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Managing Cash FlowSuits for fees are one of the leading causes of attorney malpractice claims.  Some studies suggest that 33% of all malpractice claims are due to fee suits.  The larger the percentage in over 90 days past due, the more likely the firm may have other issues when they try to collect the past due amounts that can lead to attorney malpractice claims.  Even though certain types of law practices have more issues with being paid, i.e. divorce work, there are steps that law firms can take to make sure to minimize the need for having to sue a client for fees.

1.       Make sure to discuss and have agreement as to the potential fees up front prior to engaging the client.

2.       Make sure that the law firm has as part of an attorneys compensation tied to past due clients.

3.       Make sure to collect an adequate retainer for the work to be done.

4.       Have formal billing procedures in place to bill ongoing matters on at least a monthly basis on all transactional matters.  Make sure the services being billed for are properly described so that the client can understand the work that was performed.

5.       Have a person in the law office designated to review and follow up on all past due matters.  This process includes bringing matters to the attention of the management committee of any accounts that exceed the law firm’s guidelines.  Determine as soon as possible if the reason the client is not paying is because the client was dissatisfied with the services provided.  If so make sure to address the service deficiencies with the client.

6.       Make sure to send statements out on all matters that are past due matters monthly.

7.       If the account is over 90 days past due remove the account from the billing lawyer and turn it over to someone else for collection follow-up.

8.       If a past due client submits a “reasonable” amount to settle an account, take it and close the past due amount.  Law firms can spend way too much time trying to pursue deadbeat clients.

9.       If you feel it is necessary, pursue legal remedies to attempt to collect the amount owed.  Prior to doing so make sure that the amount suing for is worthwhile and the services provided were done properly.  Suing a client for a couple hundred dollars, might make you feel better, but the consequences of a disciplinary compliant being filed or a claim being made against the firm, can costs far more in attorney malpractice insurance premiums than the amount in dispute.

Minimizing the amount the firm carries in past due accounts will help the law firm have better cash flow, reduce time spent chasing deadbeat clients for money, and minimize potential retaliatory claims because of a collection matter.

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