As we near the end of the year, our tax advisers are either congratulating us on a good year or warning us that we need to improve our collections if we want to remain in business. In larger firms, lawyers formerly ignored their collections until their bonus was about to be determined.

Over the years, I have had the opportunity to share the podium with or listen to some of the most knowledgeable speakers on law office management. Additionally, as a consultant, I have gleaned great ideas from clients and from observing other types of businesses. From these experiences, I have developed my own rules and suggestions for improving the cash flow not only for my business, but my clients’ as well. Some of these ideas may not work for you. However, taking time periodically to reflect on what type of cases you have, how they help put food on your table and how you spend your days is a worthwhile endeavor.

Over the past year, several of my clients, who primarily do insurance defense work, have had to upgrade their billing system software to comply with new requirements from carriers. For firms representing a number of carriers, making extensive and expensive changes for one carrier caused the partners to consider the value of that carrier’s work in their overall practice. I have at least one client, who, when the auditing firm requested a similar change, told the carrier that if it wanted his legal expertise, it would have to continue to accept bills as he always has submitted them. In his situation, he had the luxury of a specific sub-speciality that was hard for the insurance company to replace.

Lawyers are unique in that we are able, without additional academic training, to change or adapt our practices to new situations. Taking time to see where your business is going is critical to your long-term success. When I first began my legal technology consulting business, my two main activities were training people to use word processors to prepare legal documents and helping firms determine what type of equipment to purchase. Today, these are very small parts of my business.

I once thought that when law schools began graduating computer literate associates, the training side of my firm would shrink. In fact, some of my best clients are those who are more computer savvy, recognize the value of good training and realize they may not be in the best position or have sufficient time to train their staff and colleagues.

In the same vein, lawyers should regularly evaluate their practice and determine what types of cases they should consider handling and what types of clients they want to service. One of my colleagues recently challenged the common notion that computer programs should adapt to lawyers’ ways of doing things. Instead, Tim Mellitz, in an article for Legal Technology News, suggested that lawyers who make their practices function the way the computer programs want them to, can reap more financial rewards. His example was a lawyer who switched from a general practice to a highly leveraged workers compensation specialty and was able to use the case management and document production tools to handle more cases more efficiently.

Many lawyers have had their head in the proverbial sand while it shifts above them. Over the past decade, the medical profession, at the insistence of insurance companies, changed dramatically. The implementation of the American Bar Association’s task-based billing codes, while far from standard in their use, is laying the groundwork for similar changes for lawyers. Today, these codes are being used by auditing firms to compare one law firm to another. As with doctors, this doesn’t consider a lawyer’s expertise or experience. The next step will be to tell lawyers they will be paid X for each deposition or Y if they do no more than a specified number of depositions. Of course, like doctors, we know that each patient and each case is different and that general rules should not apply to specific cases. However, the reality is that insurance companies, as the law firm’s client, can set the rules because there are enough other hungry lawyers out there looking to take your place.

If these hoops aren’t the ones you wish to jump through to earn a living, start thinking how you can take the skills you’ve amassed during your years in practice and transition them into other practice areas. As the New Jersey Legislature changed the ground rules for awards in personal injury cases, many lawyers increased the number of workers compensation cases they handled to offset the changes in income. The most important aspect of managing your practice is to keep your eye on the horizon and figure out which way you should be heading and what expertise and client base you need to get there.

Once you have figured out what you want to be when you grow up, you should take a critical look at the operations and practices in your office to ensure you get paid for the work you do. The evaluation should start with client intake. What standards do you have for accepting a client? Does anyone who calls and asks for help become a client? Do you ask for a retainer? Is it sufficient to cover the first few months of a case? Do you ask clients to keep a minimum balance in their retainer?

When was the last time you looked at your rates? If you can set your own rates rather than have them set by larger clients, are you creating too many exceptions to your standard? There is a popular adage that 20 percent of a law firm’s clients occupy 80 percent of the lawyers’ time. If true, the question to ask is should this 20 percent have become clients of the firm? Are they relatives? Friends of relatives? Just simply difficult people? Is the nature of their case so different from what you normally do that it requires more research, paperwork or preparation? Is it worth it?

Years ago, I had a lower billing rate for sole practitioners and other clients than for larger firms. When the time came to consider a rate increase, I was hesitant to impose it across the board. Several realizations changed my thinking. First, I discovered that even though I was providing my services at a discounted rate to my firm’s lawyers, they were not doing the same for me. Second, many of my sole practitioner clients often were more demanding than those in larger firms. They were more likely to dispute my bills and they were charging comparable rates to their clients as were lawyers in bigger firms. Third, I was offering a discount based on an anticipated request rather than an actual one. Rather than wait for someone to ask for a discount, I offered it thinking the potential client wouldn’t hire me unless my rate was lower.

As I became more seasoned, I realized that prospective clients who were basing their decision solely on price weren’t the kinds of clients I wanted. They simply didn’t value my expertise or understand that I could often resolve things more quickly because of my experience. I also realized that if I didn’t charge enough for my services, my clients were unappreciative of the effort required. As seminar planners are well aware, if you don’t charge for a lecture, people don’t think it is as worthwhile as an event they have to pay to attend.

Finally, I had created a nightmare in my office trying to keep track of each client’s billing rate. While my billing software certainly was flexible enough to accommodate different rates for different clients, verifying that the right rate was charged to the right client became unwieldy. Ironically, once I changed to a standard billing rate for all clients, I had almost no resistance to my new procedures and did not lose any existing clients.

