Many law firms face the regular problem of delayed payment of their fees, whether it is the payment of invoices by clients or the payment of settlement proceeds.
Set Clear Payment Terms Upfront
The payment terms including the payment deadline, the rate of interest on late payment and your method of chasing outstanding debt should be set out in the client care letter. If a client knows what to expect in terms of payment terms at the outset they are less likely to object to them later.
Chase Aged Debt Systematically
It is useful to have a spread sheet set up to flag up unpaid invoices. Then, on a regular basis (i.e. on a monthly basis), review the unpaid invoices to ensure that any necessary action is taken before the debt becomes uncollectible.
Use Invoice Financing for Settled Bills
More on Law Firm Finance can be found at https://www.novo-modo.co.uk/commercial-finance-Legal-Firms. uk/commercial-finance-Legal-Firms.
Know Your Obligations on Client Money
Billing practices and client money handling are subject to certain rules and requirements. For law firms in England and Wales the SRA sets out in SRA guidance on billing and client money how a firm can raise a bill and what it must do with client money.
Build a Disbursement Recovery Policy
A written Disbursement Recovery Policy will enable a firm to recover disbursements (sitting as unpaid invoices) separately to the main fee in order to preserve cashflow and to avoid subsequent conflict with clients.
These issues can be managed more effectively if treated as a process rather than an uncomfortable conversation with a client.