Collections Best Practices - Getting Paid by Jeff Krause

I am very happy to welcome Loretta Ruppert, from LexisNexis Practice Management, as a guest writer. As Senior Director of Community Management, Loretta works to bring together the community of product users, consultants and technology leaders and to create a resource to facilitate better communication and cooperation between these groups. I have extended an open invitation to Loretta to guest post on this blog on any topic related to Law Firm Practice Management. Today, she writes a follow-up post to her two part series on Collections Best Practices. This post focuses on getting paid. Jeff Krause

This post will complement the three previous posts regarding Collection Best practices – (1) the Problem, (2) the Solution and (3) the multi-touch collection process and is on the subject of asking clients for payment.

Do you remember when you were in law school and you took that class on how to ask clients for payments? Did your law school offer a workshop on how to train your staff to be collection agents? Do you worry and lose sleep trying to figure out what you are going to say to your client? Asking for money is often times uncomfortable for you and your staff and one way to make it a little less painful is to create a set of collection scripts and common rebuttals from clients with answers for yourself or your employees to use for the phone calls, email or other communications. Creating the scripts and common rebuttals and answers will ensure the message is communicated consistently and prepares you and your staff for handling the questions or comments that you may be presented with when asking for payment from a client who owes you money.

On September 9th, the ABA’s listserv Solosez, featured a thread among members discussing what the perfect wording was for “You haven’t paid your bill” calls. There were some great points brought up, for instance, be friendly, firm, and direct. Some mentioned talking to your client’s in your business owner shoes, not as a lawyer, which many of your clients are as well. Others revert to empathy with the clients with an approach of: this behavior is not like you, what can I do to help you?

All of these are good approaches and in the end you have to feel at ease with what you adopt as your firm protocol.

Let’s start with listing some common rebuttals or comments you may hear from your clients – with some recommended responses. Some responses are written from the lawyer perspective while others can be used by an employee in your firm.

Common rebuttals or reasons for non-payment	Recommended actions/responses
I didn’t get the bill	Thank you for letting us know, can you confirm your address for us to make sure this doesn’t happen again? While I am taking that information, let me fax or email you a copy to ensure you get the bill. [be sure to ask when you can expect payment, reiterating the due date, the early payment discount or that they can pay by credit card]
The check is in the mail	Thank you, can you provide the check number and the date you sent it so I can make a note in your file?
I’m behind in my bills but will get a check cut today or this week	Thank you, time gets to the best of us at some point. Can I sent send a courier or employee by to pick up the check? I can save you a trip if you would like to put it on your credit card instead of cutting a check.
I don’t have the money to pay you right now [Probe to find out more information - the question may surface additional information that can help you understand what the client is experiencing and help you determine the next step.]	Thank you for being honest, I can relate to your situation, I am not only a lawyer but a business owner and have bills to pay as well. I value our relationship and would like to work with you. How about we set up a payment plan for the remaining balance. What do you think about paying [pick an amount as an offer for the initial payment, like 20% of the bill] this week and we’ll spread the remaining payments over the next few weeks? [Do not lapse payments more than a month at a time.] I will send an email with the new terms and payment plan and would appreciate a signed copy with the first payment.
I have a problem or dispute with an item on the bill	Thank you for the opportunity to clarify or modify the bill. Help me understand your concerns? [depending on the size of the dispute, you may want to set up a face-to-face meeting with the client to discuss, be sure to refer to the fee agreement which is clear on what services you have mutually agreed upon]
You cannot get the client on the phone or are getting no response from the client	This could be one of the worse case scenarios as it is difficult to even negotiate an option with the client. This situation may require a certified letter saying you have been trying to contact them regarding a past due payment. You may want to include language saying that you would rather not pursue this through means that may further hurt your relationship or the client’s credit. Ask the customer to call as you are willing to work with them for an amicable solution.

