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Volume 19, Number 3
April/May 2002

FEE or FREE:
How much pro bono is enough?

Creative Retainers

How to Get Paid

By Reid F. Trautz and Paul McLaughlin

How many times have you said to yourself, "I could retire on the money I have written off!" Or, "#%*@!!!-stiffed again!"
It is no fun to have to chase after your hard-earned fees. This is not why you went to law school! Yet many hard-working, honest lawyers find that their expectations about getting paid are not shared by their clients. The result is stress, frustration, and deep dissatisfaction with the practice of law. How does this happen? And how can you stop it from happening to you?
Law is one of the last business sectors to aggressively address credit issues. Almost alone in the marketplace, we allow our clients to pay for our services after they have received them, without properly securing ourselves. Retailers who allow customers to pay later either severely limit credit or thoroughly check creditworthiness. Even doctors demand a credit card or proof of insurance before they allow the patient into the examination room.
Unfortunately, we often are as much to blame for getting stiffed as the clients. In many cases, we allow it to happen. But we can take steps to ensure that it happens less often.

Client Service
How can you stop worrying about collections? Build more consumer-focused client service into your practice, and build trust and respect into every phase of the lawyer-client relationship. Trust and respect are the hallmarks of positive and financially rewarding service relationships.
Traditionally, we thought that creating a relationship of trust and respect meant simply being a "good" lawyer. We believed we could enhance our credibility by setting up an office near the courthouse-preferably one with lawyerly cues like marble, wood, and symbols of justice (not to mention Latin phrases and legal tomes to create impressive accents and heighten the legal mystique). We also believed that if we provided high-quality legal services, as we defined quality, we would build respect. We thought that winning, getting the deal closed, or getting the document drafted was enough to cement the relationship.
Now, however, we are in a new era of legal consumerism, and we need to embrace new ways of building trust and respect. Lawyers are part of the service sector in the new economy. It is no longer enough to be a skilled lawyer and have an impressive office. A high level of legal skills-what we deliver-is now the client's starting point; how we deliver our services is the primary basis for clients to decide how they value our relationship.
Today, lawyers need to build relationships on the clients' terms without sacrificing our professionalism. This means addressing problems on our end like tardiness in the production of work, unclear drafting, insensitivity to the nonlegal dimension of legal issues, and failure to keep clients fully informed. If you do not address the service issues in your practice, you can forget about solving your accounts receivable problems.

Nonpaying Clients
There are three categories of nonpaying clients: those who don't pay, can't pay, or won't pay. Each has distinct characteristics and requires different responses.
Clients who don't pay send you a message for which you have no explanation. There could be any number of reasons why they do not pay, and it is important to determine the real reason. Only some clients who don't pay are can't pay or won't pay clients.
Clients who can't pay are those who truly do not have the money or other resources to do so. They force you to make a decision: Do you continue working on the matter or not?
Clients who won't pay are clients who can pay, and once may have had the intention to do so, but now choose not to. They are the most difficult category of nonpaying clients.

