In the world of accounts receivable management, it's easy to fall back on the strategy you need at year-end to accelerate collections during the last quarter to meet your revenue goals. But don't just remember what you did. Consider how effective it was for you in the past. Did it accomplish what the firm really wanted? Are the obstacles of collecting A/R at the end of the year becoming tougher to overcome? Are your attorneys becoming less open to new approaches to year-end collections? This leads to a question: will those ageing receivables that are on your A/R reports now continue to sit there in 2019?
The business environment has evolved: mindsets have changed, and so have business practices. Because law firms are doing business in a different world, they also need to ensure timely payment and/or address payment issues. Past collections experiences may be worth considering, but in these changing times, they may not be wholly useful as a guide.
Ask these four questions about what you did in the past -- and what may need to change this year to ensure a brighter future:
- What role should firm leadership play at year-end? Firm leaders need to not only tell the attorneys to address collections, they must be diligent in ensuring attorneys are making progress. They need to establish clear expectations about what has to be accomplished with collection efforts now and through year-end. Leadership must also provide the right resources to help the attorneys and assess whether the firm has in place the right people, with the right skills, to do the right job.
- To what information should we be paying particular attention during the last three months of the year? Detailed reports should answer key questions: whether accounts are actively being pursued, what the payment status is, who is pursuing collections and what success they are having, why clients are not paying, and what steps are being taken to get them to pay.
- How do we proactively pursue receivables at year-end while respecting the attorneys' concerns about hurting client relationships? Educate your attorneys that many other businesses are contacting their clients for this reason, so it's entirely reasonable for your firm to do the same. Law firms lose clients by doing poor work or failing to deliver client service, not by asking clients to pay their bills.
- How can firms overcome the backlog of older, difficult A/R to be collected by December? Because the older receivables require more time and skill, you had better start now. No firm should delude itself into thinking that it is going to be paid unless it proactively pursues older accounts.