Some tips when writing scripts:

Use an active voice
Be polite, professional but firm
Use short clear sentences (limit the legal speak)
Be specific about due dates and amount due
Provide payment options for the client
Provide a way to contact you to discuss the situation in person or on the phone

Useful Phrases:

Are you aware that your account is past due?
I wanted to make sure you received the previous bills and reminder statements sent to you…
I would like to touch base to discuss the past due balance of your account for the legal services we/I have provided you?
I am following up with you regarding the balance due on your account
I appreciate our relationship and believe you have received quality legal services from me/us/[lawyer name]…
I was surprised when it has come to my attention that your account is past due. Was the payment accidently overlooked?
Is there a reason the bill we sent you has not been paid?

ScanSnap S1500 Review by Jeff Krause

Introduction

There are a number of reasons why I really like the ScanSnap. It is a great value, especially when you consider the bundle Adobe Acrobat software. It is small enough to be placed on the desktop and affordable enough to be placed on every desktop. It is fast, scans in color and scans both sides of the document in one pass. Finally, it is very versatile, allowing you to recognize text in scans and save the scans to just about any document management system you like.

The Fujitsu ScanSnap S1500 is no longer “new.” In fact, I have been using one for about six months. I suppose that one good thing about this belated review is that I have really run the unit through its paces in a real-world setting.

Impressions

ScanSnap S1500

The S1500 looks more a bit more modern than its predecessor S500. The lines are a bit more angular. Overall, it takes up the same amount of space as the previous unit. If I was really into aesthetics, I would mention that the black and silver case with the blue button perfectly matches the Dell monitors on my desk. The catch tray does look a little flimsier than the previous model but I have not experienced a single problem with it during the last six months.

My previous ScanSnap S500 had a tendency to double feed. This meant that I had to babysit scans of multiple pages. I never really minded all that much because the scanning is so fast. Nevertheless, I am happy to report that my new S1500 has not double fed a single time – so far.

Scanning with the S1500

Scanning is incredibly easy with this scanner. Simply insert the page or pages you wish to scan and hit the blue scan button. The paper is pulled through and the scan appears in the default application you have set (more on this later). If the paper was two-sided, the two sides will be pages 1 and 2 of your resulting PDF. Different page sizes are not a problem. The ScanSnap automatically detects this and adjusts the resulting PDF accordingly. Similarly, it automatically rotates pages and removes blank pages. If you scan a mix of documents where some are one-sided and some are two-sided, the blank sides of the one-sided documents are removed from the resulting PDF.

Did I mention how fast it was? To give you some idea of the speed of this scanner, I inserted 10 sheets with printing on both sides. Twenty-eight seconds after hitting the scan button the resulting scan appeared on my screen. This equates almost exactly with the 20 pages per minute that Fujitsu states in the specifications for the S1500. Inserting color documents or inserting some of the documents upside-down or sideways, does not add noticeably to this time. The only thing that does at time is adding text recognition at the time of the scan, which I never do. Why not? For starters, I just do not need it on most documents. Second, I can easily do it after the fact using the OCR features in Acrobat.

Bundled Software

ScanSnap Manager

Once the scan is finished, it can be displayed in one of several ways. All of this is controlled by the included ScanSnap Manager software, which allows you to choose what happens when you select the Scan button. There are seven choices including Scan to File, Scan to Folder, Scan to Email, Scan to Picture, and Scan to Print. There are situational uses for each of these but most users will select either ScanSnap Organizer or Adobe Acrobat as their default setting. The one you choose depends on several factors. The advice I give my clients and personally follow is to select Adobe Acrobat if you will be saving each scan immediately and ScanSnap Organizer if you tend to scan a lot of documents and save and organize them later.

