice should be mailed or emailed to your client the day payment is overdue. The longer you wait the less concerned you will seem regarding getting paid on time.
To find out more about how Interbill can help your with more effective billing statements and practices, please call 800.733.9933 or email email@example.com.