There are a number of other steps lawyers can take to improve their firm’s cash flow. Whenever possible, try to get paid for work as close to the time it is performed as possible. I am not advocating preparing bills on a daily basis. Rather, try to find ways such as retainers or same-day payments. Clients are most satisfied with the work you do when they meet with you directly or have just spoken with you. Generating a bill quickly will allow the client to connect the bill to the services just provided. Waiting until the end of the month will allow clients time to have some misgivings about either the amount or the quality of the service unless they are long-standing clients.

One way to streamline your billing process is to provide lawyers with a program to enter their time contemporaneously with their work — and insist they use it. Ten minutes of billable time missed each day adds up to a significant sum when calculated on a yearly basis. Many of the case management programs include time tracking tools and allow the time to be transferred directly to legal billing programs. Palm-based timekeeping programs also are available to provide lawyers with a timekeeping tool when away from the office. Several of the billing vendors also have remote versions that can be used on home computers or laptops.

Another trick is to use your billing program to prepare weekly billing reports for associates so they can check that their time has been entered and described properly. By monitoring their time close to when the work was performed, they are more likely to catch errors. Additionally, the partners in charge of these cases will not have to get bogged down fixing obvious errors when preparing bills at the end of the month. If your billing vendor offers a spell-checker, consider purchasing one to assist in preparing your bills. The time saved by a partner correcting typographic errors will be more than offset by the cost of the spell-checking module.

Make sure your bills clearly reflect the work you have performed on behalf of your client. This is particularly important when the bulk of your work is done outside the client’s presence. If you spend all day in court with your client, she knows what you did for her. If, however, you are asking to be paid for time on the telephone or writing letters, you should explain more fully the nature of what you did so the client can understand the value of your services. My rule of thumb is that I provide more detail for work not directly observed by the client. A corollary to this is to provide more explanation in direct proportion to the amount of the bill. The larger the bill, the more description should be included.

It is important to place yourself in your client’s shoes before rendering a bill. Have you stayed in touch with the client? Have you sent copies of all correspondence and kept the client informed about the progress of the case? Consider using the description area of your bill as another opportunity to communicate with your client. Let him know again what you did. Another aspect of this is making sure the client is aware of the amount of the bill before it is presented for payment. A rude surprise is less likely to be paid timely, if at all.

Consider the format of your bill and the mechanics required to produce it. While some requirements are spelled out in statutes for specific practice areas, such as matrimonial actions, some common-sense guidelines may be helpful. If you have more than one timekeeper on a bill, include these initials next to their time records and make sure each timekeeper’s rate is listed. Be sure you have indicated the time period covered by the bill and your expectation for a timely payment. Also specify what amount is past due and currently owed along with any payments that have been received since the last bill.

Make sure the descriptions for the work performed are consistent from one timekeeper to another. All the popular billing programs include shortcut abbreviations so you can quickly describe frequently rendered services such as "telephone conference with client regarding …" Make these abbreviations simple and easy to use. Make it a rule in your firm to fully describe the work done and try to use action words whenever possible. Which would impress your client more: "Legal research" or "Did legal research to determine liability on such and such?"

One of my pet peeves is lawyers who insist on preparing cover letters to accompany their bills. Do you really think your clients can’t figure out that the paper in the envelope is a bill for legal work? If they don’t know what has been happening on their case, consider better ways to keep them informed. Don’t wait until you are sending a bill to let them know what is happening on their case.

My other irritation is lawyers who insist on having their staff prepare individual envelopes for each bill. The amount of staff time wasted on something the client may not even see is totally counterproductive. The use of window envelopes (and you can get nice ones with your firm’s return address and design) also will ensure the right bill goes into the right envelope.

Once the bills have been sent, what steps do you take to get paid? I’ve gleaned several ideas over the years that are worth sharing. Consider changing your last day of the billing cycle. In my office, we issue bills as of the 25th of each month rather than the last calendar day. This guarantees that our bill is in our clients’ hands at the beginning of the month when they’re likely to be paying all their current bills. This often can cut an entire month off our collection cycle. Additionally, if something goes wrong with our billing software (and it is most likely to happen when you are trying to get bills out), we are not calling the company’s technical support when every other law firm in the country is calling.

Better monitoring of your accounts receivable is another easy change you can implement. In my opinion, the lawyer handling a case should never be the person to call the client to collect payment. The last thing you want is a client dodging your calls because they think you are calling to ask for their money. This task, while unpleasant, should be performed by a staff person. It is harder for assistants to agree to take less money. They are removed from the actual work performed and often can get valuable feedback about a lawyer’s work by hearing about a problem experienced by a client. Give assistants some guidelines to enable them to negotiate a payment schedule or a slight write-off. If a more serious problem is uncovered, the lawyer can deal with the client directly.

Years ago, we developed a script for handling these calls. The script begins by asking our client when we could expect payment. It is open-ended enough to allow the client to comment on the quality of the work if there was a problem or to let us know if there are cash-flow problems and additional time is needed. If a client requests an additional copy of a bill, we provide it by fax when the call is concluded. If other information is requested, we respond quickly to prevent our clients from having an excuse to delay payment. We try to make these calls just after our monthly bills are sent. When we review our bills, we make notations on the worksheets about whether a call should be made. We begin making calls when a bill hasn’t been paid in the first 30 days rather than waiting until a bill is 60 or more days overdue. Doing this lets our clients know we are closely monitoring their account and expect payment promptly.