Client Connection

Client Connection

Wednesday, February 18, 2015

Aged A/R Has Gone Too Far...Literally

Albert Einstein once said, “We cannot solve our problems with the same thinking we use when we created them.”  This reminded me of how many firms continuously carry ageing receivables that are difficult to collect. Yet, year after year, they never change their mindset about managing their backlog of A/R. By and large, law firms end up focusing on receivables that are easier and more straightforward in getting paid. When there are problem receivables -- and there inevitably are -- most firms let the receivables sit – and sit – and sit – and sit. Which is why A/R starts to accumulate over 120 days. And while many clients, both institutional and non-institutional, are much more thorough in reviewing bills that can delay payment, the larger problem still lies with law firms and their attorneys not dealing with the problem.

The fact is that most of the receivables collected during the year-end crunch are less than 120 days old. Because receivables over 120 days are usually more problematic, attorneys realize they can’t resolve them by year end. So many don’t bother. In the effort to get as much money in as possible, they focus on the more current billing and avoid dealing with unhappy clients, clients who are unable to pay, situations in which the clients did not get the result they wanted, etc. With the pressure off in the first quarter, attorneys are even less inclined to face older receivables.
The first quarter is actually the best time to focus on cleaning up old A/R, precisely because the pressure is less intense, and because the effort will take some time. 
Here’s what to do now:
  • Take time to assess the ageing A/R problem. Evaluate your older accounts top to bottom and get a handle on which receivables need to be pursued and which really are uncollectable. Sit down with each billing attorney. Request an action plan to get the accounts collected or find out if they need help.
  • Get a handle on those accounts that had a payment problem early in the ageing process and figure out why the problem was not dealt with sooner and has now left older accounts uncollectable.
  • Sit down with firm leadership and provide facts about your findings. They need to have the information to tell the attorneys to address their ageing receivables and the will to hold attorneys accountable.

Whether or not your firm had a good 2014, as you look forward, you need to recognize that getting accounts collected sooner rather than later can help make the difference in 2015. Learn more on our web-site at