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Business of Law

The Benefits of Tracking a Client’s Non-Payment

Unpaid invoices can present unique learning opportunities for attorneys.

By Frederick Hertz  |  December 8, 2016
Art: Accounting and Documenting Payments

Olaf Speier/Shutterstock

Some might consider me a bit neurotic, but I generally check my “accounts receivable” ledger at least once a week. It’s easy for me to do so, as the list of outstanding invoices shows up on my TimeNet home page every time I log on to my computer. As in most billing programs, it is equally easy to view a receivables table that displays how many months it has been since each bill was issued. Of course, it isn’t critical that you check your ledger every week, but you should commit to doing so at least once every two weeks.

There are three key reasons why this level of diligent observation is recommended.

First, you always want to be up to date on the client’s payment status when you are working on any of the client’s tasks. Failure to pay the bill is a topic you need to be open to discussing with your client, either in person, on the phone or by email. Why? Because the best time to motivate a client to pay their bill is when they are asking you to do something for them.  Even if you are not ready to cease work for the client (more on that topic later), you want them to be aware that you are paying attention to the fact that the bill hasn’t been paid—and that you aren’t afraid to raise the subject with them. Mind you, one of my favorite lawyers has a totally different philosophy, preferring to delegate to her bookkeeper all of the discussions about the uncomfortable (aka “dirty”) money issues with her clients, but I disagree. Allowing the subject of unpaid bills to become a taboo subject only facilitates the continued non-payment, and that’s not good for your practice. Yes, I have occasionally been criticized for bringing up the topic of money too often with a client, but I had a direct response, which I pass on to you: I’m only harping on the subject because you have not paid your bills and thus have not honored your promise to me!

Second, each time you ponder the state of your accounts receivable you are giving yourself the opportunity to consider what is the best approach to dealing with any particular situation. Even for the most seasoned of lawyers, our first response to a deadbeat client is not always the wisest strategy, and thus, having a few passing opportunities to reflect on what should be done with the non-paying client is surely going to refine your eventual response. Even for those clients who agree to pay by credit card, delays can happen, but you want to be savvy in how you handle those incidents. An elderly client of mine recently lost his wallet and it took him a few weeks to organize himself to get a replacement credit card –and it wouldn’t have helped our relationship for me to embarrass him by nagging him too often for the new card number. For example, if you know that your client is in the middle of a complex financial transaction that will tie up her funds for a few weeks, firing off an angry demand letter is not going to be helpful to either of you.

Third, and perhaps of greatest importance, is that every minute you spend looking at your list of unpaid invoices is, as they say, a learning opportunity. Pay attention to which clients have fallen behind, why types of cases seem to be recurring “slow pays,” and what sorts of arrangements you could have made to avoid this uncomfortable situation. Part of learning how to get paid for your legal work involves gaining a deeper understanding of what motivates your clients to act as they do—even when the results are detrimental to you. A deeper grasp of the psychology and behavior of your clients will enable you to sharpen your skills at negotiating the payment plan in advance, and knowing when to be concerned about a new client. Consider your recurring review of your accounts receivable as a form of regularly scheduled meditation on the nature of your financial landscape. Even if you don’t leap to any particular response or action, focusing on the realities of the unpaid invoices will improve your practice in the future.

Frederick Hertz, an attorney and mediator based in Oakland, has managed his practice for more than 25 years.

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