Strategies to Improve Law Firm Collections and Cash Flow
By Patrick M. Maloney
Like other businesses, law firms require steady and constant cash flow to stay healthy. Unlike other businesses, law firms generally invoice for the services they provide in arrears, leaving them exposed to substantial risks of non-payment. This article explores strategies for firms that represent clients on an hourly-rate basis to improve their collections and cash flow. Attorneys can improve collections and cash flow by carefully screening clients, formalizing the attorney-client relationship in a thorough retainer agreement, and ensuring candid client communications throughout the representation.
Attorneys experienced in running small firms recognize that accepting the wrong case or client can have a catastrophic impact on their law firm. Prospective clients who have unrealistic expectations concerning the likely outcome of the matter or the fees to be incurred, or who simply prove to be high maintenance, all affect the bottom line. Unfortunately, inadequate screening, usually brought on by the desire or need to obtain more business, allows these clients to slip through.