Receivables - time to collect

In Australia, we are approaching the mid-point in the financial year, which also coincides with the long Christmas break – traditionally the slowest month for collections. Meanwhile in the northern hemisphere the financial year is concluding for many practices. After a year affected by much slower business activity that usual, the coming new calendar year may see difficult times for some first with large outstanding debts from their clients.

Continual communication

All too often practitioners avoid the conversion about unpaid legal costs. Clients need to understand that resolving matters involves a financial commitment and payment will be required. The provision of profession times often appears intangible so practitioners must reinforce at all stages the value they provide to their clients – and receive payment for same. If it helps, every call could perhaps start with “I would like to initially update you on where your fees are at”.

Ask for security for your costs

Routinely asking every client for advance funds, held in the trust account as security, is almost always a good idea. Remember that the trust regulations stipulate there must always be a valid reason for holding trust funds so provided that work is ongoing monies can be held for this purpose. Ensure the clients understand why the funds are being held and when those funds may be utilised, but also ensure you invoice regularly and take those monies when due.

Invoice regularly

Many clients would appreciate regular invoicing, particularly commercial clients with their own expense budgets and who may appreciate taking up an input tax credit within their consumption tax system (GST, VAT, HST). Getting your client into the monthly habit of it being ‘that time again to pay the lawyer’ is a useful habit.

Offer a discount for early payment

While heavily dependent on the area of law you are working within, on average collection times in law practices can be between 30 and 60 days – higher than experiences by many other business sectors. Unlike other suppliers, lawyers feel the pressure to continue to work for their clients due to a requirement to always act in their client’s best interests, even when they themselves may end up picking up the tab. Early payment discounts, particularly when interim billing matters, could deliver a better result than waiting for a client to default on a payment due to the loss of their own business and ultimately the lawyer standing in line as an unsecured creditor.


Speak with your lender now to determine if increased loan facilities are possible. Interest rates are at historic lows creating a better environment for borrowers. Added flexibility with your overdraft could be the difference between ensuring that key business expenses are not interrupted.

Stop work on non-payers

Finally, for those clients who simply do not pay their bills or so inconsistently to make it not worthwhile – stop working for them. Difficult yes, however ultimately the provision of services where collection rates drop to marginal levels costs a practice huge amounts of lost opportunities elsewhere. If all else fails, make the hard decision as politely and fairly (to your own practice) as you can.

Join the discussion and connect with us on LinkedIn

Join the discussion and connect with us on LinkedIn

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