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:
Client challenged value of charges
Bill was for services performed too far in the past
Client disputed services
Bill format unclear to client
In the “Other” category were these reasons for past due bills:
Invoices sent irregularly
Poor tracking of fees and services
Bills sent too infrequently and bill larger than client expected
Corporate client with slow internal bureaucracy
Not a priority for client to pay
It’s really hard to believe that four out of 10 clients are financial hardship cases. But if these survey results are accurate, then law firms have a huge disconnect in one or more of these critical functions:
Marketing -- you are clearly marketing to -- and attracting -- the wrong type of client.
Sales -- you are not managing client expectations or educating them on the value of your services.
Business processes -- you have a broken billing model (i.e., hourly billing) or you do not have the proper systems in place to handle your billing and collections.
In the survey, attorneys admitted to something we all know is true (and is a lot more believable than client financial hardship): lawyers hate asking clients for money. They find it embarrassing, distasteful, even greedy.
But I don’t know any lawyers who find money itself embarrassing, distasteful or greedy!
The thing is, if you don’t expect to be paid, your receivables will probably reflect that. If you pursue your work on your client’s behalf with passion, you should pursue payment for that work with the same passion.
So you either need to change your attitude or task this out to someone who is not afraid to bulldog clients about their bills. Your profitability depends on it.
P. S. If you missed it, read my post last week about Tips for How to Bill Smarter.
Hat tip to Mike O'Horo.