Making Clients Pay Their Bills

They aren’t going to pay. Forget about it.

You can send threatening letters. You can call and threaten to break their legs (kidding). You can hire collection agencies. You can sue them.

They aren’t going to pay. Forget about it. Seriously.

Sure, I talk to lawyers who have systems that help collect overdue balances. They employ some or all of the tactics I’ve mentioned above. But, realistically, they don’t collect everything they’re owed. It’s a losing battle.

Who gets screwed out of fees by clients? Is it just lawyers representing people who can’t afford to pay? No. Is it just lawyers representing clients who can afford to pay but get caught up in paying other, more important bills? No. Is it just lawyers representing wealthy people who can easily pay and choose not to pay their lawyer? No.

Every lawyer, representing every kind of client, can tell you stories about not getting paid. Some of those stories involve a few hundred dollars. Many involve a few thousand dollars. Some even involve hundreds—yes hundreds—of thousands of dollars.

I’ve heard the stories of nonpayment involving clients of every shape, size, and variety.

What can you do?

Accept reality. Get used to the idea that if you extend credit, you’re going to get screwed.

You’ve got to build getting screwed into your system one way or another.

My way is to collect all fees in advance. We did it by requiring deposits to our trust account when we billed hourly. We do it now by charging fixed fees paid in advance.

You can do it too. You’ve just got to figure out what works in your jurisdiction.

The most common objection I get at this point in the conversation with most lawyers is something like “My clients don’t have the money in advance, so I’ve got to spread the fee out over the course of the case. Then when the payment isn’t made, the judge won’t let me withdraw, so I get stuck with an outstanding balance.”

If the client can’t pay you so that you don’t get stuck, then don’t take the case. Repeat: Don’t take the case. It’s a bad case, bad, bad, bad. Don’t take the case.

“But,” you say, “If I didn’t take those cases, then I wouldn’t have any work.”

Guess what? If that’s the scenario, then you don’t have any work.

What do I mean?

I mean you’re taking those cases, doing the work, and not getting paid. That’s like not having the work. Doing things for clients without getting paid is like doing nothing. You don’t really have the business if they’re not paying.

However, if you’re going to insist on taking these cases knowing that you’re not always going to get paid, then you’ve got to cover yourself in another way.

You’ve got to build the unpaid bills into your system.

Do it by raising your rates sufficiently to cover the losses from unpaid accounts. Build it into your overall fee structure. Let the people who pay cover the people who don’t. That’s what the rest of the world has been doing forever. That’s how they cover the shoplifting at Target and the indigent care at the hospital. It’s how the real world operates. People who pay cover the people who don’t.

If you build those unpaid receivables into your system, then you’re getting paid, and you can stop worrying about the unpaid balances. It’s all good.

There really isn’t an effective system for making certain kinds of people pay their bills. Get paid in advance and eliminate the problem: that’s the best solution. Everything else will drive you crazy, make you unhappy, and keep you up at night.

Remember where I started with this discussion, and deep down you know it’s true: they aren’t going to pay. Seriously.