Too often, firms get to December 31 and breathe a sigh of relief that they made it to year-end safely. Yes, they may have made budget, but they probably left too many unpaid receivables on the table, which will continue to age and become increasingly difficult to collect. They choose to ignore the amount they have failed to collect during the year so they could perform better.
Throughout the year, it is essential to evaluate how your firm can better manage and collect its receivables. While the year is still young, we can recommend five steps to help you fully commit to managing your receivables in order to improve your firm’s bottom line.
1. CONNECT THE DOTS, MANAGE EACH STEP AND ADHERE TO THE PROCESS
Stop throwing spaghetti against the wall to see what sticks! Take appropriate steps to build a program to manage AR all the way until invoices are paid in full. Manage it all year long; do not wait until the last month of the year to pay attention.
Too often, firms want the results of a strong accounts receivable management program without putting in the time and effort needed to make it happen. Recognize that the collection process is long, sometimes tedious and requires daily attention. You need to have a plan of attack, clear expectations and assignment of responsibilities, and ramifications if those involved in the process do not take ownership of their responsibilities.
2. UNDERSTAND AND MANAGE THE AUTONOMY YOU GIVE ATTORNEYS
Many firms give their attorneys too much control over collecting receivables from clients without making sure that the attorneys are spending the necessary time to collect their aging AR. The culture of forgiveness needs to be replaced with a culture of high expectations to increase revenue through better collection efforts throughout the year — not just in the year-end sprint.
Identify attorneys who need help getting paid, practice areas that need consistent AR management support and problem clients who don’t pay on time. If attorneys cannot make the time to monitor payment status, the firm must have AR professionals to do it for them. Attorneys are vital to assess the clients’ ability and inclination to pay, but they do not have to be the ones getting them to do so.