ScanSnap Organizer

Because my typical scanning process is to scan a number of documents in quick succession, then save each of them once they are all scanned, my default is set to the bundled ScanSnap Organizer software. In other words my scanning process is scan, scan, scan, save, save, save. The ScanSnap Organizer is a software tool that will remind you of Microsoft Outlook or any other software that has a main display window and folders within which files can be displayed. As you scan each document a thumbnail of the scan appears in the main window. You can create folders and drop scans into those folders, or double click on any scan and open it in Adobe Acrobat. The ScanSnap Organizer also allows you to right click on any scan and access the previously mentioned Scan to Email, Scan to Print, etc. Personally, I open each document from the ScanSnap Organizer to Acrobat and use TM Save to save it to Time Matters. Once saved, I delete it from the ScanSnap Manager.

The fact that Adobe Acrobat Standard has always been included with the ScanSnap is one of the scanner’s best selling points. The S1500 includes the newest version of Acrobat, 9 Standard. I often describe the ScanSnap as a “paper to PDF” machine. It is the fastest way to turn a piece of paper into a PDF file and, as we all know, PDF is a nearly universal format that can be read by almost anyone and is compatible with every document management system used in professional office. From a scanning prospective, PDFs are also more compact than some of the traditional scan to formats like TIF.

If you choose Adobe Acrobat as your default application, scans will appear immediately in Acrobat. This is very useful if your scanning process is scan, save, scan, save, etc. Simply use Save As in Acrobat and save the file with a name and location of your choice or, if you use a document management system, save it from Acrobat into that system. For those of you who already have Adobe Acrobat 9 Professional, you can continue to use that application with your ScanSnap S1500. Adobe also offers upgrades from 9 Standard to 9 Professional. These upgrades are available for approximately $150.00 and are available via download from Adobe’s website.

I do not mean to short-change the other software bundled with the ScanSnap S1500 but I must admit that I am not all that familiar with these products. For example, ABBYY FineReader is bundled as an OCR application. It receives very good reviews, but I have not used it. Instead, in the rare event I need OCR, I use the OCR Text Recognition function in Acrobat.

Conclusion

The ScanSnap S1500 has a suggested retail price of $495.00 but you can almost always find it for less. Like earlier models, there are $50.00 rebates available and many resellers will sell if for less than the $495.00 list price.

Overall, the ScanSnap S1500 continues the traditions established by its predecessors – speed, accuracy, ease of use, loads of features, and great bundled software. It is an integral part of my own office and a tool I recommend to all of my clients.

For more information on the ScanSnap S1500 including a Flash demo, visit my website at Krause Practice Management - Fujitsu Scanners.

A Multi-Touch Collections Process by Jeff Krause

This post will complement the two previous posts regarding Collection Best practices – (1) the Problem and (2) the Solution and will focus on the multi-touch collection process.

On September 9th Allison Shield blogged on the subject of talking to your clients about fees on her blog Legal Ease. She mentions an important point - it all starts with the fee or engagement agreement. There is no such thing as too much information when communicating with your client about rates, and what is included and more importantly what is excluded from the fee agreement, don’t be afraid to spell it out.

• The fee agreement should also contain a clause regarding past due accounts and what happens in the event of non-payment. Do you ask for a credit card number in the event of non-payment that authorizes you to charge the credit card for the balance due? Do you have some physical collateral to put a lien against or sell?

• Include aging periods for past due accounts in the fee agreement, these are typical accounting standards of 30, 60, 90 and over 90 days past due. But this is really for reporting purposes. There is nothing preventing you from taking action before or in between these aging periods.

Aging periods are one of the main areas we focus on when developing a multi-step collection process. Below is a list of some steps and recommended do’s and don’ts. As with most business practices and processes, some of them are very obvious, but the ability to implement a multi-step process and stick to it is more important than just developing one.

If you offer an early payment discount, don’t be hesitant to send an email reminder or fax reminding your clients to take advantage of the early payment discount.

Only charge interest if you plan to collect it.

At the 30 day mark, send out a reminder statement.

When the bill is 45 days past due, you have now provided enough time for your clients to get your bill and additional mail time to receive payment. Pick up the phone and call your client and ask straight up when you can expect payment, the conversation obviously should be polite but firm.

At 60 days charge the client’s personal credit card they authorized in the event of non-payment at 60 days. If you don’t have this in your agreement, ask the client if they are having financial difficulty and if they are, negotiate a payment plan.

