Positive ways to collect money and maintain relationships

friday, 8 february of 2008

Positive ways to collect money and maintain relationships

By Trey Ryder

You know the many get-tough methods you can use to make clients pay.  The problem is, these methods often embarrass clients, arouse anger and destroy relationships.  Here are constructive steps you can take to avoid collection problems, encourage payment and strengthen bonds with clients.

Step #1:  Give every new client your written schedule of fees and collection practices.  You might do this as part of your engagement letter or as a separate document.  If you have different fees for different types of clients, then prepare a fee schedule for each client category.  When you give every new client your explanation of fees and collection practices, clients understand that these practices apply to all of your clients so they don't take your policies personally.  Also, when clients have a clear understanding of how you collect money, they will act to avoid the known consequences of late payments.

Step #2:  Give clients a reduction for paying your invoice on time.  Some lawyers add finance charges to past due invoices, but finance charges usually create bad feelings.  Instead, take the positive approach and offer your client something he wants:  a discount.  You might offer clients a reduction of 5 or 10 percent when they pay your invoice within 10 days or whatever time period you choose.  Write a short statement on your invoice so your client knows the exact amount of the reduction (in dollars, not a percentage) and the date by which you request payment.  Something like this:

(John, you're invited to take a prompt-payment discount of $125 if I receive your payment by Monday, September 15, 2003.)

When you offer a prompt-payment discount, you show your client how to reduce his legal bill.  As a result, your client saves money and you get paid -- the proverbial win-win situation.  But when you penalize clients with collection procedures and finance charges, you strain and sometimes demolish relationships.

Step #3:  In your first request for payment (after the original invoice), acknowledge that your client might not have received your bill and include another copy.  Also, write a gentle request for payment over your signature.  If the post office didn't deliver your bill, this gives your client a second chance.  And if not paying your bill was simply an oversight, you don't want to come on too strong when your client made a mistake.

Step #4:  Once an account is past due, make sure all requests for payment are over your (the lawyer’s) signature.  Clients often think their past-due balances are known only to the back-office billing clerk -- or an outside billing service.  But when the request for payment comes with a note from you, the client realizes you know his payment is late.  To avoid embarrassment and the possibility of jeopardizing your relationship, clients often pay your invoice or contact you to request payment terms.

Step #5:  Send collection requests frequently.  Some clients think that after they receive your invoice or statement, they won't hear from you for another month.  In this way, they view the arrival of your statement as a 30-day extension.  Instead, send requests for payment of past-due amounts every 10 days or so.  This keeps your receivable ever-present in their mind and gives them a gentle nudge because they know they'll receive another statement in 10 days.

Step #6:  Invite clients to pay with a credit card.  If you think your client may be short on cash, offer an alternative.  Plus, clients often like to pay by credit card because they add to frequent flier miles or other reward programs.

Step #7:  Ask clients to call you to arrange a payment schedule.  Some clients don't ask permission to make payments to avoid embarrassment or for fear that you'll say no.  If you think your client may be in a cash crunch, invite him to call you about payment terms.  If your client is a “little short,” this may be the breath of fresh air he needs.  Plus, your offer to help him tightens the bond between you and strengthens your relationship.

© Trey Ryder

FREE LAWYER MARKETING ALERT:  If you'd like to receive Trey Ryder's weekly Lawyer Marketing Alert, send an e-mail to Trey@TreyRyder.com. Write "Subscribe LMA" in the subject line and write your name and e-mail address in the body of the message.