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A blog for owners & managers of litigation support businesses by experts on using technology to improve your profitability, efficiency and effectiveness in a unique marketplace.

Reduce delinquent accounts

One of the most effective ways of managing accounts receivable is to reduce the number of delinquent accounts. The key element required in accomplishing this goal is consistency. And consistency is built upon process. You should implement the following system to ensure that you are not the reason your clients are paying late:

  1. Decide up-front who gets credit and who doesn’t. Make a decision on how you will be paid, before you make a sale. Will you always require payment in advance from out-of-town attorneys? Or, will you extend credit to some of them? If you’re going to extend credit, make sure you have some criteria in place to determine who gets the privilege of a loan. That’s right. When you extend credit, you’re actually providing an interest-free loan to your client. You need to develop a profile of the type of client that deserves such a loan, and stick to it. Use the COD checkbox and Warning in RB8’s Firms table to designate credit-risk clients.
  2. Never accept a verbal order. Use a Copy Order form to get the copy request in writing. The form should clearly state your full terms and conditions including finance charges. Store signed order forms in the job-level repository for quick retrieval.
  3. Send statements on a set schedule — on the same day of each month. It is recommended to send out monthly statements around the 15th of each month, so that they will make it into your clients’ month-end bill paying cycle.
  4. Routinely monitor your clients’ payment habits. Run the Client Rating Report in RB8 monthly. Look closely at the Payment History section to see if anything is sending up warning flags.
  5. Immediately follow up on delinquencies. It’s a well known fact that the probability of collecting on a past due account drops significantly with the passage of time. If possible, contact the client as soon as the account goes past due to find out what happened. Ask for a specific date they will send payment. If they reply that “the check is in the mail,” ask for the check number. You might also suggest that they send payment overnight, or offer to send a courier to pick up the payment. Their response to such suggestions will give you a good idea of how serious they are about paying. Record all conversations about a client’s delinquencies in the Collection Info tab of their listing in RB8’s Firms table.
  6. Gradually increase the pressure for payment. Prepare a set of letters that become increasingly firm (or phone scripts if you have the manpower to make personal calls). Send these letters out at regular intervals, every week or two weeks. The first letter might be a simple reminder of your terms and the missed due date, requesting that they contact you if there is an issue. The second might alert them to the overdue interest accruing (if you charge such interest), and suggest that you will not be able to provide further service until payment is made. The third or fourth should demand payment in full by a specific date, and outline what action you will take — for instance, placing the account with a collection agency — if you do not hear from them. (Remember, if you threaten a specific action, you must follow through; otherwise you will lose leverage and credibility.)
  7. Consider outsourcing as an option. Choose a reputable company that offers a low flat fee program for dealing with collections (around $10 per invoice). Be proactive with problem accounts by transferring them to outside professionals at an early stage. Do not wait and hire a collection agency or attorney as a last resort if you hope to get paid.
TIP

RB8 includes some basic form letters for collections. Use Tools > Form Manager to customize the letters and to make additional collections letters.

See also

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Outsource to improve profitability

by . Posted in Best Practices, Outsourcing, RB8, Reference, ReporterBase, Saving money, Saving time.

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