If you negotiate a payment plan, do not drag out the payment plan beyond three to six months depending on how many months of work it represents and absolutely ask for a retainer for any further work until payment is complete.

When you reach 90 days past due you are at a high risk of not receiving the payment in full or at all.

Consider a visit with the client face-to-face, depending on the amount past due of course, and if a considerable amount, start thinking about the lien on collateral. If you don’t have this to fall back on, go to the next step.

As a last resort, consider negotiating the bill, the timing may be well past the 90 days. E.g. If the client pays the firm 60% we will write off 40% or whatever you think is reasonable. Or you can choose to hire a collection firm. The problem with using collection firms are the fees, but by this time, you have already taken so much of your time and your staff’s time trying to get the fees collected.

The main point you want to take away from this post is to prepare for the exception - the non-payment, and to be consistent in your approach of how to handle them. Automate as much of these steps as possible using a calendaring or billing system. And if you have a repeat client who continually falls behind in payments, consider what the intrinsic cost to your firm is to keep that client versus one that pays you.

Collection Best Practices - Solutions by Jeff Krause

I am very happy to welcome Loretta Ruppert, from LexisNexis Practice Management, as a guest writer. As Senior Director of Community Management, Loretta works to bring together the community of product users, consultants and technology leaders and to create a resource to facilitate better communication and cooperation between these groups. I have extended an open invitation to Loretta to guest post on this blog on any topic related to Law Firm Practice Management. Today, she writes the second part of a two post series on what has become a growing problem for law firms and almost every other small business, expanding accounts receivable. Jeff Krause

Collection Best Practices – Solutions

For the firms who have developed collection processes, here were some common best practices:

1. Revise fee agreements with language and actions for non-payments.

2. Establish a multi-touch collection process i.e. letter, then phone call and perhaps fax or email with a note and a copy of the bill. Timing of each of these client touches need to be structured into the process as well.

3. Track the reasons for non-payment. How can you fix something when you don’t know what’s causing it. Do qualitative research to find the root cause for this behavior. Examples usually fall into a couple of categories, something wrong with the bill or financial difficulty. The following are standard reasons for nonpayment; only two are irreconcilable:

• Services on the bill are not descriptive enough for the client to understand
• Services on the bill are not something the client is willing to pay for, or the client thinks they did not get what they hired your for
• Costs on bill do not have enough explanation or copies of vendor invoices are not being sent with the bills
• Costs on the bill will not be paid per agreement
• Interest was charged and entire bill is being held for payment until corrected
• Client doesn’t have the money to pay
• Other: You don’t know because you cannot get a hold of the client, they are not taking your calls and not responding to your letters or other communication

4. Map out ownership within the firm. Assign certain tasks to individuals and request for status reports often. Some billing solutions will work with you to establish a system of reports which alerts each individual of the collections action they own. Management can eliminate noise by focusing more on exception reporting, or addressing significant accounts or accounts that have fallen through the cracks, rather than feeling obligated to pour over voluminous collections detail. Do not wait until the end of a month to see who has not paid. Execution and consistency are the keys to a successful collection process.

5. Provide scripts for employees so there is no doubt in your mind what was communicated. This will also help in the event the employee is not comfortable doing this task; most educational programs do not include “how to perform collections.”

6. Set up payment plans for clients who cannot pay. Make this a formal signed agreement between you and the client with clear actions if payments cease.

7. Modify your billing intake form to ensure the agreed upon services and bills are clear and noted by the billing staff, and have a different person in the firm double check it against the agreement. Many applications have billing templates that can accommodate most items. Consider having the client initial it.

8. Accept Credit Card payments. This is becoming more common. It is so bizarre when I hear attorneys say they don’t want to pay a 2% fee for taking credit cards, yet they lose so much from staff productivity following up on collections, or from having to personally lend their firm money to stay afloat. Would you give a customer a discount for paying early? Great segue to the next point.

