Why aren’t lawyers getting paid…. great question! And I thought I was all alone with receivables challenges! I read once that for every 30 days past 90 days due; that money is worth half of the original amount. So put interest charges on the invoice, which in my experience look good on paper but doesn’t work. When the client does decide to pay, they either negotiate the finance charge off or just pay the original invoice and ignore the finance charge. When you do get paid and have a little extra, it seems everyone and even inert things know.
It puts all of us in an interesting position when you have a client go past 90 days and beyond. Yes, you want to get paid but how far do you go to get paid. You want to keep them as clients and are concerned that any aggressive collections tactics or even no aggression will result in losing the client. If the client goes away, now we have to replace the revenue. And as we all know it is much more expensive to get new client than it is to retain a current one.
Why Aren’t Lawyers Getting Paid?
A recent LexisNexis survey of 309 U.S.-based law firms — 75% of which were firms with less than 10 attorneys — reports that 39% of a typical practice’s client accounts are past due. And of these past due accounts, only half are likely to be paid.
That’s a lot of cash flow down the toilet.
In fact, 73% of small firms say they have past due accounts and 53% of firms have client accounts where between 10% and 39% are past due.
So why aren’t lawyers getting paid?
The #1 reason by far cited by the lawyers in the survey (82.5%) was “client financial hardship.” The other reasons in order of prevalence:
We try to be a gentle as we can about receivables. We email statements on the first of every month to the Accounts Payable people. Then, after 45 days past due, on the 15th of every month we email the invoice again to the individual in the firm who ordered our services. This is our normal procedure and seems to work for our clients. We understand that your clients are all different. We know that some of your clients pay on time and some don’t, so we try to be patient. Or some cases you are working on has taken longer than everyone thought!
One more point should be brought up. The business of law has changed since the “Great Recession”. Law firms are facing new challenges never faced before 2008. The numbers and reasons in this article are just a few of the challenges.