Options for Getting Paid

Options for Getting Paid

Since 2016, Clio has been doing annual surveys that found that lawyers, on average, bill only 30% of their time and collect on about 85% of those billed hours. The reason for this isn’t because solo attorneys and lawyers in smaller firms are slacking off. It’s because they spend part of their workday on nonbillable work that cannot be delegated due to a lack of staff. It’s also because lawyers are not always diligent in entering their time, invoicing, and collecting on their bills.
Even when lawyers do all the right things to get paid, collection can still be an issue. They take a retainer from clients, deposit the money in the trust account, send out monthly statements, then properly withdraw the earned funds. Then the retainer is gone and some clients won’t replenish. The lawyer sends the bill, but the clients ignore it or plea for more time to pay but then don’t pay. Payment keeps being postponed to the point where the lawyer is working for free.
Lawyers can do various things to ensure payment, such as charging a flat fee that is earned upon receipt. For lawyers taking retainers and charging hourly, here are some options to help you get paid.

Ask for a Bigger Retainer

If you notice that you’re quickly using up the clients’ retainers, it could mean that the retainers are too small to begin with. Start asking new clients for a bigger retainer, such as doubling the amount you normally ask for. Sometimes clients may be willing to write a bigger retainer check if you explain to them that the money still belongs to them. Let them know it is deposited into a trust account to be withdrawn only after you complete the work and send them a statement.

Use an Evergreen Retainer

If clients hesitate to provide you with a big retainer up front, consider using an evergreen retainer. This is a retainer that the clients have to replenish when it falls below a certain amount. The purpose of an evergreen retainer is to ensure there are always sufficient funds in the trust account against which you can bill.
An evergreen retainer works like this example: the client pays $1,500 for an advance retainer, and whenever the retainer falls at or below $500, the client agrees to replenish the retainer with a payment of $1,000.
Clearly communicate to clients how the evergreen retainer works. They should know what the required minimum balance is and when and how much they will need to replenish their account. Also explain the consequences of not maintaining the minimum balance, for example, work will stop in their case. Include a clause about the evergreen retainer in your fee agreement so there is no misunderstanding later on.
You may accept evergreen retainer payments by check, cash with a receipt, or by credit card. If the client asks you to keep a credit card on file to charge the evergreen payments, make sure you have the client sign an authorization to charge credit card agreement and form. A sample agreement and form can be found at the PLF website here
An evergreen retainer may not be ideal for every client. It’s not great for cash-strapped clients because they are not going to know when they will be asked to replenish and may not have the funds available at that moment. For those clients, consider having them pay an initial retainer deposit, then a monthly fixed retainer (e.g., $100) after that.  
Using an evergreen retainer requires you to know when the client’s funds are reaching or below the minimum balance. This means keeping individual client ledger cards or running ledger reports so you will know, at any given point, the balance of each client in the trust account. Staying on top of the accounting will help you timely follow up with clients when their funds are low.

Give Client a Call

When clients do not replenish their retainer, call them and kindly remind them what the fee agreement says, and give them a reasonable time to make payment. Also remind them of the consequence of no payment as specified in the fee agreement.
It can be difficult to make a bill collection call to clients. Sometimes being direct is the easiest option. Call the client and say something like, “I noticed you haven’t paid your last bill. I just want to make sure everything is okay with you and ask what I can do to help make it easy for you to pay.” Through this conversation, you may learn why clients didn’t pay and then propose some options for payment.

Set up a Payment Plan

For clients with unpaid invoices, consider setting up a payment plan for the past amount owed with clear due dates. The monthly amount is something you’d need to work out with the client, taking into consideration your need for cash flow and the client’s ability to make the monthly payments. If the client’s matter is still ongoing, let the client know what will happen if they miss an installment (e.g., withdrawal/termination) and make sure you follow through. You may also want to ask clients to make separate fixed monthly retainer payments into an evergreen retainer so you can continue work on their matter. 

Offer Discounts for Aged Invoices

For really aged invoices (e.g., 120 days or more), consider offering a discount on clients’ amount owed. For example, tell them you’d discount 10%, 20%, or 40% off past invoice if they pay within 14 days or whatever time you think is reasonable.
Remember that suing clients for unpaid fees often provokes them to sue you for malpractice and rarely results in the desired outcome of getting paid. Instead, try contacting the OSB’s Fee Dispute Resolution Program to see if your fee dispute can be mediated.

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