Clients Who Don't Pay
Nonpaying clients are telling you something, but the bare fact that the bill hasn't been paid is not an explanation. Maybe they did not receive the bill, or they forgot to look at it. Maybe they are procrastinating or simply have not prioritized it. Maybe the bill arrived at the wrong time in their cash flow or bill-paying cycle, and the client is waiting for its own receivables to come in.
It is up to you to take the initiative to determine the reason for nonpayment. When you clarify the reason, you can create a solution that will improve your relationship with this client.
The message you want to send is that you manage your financial affairs with the same diligence as your legal work. Your reputation, your most valuable asset, is on the line; if you are unassertive about getting paid, you eventually might be typed as being lackadaisical about the quality of your legal services.
Who should make the initial contact with the client to discuss the bill? Some experts suggest that the staff person with the best people skills should call to inquire about payment. Others believe the lawyer working on the matter must handle it. Whoever calls, the purpose of the first call should be clear: not to dun the client but to discover the real reason why the client has not paid and to encourage payment. The person making the call should maintain a healthy dose of skepticism but should not project anger or cynicism.
Scheduling an in-person meeting to discuss the reasons for nonpayment is even better than a phone call, but you may feel awkward about how to proceed. Start by reminding your client that your bill is outstanding-be sure to have a copy available. Politely ask when you can expect payment. Then sit back and listen to the client's words as well as the client's voice and body language. Do not get angry or defensive. Remain calm. Politely but firmly probe, and listen carefully to the answers. What is the client really saying? What is the real issue? As you listen, try to determine whether the client intends to pay your bill and, if not, whether this is a can't pay or a won't pay situation.
Be prepared for some typical excuses. When clients say they did not receive the bill in time to make the payment date, ask whether sending the bills at a different time of the month would be better and offer to send them then. Make a note of the new arrangement, and stick to it.
When clients say they have not had a chance to review the bill, tell them you would appreciate if they would give the matter priority. This request is more convincing if you have given their work priority. Reassure them that you are willing to discuss the bill. If the client says that won't be necessary, make a note to contact the client again if payment is not received within a week.
You and your client may need to come to a new agreement about how the outstanding bills will be settled. Options include the following:
-A monthly payment schedule in the amount the client can afford to pay. (One lawyer regularly received $10 a week from a client for five years then forgave the balance.)
-A new retainer paid on the client's credit card.
-A monthly payment against a credit or debit card.
You also may be able to provide an opinion letter assessing the likely outcome of the matter, which your client can use to borrow money from a relative or friend. (Just be careful not to create a reliance on which you could be sued if the matter doesn't work out as you predict.)
No matter the reason for nonpayment, be sure to keep track of clients who say they will pay. If this turns into a can't pay or a won't pay situation, you will want to know as soon as possible.
If you find yourself with a practice full of clients who don't pay their bills, reevaluate how you administer the billing process and how you accept payments. For example, you might want to start accepting credit or debit card payments-the small service charge is not significant when weighed against the huge cost of nonpayment.

Clients Who Can't Pay
Some clients simply do not have the means to pay your bills. Clients who truly cannot pay are not just insoluble collection problems, they also are evidence of poor credit-granting policies. If you have a significant number of clients who cannot pay for services already rendered, your credit policy and intake procedures need to be revised. By carefully screening new work, you can dramatically decrease the number of clients who fit into this category.
How can you avoid taking on too many clients who can't pay? Determine your clients' creditworthiness at the beginning of the representation, and check on it as the matter proceeds. If you neglect this, you will become the client's banker and loan officer. With existing clients, a past history of timely payment might be enough, but it is surprising how often lawyers take on new work from clients with poor payment histories.
Ask for financial information from new clients on a pre-interview client intake form or during the initial interview. You already may have collected some of this information for the legal matter itself, such as current employer and income, bank accounts and balances, credit card and loan balances, outstanding taxes, and property and other resources. Next, run an official credit check-again, the minimal cost is well worth it. The bottom line is that you must take steps to get adequate, reliable information so that you can make an informed credit decision. If the credit history looks bad, you probably will want to decline representation.
By being actively in charge of the selection process, you do not allow your clients to turn their matters into pro bono cases or speculative work without your consent. You will feel more in control of your practice-and more fulfilled-if you make the decisions about where you direct pro bono work or whether speculative work is worth the risk.
What do you do when you find yourself with a can't pay client in the middle of a legal matter and you do not want to finish the case on a pro bono or spec basis? If all else fails and you are ethically in a position to do so, you can terminate the representation. Do it gently and politely, but do it in a timely manner so the client can consider other options. Try not to burn bridges: Former clients can be good referral sources-but they also can discourage potential clients through negative comments.

