In order to maintain a steady stream of cash, a law firm needs to have a standardized billing policy. The primary issue in maintaining incoming cash is determining whether existing and potential clients can and will pay bills for legal services and advanced expenses. A firm should establish a policy that requires lawyers to create a written agreement for each client that outlines the understanding between the lawyer and client concerning the nature and scope of work to be performed and the terms of payment for those services and for advanced expenses.
Such an agreement should be confirmed in writing before the firm commits to represent a client. This policy should be enforced by the firm administrator and by management.
In order to improve short-term cash flow in the absence of a standardized set of procedures, a firm should try to collect retainers for future fees and advanced expenses in as many cases as possible.
In order to improve cash flow in the long-term, a firm needs to implement a sound set of procedures and policies regarding billing and collections. Such an endeavor would include implementing a central control over the processes. An individual other than the billing attorney or his/her assistant should be in charge of preparing bills and reporting on collections. The system should be supported by appropriate organizational and financial expectations and consequences. In addition, each lawyer should be held accountable for individual billing and collection responsibilities. The procedures require the support of the entire firm in order to maintain the diligence of each lawyer.
Firms looking to improve their revenue procedures often consult with us. If you would like more information, please contact our office.