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Law Firms Outsource to Collect Unpaid Fees

December 10, 2014 | Posted in : Fee Dispute, Unpaid Fees

A recent New York Law Journal story, “Firms Turn to Specialists to Boost Collections,” reports that as pressure mounts on law firms to boost revenue, several firms have upgraded procedures to get bills out of the hands of partners.  Earlier this year, for instance, Herrick Feinstein turned to collections company Intelliteach, which works with three collection specialists at Herrick to contact clients about outstanding bills, said George Wolf, Herrick’s managing director.

Outsourcing collection has become more common in the past five years, Wolf noted.  Some law firms, including Herrick, collect up to 30 to 40 percent of the year’s revenue in the last quarter, he said.  “Every law firm would like to collect one-twelfth of the revenue in every month but it just doesn’t happen.”  “We’re trying to have the bills paid faster,” Wolf added.  “Clients are slower to pay bills because of the economy so we have to be more diligent in our bills.”

Holland & Knight implemented a 10-point plan earlier this year to improve its billing and collection procedures.  One change was to allow partners to hold back an invoice on bills under $2,500, but for amounts larger than that, the partner must receive approval from a practice leader, said William Honan, who leads Holland & Knights’ New York office and is in charge of billing and collections.

DLA Piper employs collection specialists in cities such as Tampa and Baltimore who work with partners to collect payments, especially in the last quarter, said Richard Hans, co-managing partner of the firm’s New York office.  The staff keep track of accounts receivable and work with clients’ accounts payable teams.

Hans said the firm is also putting pressure on partners to input their time regularly.  “We never want anybody to go more than a week without inputting their time.  The sooner you do it, the more accurate it is,” Hans said, adding that clients often ask the firm about anticipate fees before the end of the month.  “We keep a timely record of where we are along the way.”

Goodwin Procter has assigned collection specialists to each practice area, using quarterly and monthly reports on accounts receivable and work in progress, said Michael Caplan, Goodwin Procter’s chief operating officer.  The firm has hired more collections staff in recent years, now up to about 10, he said, and billing partners now work with collection staff to negotiate up front with clients on billing arrangements.

“We’re relying more on the collection staff than partners to get money in,” Caplan said.  “We want our partners to focus more on generating new business, and we’d rather have our collection people focus on collecting money.  If we can build our rapport between collections staff and clients, it will help our lawyers do what we want them to do, which is to do legal work or generate new business.”