Clients Who Won't Pay
The biggest collection headaches are clients who will not pay-they can pay but now decide not to. Unfortunately, these also are the clients most likely to respond to a fee collection suit with a counterclaim for malpractice.
A small number of clients never intended to pay you. Most won't pay clients, however, view nonpayment as a way to make a statement about your bill and about your services, your skills, and the relationship they have with you. It is important to remember that the issue usually is value, not price-not what you charged but what you gave in return.
Trust and respect may seem irrelevant concepts in bill collection, but they are fundamental. The more your clients trust and respect you and the work you do for them, the more likely they are to value their relationship with you as their lawyer. They see paying your bills on time as a way to preserve the relationship. But when you do not meet your clients' service expectations, you cannot build the trusting, respectful relationships clients desire.
How do you deal with the client who has decided not to pay you? You must discover the reason for the decision and determine what, if anything, you can do to save the relationship. This can be a tricky task, but it may mean the difference between getting paid and losing a client.
The first step is to call the client and request a meeting. If the client will not come to you, go to the client. When you meet, remember that you are not trying just to get paid for an existing bill; you are trying to repair a relationship so you can turn a dissatisfied client into a happy one who will be a source of revenue and referrals for many years to come. This is your chance to save the relationship or, at the very least, to prevent it from damaging your business.
At the meeting, tell the client that you realize there is a problem with the relationship and the client's opinion of your service. Let her know by asking how you might improve the relationship and stating that you value the relationship and want to salvage it. Then sit back and let the client talk. Be prepared for harsh words, but do not be defensive. Show the client you are listening by maintaining eye contact and using affirmative gestures. Do not take notes-show that you are listening.
If the client does not want to talk, ask nondefensive questions to draw out her thoughts. Debrief the case and the relationship. What went wrong? What aspects of your legal representation would the client like improved? Is it you, or does the client have other concerns for which you are not responsible?
Once you understand what went wrong, you can make new assessments of your own: Can I improve my services to meet the client's expectations? Can I build trust and respect? Can this relationship be saved? Should I continue the representation? If I continue the representation, can I obtain payment and assurances of future payment?
Only after you have established that improvements can and will be made should you discuss the outstanding fees. Ask the client how she would like to pay the outstanding bill. If you agree that your service has been lacking, you may agree to reduce the bill. Remember: You are trying to seek a resolution.
If you conclude that you cannot meet the client's expectations, you may want to terminate the legal relationship. Keep the discussion civil. Explain that the client will have to find a new lawyer. Offer to help and cooperate with new counsel, then talk about your fee. Be firm but not strident. Unless you acknowledge your work was sub-par, do not agree to an outright reduction in your fee-the client may view this as an admission of guilt. If the client insists on a reduction, you may offer to cut a portion of the fee owed after the client has paid the current amount.
Most lawyers find these discussions difficult. They fear that confronting their clients about money will taint their working relationship. It takes practice and patience to develop the skills you need to steer through the numerous shoals that lie hidden under the lawyer-client relationship.
There are a small number of clients who never intended to pay you. These are people who think the rules don't apply to them, and you are just one in a long line of unhappy creditors. There is only one way to protect yourself from these crooks: Recognize them for what they are in advance and say No thanks. Do not be too hard on yourself if you get caught by one-they often radiate a surplus of charisma. Remember: Good judgment comes from experience, and a lot of experience comes from bad judgment. Just don't let it happen again.

Control over Accounts Receivable
Despite the lack of billing and accounting scenes in legal TV shows and movies, getting paid is a critically important activity in every law practice. If you are not paid, you will soon be out of business. If you are out of business, you will not be able to help all your other, worthy clients, the ones who willingly pay your bills.
Although we cannot guarantee that you will be able to eliminate delinquent accounts completely, we know many lawyers who have done this-even domestic relations lawyers whose cases can be highly emotional! But you can reduce your accounts receivable problems if you apply a new awareness and commitment to screening techniques, creating a practice full of clients who want to pay your bills.

Reid F. Trautz is a lawyer and practice management advisor based in Washington, D.C. He is a nationally known author and speaker on important issues facing lawyers in the business of law, including financial management, client communications, and practice development. Reid can be reached at rtrautz@earthlink.net. Paul McLaughlin is a practice management consultant, trainer, and coach. He has written and presented on a wide variety of law practice management topics. He is the author of Welcome to Reality: A New Lawyer's Guide to Success. Paul can be reached at paul@dogonit.com.