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Collections – A Full Time EffortPresented by:
James A. Nitzberg, Executive Vice PresidentSelect* Associates, Inc.
Don Williams, Collection Consultant
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The Value of Professional Services
“The Perceived Value of Services provided Today Decreases Rapidly with the Passage of Time”
Chester L. KarrassAuthor, Speaker, Negotiation Expert
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The 7 Steps to Effective Collections
1. Timely Billing2. Timely Collections3. Create a Firm Collection Policy4. An Organized Approach to Collections5. Ask for your money6. Document…Document…Document7. Measure Results
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The longer an account remains unpaid, the lower the probability of collection.
Important Collection Fact
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According to the Association of Commercial Collectors:
The probability of collecting a payment 90 days past due declines 12% for each additional 30 day period.
Based on a study by Dunn & Bradstreet
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9893
8573
57
42
25
130
1020
30
4050
6070
80
90100
Length of Delinquency
Collectability of Delinquent Debt
due
1 months
2 months
3 months
6 months
9 months
12 months
24 months
Probability of Collection vs. Time
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Attorney Thoughts about The Collection Process
The Top 10 Misconceptions related to Attorneys and their efforts to Collect
Money from their Clients
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Top Ten Misconception #1We need more Time
The Theory:“If I give my Client enough Time, they’ll eventually pay
my bill”In Reality:If you haven’t been paid in 30 - 60 days, there’s a
reason for it – and it’s not likely to go away automatically
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Top Ten Misconception #2Don’t Offend My Client
The Theory:“Don’t YOU (the collection staff) call MY Client. You’ll offend
them and they won’t pay.”In Reality:Many A/R issues can be resolved quickly by the Law Firm’s
Professional Collectors – provided there’s no primary issue with the quality of work performed or a billing error
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The Theory:“Send them a 4th reminder letter. They’ll pay after this
one”In Reality:If they haven’t paid after the first reminder, there’s
something wrong. Another mode of communication is necessary.
Top Ten Misconception #3Only Send Reminder Letters
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The Theory:“Let’s not bill them this month. We don’t want to add
gasoline to the fire.”In Reality:By delaying billing (and ultimately resolving the entire
A/R) you’re actually putting yourself in further jeopardy since your Client doesn’t know the full amount of what they owe.
Top Ten Misconception #4Stop Sending New Bills
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The Theory:“Let’s wait until we are COMPLETELY done with this project,
then we’ll negotiate.”In Reality:Unless you have spelled out a settlement amount or formula in
advance – this sets your Firm up for a large potential discount at the end of the project.
Top Ten Misconception #5Wait until we complete all work
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The Theory:“Eventually my client will recognize the true value of the
services I provided several months ago and they will pay the bill.”
In Reality:The longer the gap between services provided and payment –
the less likely your Client will remember how valuable those services were. (Remember the Chester L. Karrass Theory)
Top Ten Misconception #6Do Nothing: My Clients are Trustworthy
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The Theory:“We can’t push too hard to collect the receivables. It will
damage our relationship with my Client”In Reality:True – you do have to be careful about your approach –
however you need to resolve A/R disputes as quickly as possible. Not resolving the dispute can actually do more damage.
Top Ten Misconception #7Collection Efforts? That’s too pushy!
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The Theory: “I won’t stoop to asking my client for money. I always let my
collection staff handle that”In Reality:There is a definite time when the Attorney needs to be involved
– since they are providing to the actual work product. This is especially important with large A/R Balances.
Top Ten Misconception #8An Attorney should never ask for Money
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The Theory:“I’m a busy Professional Attorney. I don’t have time to stop
and make collection calls.”In Reality:At times, Attorneys can’t afford to NOT make these calls –
since unresolved A/R can affect a Client Reference and the Attorney/Client Relationship as well as stall consideration for future business.
Top Ten Misconception #9I’m too busy to collect my money
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The Theory:“We can’t possibly ask for our money now! I’m working on
closing a much bigger, better, more lucrative deal!”In Reality:This is a dangerous thought process – ideally your Firm
must clear up one outstanding set of issues prior to taking on additional matters.
Top Ten Misconceptions #10I’m Working on the Next Big Deal
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What’s Next?
Your Firm is committed to creating a collection PolicyYou have buy-in from your Attorneys
This could be the subject of another presentation by itselfHow do you get started?
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Don Williams – Biography
28 years in financial services industriesWorked at six different law firms as a consultant and employeeSurvived eight year ends: Hit list, Cattle drive, pledge drive, Target list and…the Bible.Has worked with four collection software applicationsCurrently Credit/Collection Manager with international law firm
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Business of Law
vs.
Laws of Business.
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Provide the service
and…
Get paid for it.
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Monthly statements are sent to all clients listing all open invoices.
Have a formal written collection policy detailing exactly when clients can be
contacted.And…have the support of managing
and/or senior partners.
Common collection strategies of successful firms:
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Monthly Statements – an absolute must!
From the cable company to the phone company to the electric company – everyone sends bills, and every one of your clients
expects to receive them in the mail on a regular basis.
Why not law Why not law firms? firms?
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The cover letter should be simple and to the point.
Dear Client:
Attached you will find an Account Statement listing all open invoices as of 08/20/2007. Please take a moment to ensure the individual or department responsible for payment of legal services has received all of the invoices listed.
After review, if you have any questions or need additional information, please contact Don Williams at your earliest convenience by calling…
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Invoice dateInvoice number
Matter # and nameAmount due
Total due for all invoices listed
The Account Statement should include:
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The First and Best Contact
Firm’s Accounts Receivable
Client’s Accounts Payable
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Collection policy
Must set clear and simple guidelines for delinquency control.
Example: A client will be contacted by the collections team when any of their invoices exceeds 90 days
outstanding.
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Ensure all collection contacts are documented. All e-mails, phone conversations, documents faxed,
etc.Track collection activities on a regular basis.
Check payments daily.Push to clear unidentified payments ASAP.
Switch assignments if stagnating.Never assume a receivable is too old to be paid.
Address partial payments ASAP.
Once statements are in place and policy is set:
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Use first six months of year to clear older A/R once and for all.
Promote use of credit cards for payments for chronic slow-paying clients.
Assign one person to “embrace” technology and learn it inside and out.
Ensure consistency – Client vs. matter vs. invoice level review
Once statements are in place and policy is set:
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In collections…
Creativity Count$!
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Largest balancesDate last paidDate last billed
Invoices over 90/180/365Unapplied cash
Short-paid invoicesDays to pay
Never left blocks ( no payments made )Reporting vs. Results
Use the collection technology available to slice/dice database
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An experienced collection team is best.
Ledger cards were great, modern technology is better, and …
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Collections – A Full Time Effort
Presented by:
James A. Nitzberg, Executive Vice PresidentSelect* Associates, Inc.www.selectsa.com
410-308-7600
Don Williams, Collection Consultant