The Law Firm Collections Checklist

By Dean Dave Callahan, Director of Sales, Select*Associates

For many law firms, taking on a new client is cause for celebration. It's also a set of liabilities and potential pitfalls that most firms don't consider and address in a clear, careful, and systematic manner. Creating and following a clear collections checklist can help both you and your administrative team be better prepared in the event that your new client ends up unable or unwilling to pay. It also sets expectations for your clients about payments and the policies that govern their repayment schedule. Having a clear process will make the onboarding and collections process simpler, and it will greatly reduce the chance of non-payment later down the road and ease the collection on non-paying clients. Your firm can use this new client onboarding and collections checklist as a starting point to tailor your own workflow, or it can be used "as is" if it fits the way your firm does business.


Have a standardized application for new clients seeking credit. The application should be uniform across all new clients, and it should be filled out and delivered to your office. Make sure that the application is filled out personally by the potential client and that all directions are followed. Seemingly minor problems like answering a question incorrectly or turning the application in late can be indicative of a client that is more likely to stop paying. Check all applications for accuracy, completeness, and timeliness.


Check applicants through a credit bureau. If your client is an individual, use a credit check service to get their scores for the three major bureaus and use that information to determine terms and a repayment schedule. Pay attention not just to the number but the actual marks on the report. For clients that are corporations, you can check with corporate credit clearinghouses like Dunn & Bradstreet or request financial documents. If you do request financial documents, like balance sheets or accounts reports, have them looked over by an accountant to verify that they are correct.


Cover the basics on your application. To make sure that you have a strong understanding of a client's potential to pay, cover the following on your application: business revenue, fixed obligations, market stability (will they be out of business next year?), credit history, bank account balances, how long they have been in operation, and whether they have any fixed assets that can be used as collateral.


Use prompt and regular invoices. Make sure that all invoices you send are regularly scheduled, prompt, and accurate. Clients are much more likely to pay in a timely manner if the invoices you send arrive at an expected time every payment period and if they know they can trust them to accurately reflect their balance and obligations.


Make payment plans clear and understandable. If a client wants to arrange credit or a payment plan, make sure that the terms of the plan are clearly spelled out and easy to understand. This goes a long way toward ensuring compliance.


Listen to your clients. Some clients have special conditions that they either want stipulated in their repayment agreement or that alter or impact their ability to repay. Listen to them and take their considerations seriously. If they feel that you are ignoring their special instructions, they may be tempted to ignore your invoices.


Offer prompt payment incentives. These incentives usually take two forms—a discount and a penalty. Offer a cash discount to encourage on-time or early payments from clients, especially larger clients. Enforce a late payment penalty that is clearly communicated and understood by your clients to ensure that they pay within the allotted repayment period. Make sure all clients are aware and agree to both policies to discourage problems further down the line.


Operate with consistency. Regularity, stability, and solidity are all traits that encourage trust and discourage late payments. Make sure that you operate the same way with all clients every day that you do business. Not only will your clients appreciate it, but it will be much easier for your administrative staff to stay on top of collections and will keep accounts from falling through the cracks.


Select*Associates provides Elite clients with collection management and periodic cash forecasting solutions. Star*collect provides integrated collection activities, email aware AR statements, automated collection events, and integrated reports. Star*targetCash manages the periodic and year-end cash projection and collection process. Cash projections and comments are collected and compared to actual collections with specialized (SSRS) reports. Click here to learn more or visit our website.

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