Prepare for a Challenging End to a Year Unlike Any Other

Jake KrocheskiWeekly Advisory Article

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You Hear Only What You Want to Hear

2020 has been a rough year, unlike anything we have ever experienced. We would venture to say that no firm has planned adequately for such hard times. Even more challenging, if your firm has not done a good job managing its A/R in good times, how can you expect to manage them when times are tough?

But no matter how difficult times are, year end is coming, just like all other years. So take the time to get your priorities straight and determine how your firm will make changes that are needed.

Effective receivables management starts from the top. Firm leaders should lead by example. They need to tell the attorneys to address their collections. Just as important, they need to understand what resources and strategies are required to help achieve results — sooner rather than later. Look at everything, including how your firm historically has managed its receivables at year end, to determine where changes need to be made, based on today’s down economy and different client payment patterns. More than ever, be aware that certain problems surrounding clients’ failure to pay your firm has dealt with in the past are becoming more prevalent. For example, clients with cash flow problems will delay payments or not pay at all, and clients can have “sticker shock” when they expect to receive a bill of a certain size and are surprised when a much larger one arrives.

Focus on areas that make a difference and don’t make assumptions

Change can be difficult, especially with so many priorities to attend to during such uncertainty. But the bottom line is the bottom line. This year, unlike others, it requires all hands on deck to ensure that bills are in line for payment. Therefore, start determining:

• Whether accounts are actively being pursued at certain ageing points or if follow-up efforts are stagnating
• What the payment status is on accounts, what can be done to speed up the process and what the chances are of not being paid
• The time commitment that is necessary, skill level of those pursuing unpaid bills, how much of a priority they are devoting to the efforts, and what success they are having, especially with older accounts
• Why clients are not paying and what steps are being taken to get them to pay

Be careful that assumptions are not being made at all levels:

• Firms assume attorneys are vigilant in getting clients to pay;
• Leadership assumes receivables are being actively managed;
• Attorneys assume clients understand payment obligations; and
• Everyone assumes staff assigned to accounts receivable efforts understand their duties and are actively pursuing accounts.

Don’t get caught in a vicious cycle. Get to the root of the problems and find solutions.

Clients are expecting to hear from you this year

Remind everyone involved with year-end collection efforts that many other business partners are contacting their clients to get paid, so it is entirely reasonable for you to do the same. Institute regular, steady, professional communication concerning unpaid bills to secure dates for when payment can be expected, or to determine appropriate follow-up.

Educate your attorneys about various payment scenarios, plans and options before they contact clients. Because clients may not be able to pay as they have in the past, be prepared to recommend a few payment solutions that can be tailored to their cash flow issues.