Why the timidity around billing?

In the current economic environment, law firms, like other businesses, are keeping a close eye on cashflow. This is always a particular concern for professional firms, who are rarely paid up front for their services.

Yet, billing is a matter where few firms are as good as they would like to be, or need to be. Many partners are reticent about first billing, and then about chasing payment.

Typical reasons given include variants on the following:

• The belief that they will get a better recovery if they wait;
• The client is going through a difficult period – we need to support them;
• A previous bill has not yet been paid;
• The client will use a different firm in the future if chased; and
• The project is not yet finished.

Partners who say each of the above don’t believe they are making excuses – they believe each reason. But some managing partners and finance directors who have looked closely at these obstacles to payment insist that many of them do not stand up to close scrutiny.

Of course, discovering which are wrong has to begin with direct conversations with clients. But the following findings have a ring of credibility to them:

• Clients are less likely to query, and more likely to pay, a bill they receive soon after completing a transaction – after all, they are on a high from a transaction or winning a case;
• Receiving this bill may prompt them to pay the previous one;
• Regular billing may actually be better for their cashflow than one large bill; and
• Calling to check a client is happy with the bill is a chance to ask them what other matters they have coming up.

Particular exceptions, where the time-to-payment genuinely cannot be reduced tend to include matters such as divorce cases, where the client can pay only when assets or income to which they are entitled are bound up in the case.

Outside of these exceptions, the reason to tackle this issue is obvious. As one managing partner recalls telling a partner, ‘I can’t pay staff using work-in-progress’.

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