Client Connection

Client Connection

Wednesday, October 9, 2019

The Fourth Quarter is Here. There Is No Longer Time to Wait.

Too many law firms continue to think that collecting their receivables is an easy process – all you have to do is remind clients to pay and they will.  We at Client Connection have been telling you that A/R management and collections is all a process that must be followed regularly and consistently throughout the year in order to achieve the right results.  Now we’ve reached the fourth quarter, when the rubber meets the road.  Listen to what others are saying about receivables.

Gretta Rusanow and Jeff Grossman of Citi Private Bank’s Law Firm Group recently published a report entitled “Law Firm Margins Tighten as First-Half Expenses Outgrow Revenue.”  They anticipate that “it will be a challenge for the industry to see a repeat of 2018’s strong performance in this year’s results,” but they expect 2019 to be a good year compared to earlier post-recession years. A survey of 191 firms saw revenue growth of 4.1% in the first half of 2019, but attributed that growth largely to the rise in lawyer billing rates. Soft demand, they say, has reduced revenue growth, but so has the lengthening of the collection cycle, which they report as a prolonged trend.  Changes in client bill payment behavior have been causing the collections showdown, and causal factors include e-billing systems and greater scrutiny around bill review, as well as changes in payment terms.

Citi’s report concluded that “collecting on increased inventory levels will be key.”

Separately, Thomson Reuters Peer Monitor Index reported that law firms collected 89.2% of the bills clients had agreed to pay, in the third consecutive quarter of decline. 

Said a September 19 article in Bloomberg Law, “Declining realization is a long-term trend that has a pernicious, often unspoken impact on law firm finances.”  That article concluded, “So you keep raising rates, but if you can’t bill it and you can’t collect it?  It’s ridiculous.”

At Client Connection, we want to make sure that the message comes through loud and clear:  pay attention to your accounts receivable and take action in a timely and thorough way.  Be realistic about whether your firm is underachieving in its A/R management goals and efforts.  And if your firm has developed bad habits, now is the time to overcome them. Learn more on our web-site at: