Is Your Law Firm Missing These 5 Pieces of the A/R Puzzle?
Our CEO, Emily LaRusch, sat down with Brooke Lively, Founder of Cathedral Capital, to discuss the pieces that many attorneys are missing when it comes to the A/R puzzle, and exactly what you need to do to ensure your law firm stays profitable.
Brooke compares building and running a solo or small law firm to climbing a mountain: It’s fun, exciting, beautiful, but it can also be dangerous, scary, and lonely. That’s where she comes in, to be the “Financial Sherpa” for attorneys who need a guide to get them to the revenue goals they’ve set.
Financials come easy to Brooke, just as practicing law comes easy to you. What isn’t easy is running the parts of your firm that aren’t in your zone of genius, and also placing value on the things that do come easy to you. When you bring in a CFO, whether fractional or full-time, they can really take a look at where your money is going, how much is coming in, whether you’ve placed enough value on the services you offer, and also ask questions like “How can this make us more money?”
Brooke’s 5 Pieces of the A/R Puzzle: What Many Attorneys Are Missing
- Retainer
- Evergreen Retainer
- Stop-Work Policy
- Automate Payment
- Fee Agreement
Don’t Start Work Without a Retainer
The first piece of the A/R puzzle is to put a stop to the collections chase and implement a retainer equal to the first 3 months of work at the start of your client relationship. There’s no profitability when you’re afraid to collect payment, so avoid any future conflicts by getting that payment upfront.
Implement an Evergreen Retainer
What happens when that initial retainer runs out? An evergreen retainer ensures that you’re always a step ahead and collecting payment before spending any of your time on client work. Your evergreen retainer should average about 3 months of work (this may be less than your initial retainer).
Create a Stop-Work Policy
So what happens when someone doesn’t pay? You’re trying to avoid the fight of collecting on the back end, so you need a policy in place to protect you. If the retainer isn’t paid on time, you immediately stop all work on that case. Brooke mentions a “red rubber band policy” at one firm where cases with late payments are immediately wrapped in a red rubber band that tells you (and everyone else in the firm) that this case should not be opened. In a modern law firm, you can even set up document locks to prevent oversight and protect your time.
Take Payment Out of the Clients’ Hands
When you take out the middle man (in this case, your client) it’s much easier to avoid forgotten payments, human error, missed emails and notices, etc. Have your clients sign a Credit Card Authorization to ensure that your invoices don’t spend time sitting on a desk or wind up forgotten in the trash. You’ll receive prompt payment and your clients won’t wonder why you’ve stopped working on their case – a win-win!
Have a Clear Fee Agreement
Fee agreements protect all parties, but what it really comes down to is protecting your firm. Have a clear fee agreement that lays out your fees, when they’re due, and what happens if they aren’t paid. Your clients will appreciate clear communication and no surprise charges and you will appreciate being paid for your time and expertise!
Interested to hear more from Brooke Lively about law firm financials? Listen to her full interview on the Solo de Facto podcast here.
