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Cash is the grease that makes the business wheel turn,
and the practice of law is definitely a business! Without
enough cash at the right times, your entire practice will
grind to a halt. Here are ten tips to help attorneys keep
that cash flowing:
1. Change your billing cycle. Bill
one-fourth of the alphabet each week. This way, you
will receive money from clients on a regular basis,
probably weekly, rather than once per month.
2. Shorten your billing cycle. If
you remain on the monthly billing cycle, be sure your
clients receive your statements on or before the first
day of the following month. To do this, your billing
cycle must end on or about the 25th of the month.
3. Send statements after a particularly
beneficial psychological event even if somewhat before
or after the normal billing date. This will place the
client on the peak of the "client satisfaction
curve," the time of least resistance for payment
of fees. Later, the client will invariably forget how
important you were in the process of the result and
wonder why the bill is so high.
4. “Age” your accounts
receivable once a week. Time passes quickly when you
are busily engaged in practicing law and advocating
clients’ interests. There are times you may tend
to forget that one client owes you money while you are
working on other clients' matters. Forgetting or ignoring
"old" clients results in forgetting or ignoring
the accounts receivable, thus, it is important to be
reminded frequently. On the one hand, you will be able
to pursue collection with the regular weekly reminders
that money is owed to you. On the other hand, you will
be able to thank a client you talk to who has recently
sent in payment on their account.
5. Don't wait to deposit checks. The
first rule of cash flow management is do not accumulate
checks for deposit until the end of the week! While
the check is "cooling its heels" in your desk
drawer, too many catastrophic events might occur.
6. Be sure that you sign all outgoing
checks. Do not delegate this authority. You must know
the present status of your “business” at
all times. Further, your attention to detail will help
prevent embezzlement by a "trusted" employee.
7. Consider an automatic bank sweep.
Banks today provide for an "automatic sweep"
on a daily basis. Establish a minimum amount of money
to remain in your general account such as $2,500. The
exact sum depends on the amount of checks and deposits
that pass through your bank account each month. Then,
instruct the bank to segregate all funds in excess of
this amount at the end of each day and "sweep"
or transfer those "excess" funds into a money
market (interest bearing) account until needed.
8. Use remittance envelopes, pre-addressed
and stamped, and mail them with your statements. This
saves the client time and effort in mailing your payment
and, frequently, saves at least one to several days
in your receiving payment.
9. Hire someone, even if only part-time,
to help collect. If you are having little success in
collecting your accounts receivable or if you believe
that the sales person (you) should not be the person
collecting the bills, then hire someone (e.g., a part-time
accounts receivable clerk from a local college or a
retired bookkeeper) to do only this task. The cost of
the person will be less than the money received as a
result of that person’s efforts.
10. Develop a Cash Flow Statement.
The cash flow statement is sometimes called a Cash Flow
Budget, a Statement of Cash or a Forecast. Whatever
name you are comfortable with, this is the statement
that you need to concern yourself with at least on a
weekly, if not daily, basis. It is the single most important
tool for the success of any business activity.
Edward Poll, J.D., M.B.A., CMC, is
a coach to lawyers and certified management consultant
who shows attorneys and law firms how to be more profitable.
Ed's latest book is Collecting Your Fee: Getting
Paid From Intake to Invoice (ABA 2003); he is also
the author of Attorney & Law Firm Guide to The
Business of Law, 2d ed. (ABA 2002) and Secrets
of the Business of Law: Successful Practices for Increasing
Your Profits. To make suggestions or comments about
this article, call (800) 837-5880 or send an e-mail
to edpoll@lawbiz.com.
You can also order a free e-zine or visit Ed on the
web at www.lawbiz.com.
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