9. Provide positive feedback or rewards for paying bills. Consider providing a service discount for paying early. Rewards don’t have to be costly. When I worked for a CPA firm, we periodically sent out chocolates and thank you notes to the person responsible for processing payments or approving payments.

10. Client relations – know your clients. When you are a trusted advisor and take time to personally connect with your clients, you will feel more comfortable approaching them for payments and ultimately get paid.

Some of the collection best practice items may have been implemented in your firm while others are ones you want to implement. This topic is an important one and many of the best practices could be a post of their own. For that reason, you will see a separate post in the near future talking about some of these topics in more detail, i.e. the multi-touch collection process and the collection scripts for yourself and your employees.

Loretta Ruppert
Sr. Director - Community Management
LexisNexis Practice Management

Loretta.Ruppert@lexisnexis.com

Twitter: www.twitter.com/lorettaruppert
LinkedIn: http://www.linkedin.com/in/lorettaruppert
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Collection Best Practices – The Problem by Jeff Krause

I am very happy to welcome Loretta Ruppert, from LexisNexis Practice Management, as a guest writer. As Senior Director of Community Management, Loretta works to bring together the community of product users, consultants and technology leaders and to create a resource to facilitate better communication and cooperation between these groups. I have extended an open invitation to Loretta to guest post on this blog on any topic related to Law Firm Practice Management. Today, she writes the first part of a two post series on what has become a growing problem for law firms and almost every other small business, expanding accounts receivable.

Over the past year I have spoken with many small (1 to 10 attorneys) and mid-sized (11 to 50 attorneys) law firms through individual office visits, user group meetings and telephone interviews. Unfortunately, one common experience for most of these firms is the growing amount of accounts receivable. They are performing the work but not always getting paid for it. Of course this varied by the area of practice, and has mainly affected law firms who get paid by individuals and smaller companies. However, payments are not coming in as quickly as they used to from some corporate clients as well, and often rates have been renegotiated down, affecting the firms’ profitability. Many law firms have had to finance their accounts receivable and unfortunately banks assign very little value to receivables older than 90 days when financing accounts receivable, even for their best customers. Unfortunately, many law firm owners use a personal line of credit and lend money to the business to keep the firm afloat until they can collect.

Does this sound familiar?

To make matters worse, most law firms have a “soft” collection process that goes something like this: After billing is completed (usually monthly) law firms send out reminders to clients who had no current work but have a balance due. Law Firms tend to stick with the kind and gentle approach with the written collection communications:

—sample—-

Dear Client,

We show your account 30 days past due. Please find for your convenience an enclosed copy of invoice # xxx dated ##/##/#### in the amount of $#,###. If you have already sent in your payment, we apologize for any inconvenience.

If you have any questions regarding the invoice or services we have provided, please do not hesitate to call us at ###-###-####.

Kindest regards,

Law Firm

—-end of sample—-

The language tends to get a little stronger after 60 days and then again at 90. But then what? Who wants to call a client and ask them for money, this is not what attorneys were trained to do and it is not fun.

What’s worse, are clients you continue to work for who have past due balances. Perhaps you feel obligated because you might lose the client who won’t pay you, or your fee agreements only mention charging interest on past due accounts and do not clearly define what happens if they do not pay, i.e. cease legal services, send account to collection agencies, or file small claims, etc.

Some law firms have gotten more aggressive on taking retainers before doing any work and/or developing a firm collection process. Others, depending on the area of practice, do credit checks on their clients to minimize risk of non-payment. Both of these strategies can help you ensure that you get paid right away but what about those accounts where neither is possible or are already past due.

Tomorrow: Collection Best Practices - Solutions

Loretta Ruppert
Sr. Director - Community Management
LexisNexis Practice Management

Loretta.Ruppert@lexisnexis.com

Twitter: www.twitter.com/lorettaruppert
LinkedIn: http://www.linkedin.com/in/lorettaruppert
FriendFeed: http://friendfeed.com/lorettaruppert