For most law firms, past due client accounts are a fact of business. A new LexisNexis survey of 309 U.S.-based law firms found that more than 73% experience past due accounts. Yet for many lawyers, asking a client for money they earned is embarrassing, uncomfortable and for some, even “distasteful.”
Consider the following comments offered in response to open-ended questions on the survey:
“Attorneys have a problem asking for money after the retainer and throughout the process of working.” (veteran paralegal supporting a Florida-based family law practice)
“[It] makes me feel greedy to call a client about a past due bill or to issue a written past due statement.” (personal injury attorney in for an Ohio-based law firm with 1-2 attorneys)
“At my firm, the attorneys have to make collection calls to any clients that are late paying. I would prefer to have a staff member take care of that. I find it damaging to my relationship with my clients, and distasteful.” (family law attorney for a California-based law firm with 6-10 attorneys)
The data suggests the expressed sentiment represents a sizable business challenge for small law firms since about half report upwards of 39% of a law firm’s total client base is typically past due. While client financial hardship is most often cited as the primary reason clients are most often late on payment, there are notable indications that client communication, the value of the services and even sluggish law firm business processes are also factors.
“Following up on collections or past due accounts is perhaps the least favorite law firm business activity, but it’s incredibly important to a healthy law practice.”
Sample Key Findings from the Billing Survey
A SlideShare presentation for the report – Past Due: The Discomfort of Collections in Law Firm Billing – is embedded nearby and an at-a-glance view of few of the findings:
- Past due client base: About half say between 10% and 39% of their total client base is typically past due.
- Unlikelihood of collection:Nearly half, (45.6%) put the chances of collecting on invoices that are outstanding for 90 days or longer at “unlikely” or “very unlikely.”
- Discounts and write offs pervasive: A majority of law firms surveyed (71.2%) report providing discounts or writing off legal work even before invoicing clients.
- Law firm billing requires 8 hours of work: Most small law firms (61.5%) reported spending about eight hours per month on their billing process although about a quarter say it can take up to 16 hours.
- Most law firms use software: A majority of law firms (66.7%) use software with integrated invoicing and billing – but indicated they are not using standard reporting features for analyzing the customer base.
“The survey results reflect what we hear anecdotally quite often: Lawyers enjoy the practice of law and dislike the management of law,” said James Paterson, senior director of product management at LexisNexis who leads the direction of software including the LexisNexis PCLaw® practice management solution, in an announcement about the survey. “Following up on collections or past due accounts is perhaps the least favorite law firm business activity, but it’s incredibly important to a healthy law practice.”
Additional resources and helpful tips:
- Top 10 Law Firm Collections Challenges and How to Solve Them
- Infographic Friday: Billing Rates Up 4%, But So Are Discounts
- Discounting Legal Fees Sends the Wrong Message
- Six Business Metrics Every Law Firm Should Measure
- Seven Tips for Improving Law Firm Billing Efficiency
- 3 KPIs to Make a Law Firm More Profitable
- 12 Essential Metrics for Law Firm Rainmakers