Ensuring Brief, Onetime Client Work Results in Payment
If a client misses a payment while a matter is ongoing, attorneys have some recourse: they can halt work until they’re compensated. But short-term work for clients who’ll likely only need to hire an attorney one time — to set up an LLC or trust, for instance, or file an uncontested divorce — may pose more of a risk.
Owner Chicago Journalist Media
In some instances, a client might only receive one bill; if it doesn’t get paid, all the time and effort the attorney has invested in the work could end up being a loss.
Hiring a collection agency to try to chase down the debt can be expensive, according to Krystal Champlin, Chief Executive Officer of RJH Consulting. To avoid outstanding payment scenarios, the consultancy has advised its law firm clients to try to charge a flat fee, initially securing the full amount, if possible, for a package deal that specifies what services are included in the cost.
“For instance, if it’s a simple will, it may be a $500 flat fee, and [the will] consists of less than five pages,” Champlin says. “Another option is payment plans — for a onetime deal in the $1,500 range, [asking for] 50% up front. The other 50% is split into a onetime payment or two over the course of 90 days. Most of the time, you don't get the final document until you’ve paid in full.”
BUILDING A BUFFER INTO BILLING
Asher Rubinstein, a Partner at the New York-based law firm GalletDreyer & Berkey, LLP, ideally likes to get 50% of the cost for singular matters before beginning the work.
“You have to ask for something up front — some degree of retainer,” says Rubinstein, who works on asset protection, estate planning and other matters. “You don’t want to be taking on 100% of the risk, about to perform services and have nothing from the client.”
By including verbiage in the retainer agreement that states the retainer has to be replenished within 15 days if it ever runs out, lawyers may be able to minimize the amount of missing funds, according to Dan Stock, Owner and Founder of family law firm Daniel H. Stock PLLC. His clients typically deposit an upfront fee into an attorney escrow account.
“Some lawyers just send bills to the client — I have colleagues who, at any given time, are owed a half-million dollars,” Stock says. “As soon as it becomes apparent the client isn’t paying, there’s a provision in [my] retainer agreement that I will not work for you anymore. The worst that can happen is you send out a bill for work done for the past month; they don’t replenish the retainer and wind up owing you for one month of services.”
Stock also charges a standalone fee for a consult — usually slightly less than his hourly rate. With New York City rent and other operational costs, the revenue doesn’t go far, he says. However, he feels the fee helps reduce the amount of people who reach out but aren’t serious about getting a divorce or can’t afford his services, while also providing some compensation from clients who’d just like to talk about their options.
“If a person wants to walk out of my office and use the advice I’ve given them to file their own divorce, I’m perfectly happy to have them do that. They paid me for one hour of time,” he says. “I just don’t have the time or inclination to give out free consults and have somebody pick my brain for an hour and never see them again. That’s never made sense to me.”
MINIMIZING REVENUE WRITE-OFFS
Clients may reach out with questions or return the bill to you, delaying payment, if they don't understand why they’re being charged a certain amount.
Aligning expectations can help firms sidestep those kind of payment pauses, Champlin says. She recommends billing one-off clients at least once a month — possibly biweekly if you've provided a cost estimate for the work — so clients know the latest cumulative time total.
“[Make] sure you aren’t just sending a bill that says ‘telephone conference,’ that you’re sending one that says ‘telephone conference in reference to this particular subject,’” she says. “If a client sees there’s value there, they tend to want to pay that bill.”
In some instances, single-matter clients may not have compensated you yet because they’re struggling financially. Offering additional payment options might help you avoid accounts receivable issues, according to Rubinstein, or not getting any money at all.
“Especially in the COVID economy, people are making less money and finding it harder to pay their bills,” he says. “If a client wants me to do a payment plan, they can pay in installments. [I’d even] accept a little bit less, maybe, and everyone comes out ahead.”
You can hear more from Krystal Champlin, CEO of RJH Consulting, in our upcoming Solution Series Webcast, “Navigating Organizational Change & Growth Strategies with STARS Framework.” When we think of organizational change and growth strategies within law firms, we often assess our current situation by what is on fire at the moment instead of tailoring business strategies to accelerate change and growth. This webcast will cover the five common stages law firms may find themselves in and how to gain traction within each of those stages. The webcast. Sign up for this free webcast here.
About the Author
Erin Brereton is a freelance writer, editor and content strategist who has written about the legal industry, business, technology and other topics for 20 years.