Lots of lawyers operate under the assumption that they’re doing well when they have a client and the client has a legal problem. They’re busy, they’re getting to apply the knowledge and skills they’ve acquired, and they feel like they’re firing on all cylinders. But they’re not. They’re headed for trouble if that’s all they’ve got.
Those lawyers have work to do and the skills to do it. But, they don’t, necessarily, have a plan for getting paid for doing the work. Until you’ve got that part of the equation figured out, you’re not doing well. In fact, until you’ve got that part figured out, your not only not doing well, you’re actually headed in the wrong direction. Your using up your resources without a plan for compensation. Bad idea.
When you do work without payment in advance you’re extending credit. You’ve become a banker and your client is your borrower. The problem is that you’re likely not a very good banker. You probably haven’t done a credit check, required a financial statement or secured your loan. You may even have made your loan on a handshake with zero documentation.
If you’re like most of us, being lawyer is tough enough. Being a banker is way more than we can simultaneously handle. It’s not going to work.
So what’s the solution? Don’t be a banker. Don’t lend money. Get paid in advance.
One way to handle the situation is to collect fixed fees, in advance. That’s the way I do it. Our clients pay for our services when they hire us and, in some cases, at designated times as the case progresses. Another way to handle the situation, and probably the most common solution, is to have the client place a deposit in the attorney trust account. Billing then takes place on a periodic basis, and the bill is paid from the trust account.
Either system is effective if the firm keeps up with the accounting. It’s important to collect every fee immediately upon it becoming due. Don’t let a fixed fee that comes due slip by. Don’t let a client fail to replenish the trust account as the balance diminishes. You may need to check your accounts more often than monthly. It’s critical that you never transition from being the lawyer to being the banker. Do not let the client get in the hole.
If you get to a point where you’ve screwed up and suddenly you’re owed money then it’s time to get out. Ask for payment, give a very short deadline (remember this wasn’t supposed to happen), and withdraw (if permitted) immediately if payment is not forthcoming. Don’t hang on to the client in hopes of getting the balance brought current. Get out now, while you still can and before the balance grows. You’re a lawyer, not a banker. Don’t forget it.
