Winning your client's case is hard enough. But these days, many lawyers are finding it a walk in the park compared to getting the client to actually pay you. Either because they can't, they won't, or they simply need to be nagged, clients can be awfully slow in compensating you for your work.
But there are alternatives to calling in the collection agency. Small-firm lawyers and those who advise them say there are numerous options you can take to ensure your clients pay what they owe at the case's conclusion.
Start at the beginning. Screening new clients for their ability or willingness to pay, like collecting a retainer, should be done before work is started.
"The time to address the collection problem is not when the bill goes overdue, but much much earlier in the relationship," says Paul McLaughlin, practice management advisor for the Law Society of Alberta in Edmonton.
"And you can't assume that just because a client presents himself in your office with a legal problem, that they can or want to pay your bill," he adds. "So you have a certain amount of due diligence to do, starting with before the client comes into the office, and then throughout the file."
McLaughlin conducts seminars across North America with Reid F. Trautz, director of the Law Practice Assistance Program in British Columbia, on "how to create a practice based on clients who want to pay your bills."
"Our experience is that most clients who have received value, as they perceive it, are willing to pay their bills," McLaughlin says. Lawyers are in the business of judging character, he says, and should be able to spot the signs of clients who won't pay their bills.
In particular, he identifies the person "not socialized to pay their obligation," often smooth-talking, self-promoting types. He recommends running credit checks, although the best fraudsters can elude those, and occasionally writing these clients off.
But the vast majority of clients are "good faith" clients. With them, it's crucial to be candid and realistic from the outset about the cost of pursuing a matter to its conclusion. McLaughlin recommends an initial "value discussion," in which the lawyer discusses with the client the potential costs.
Allan Adel, a litigator with Miller Adel in Montreal, says the root cause of payment problems is often "a problem of communication between attorney and client.
"Right at the beginning, when the client hires the attorney, there's an important ethical obligation to inform the client as well as you can what the client can expect to pay down the line," says Adel, secretary-treasurer of the CBA's General Practice, Solo and Small-Firm Conferenc (GPSSC).
Of course, that isn't always easy. In his practice, Adel has learned to provide clients with cost ranges that may run from $5,000 to $15,000. This "opens the client's eyes as to what the risks are," and prevents situations where the client may complain later.
The lawyer and client should then enter into a written agreement setting out as clearly as possible the services for which the client will be responsible: legal fees, disbursements, court costs, taxes, and whether the mandate is limited to a court of first instance.
The client must also understand that the lawyer's bill may exceed the award, but that even if the judgment is small, the lawyer has still had to devote the same amount of time and effort to the case as she would to one with a larger judgment.
And, says Adel, there should be a provision in the fee agreement to provide for interest on overdue amounts. This rate "should not be abusive, but sufficient to encourage the client to pay the account earlier rather than later."
It's also necessary to determine from the start a client's actual ability to pay. "This is something I discuss frankly and directly with the client," says Adel. Where is the client working? What is the family income and revenue? Is a spouse prepared to contribute to the cost of the litigation? "It may be advisable for the lawyer to get both the client and the spouse to sign the fee agreement in the beginning."
Kristin Storey Hillenbrand of the Zatlyn Law Office in Prince Albert, Sask., says her firm has no problem collecting on corporate files, but notes that family law accounts, which constitute close to 85% of her firm's practice, are tougher.
Custody, access and maintenance cases may be particularly difficult, since matrimonial property is not available as an asset, notes Storey Hillenbrand, co-chair of the Saskatchewan Branch of the GPSSC. In family cases, she'll also ask a client where he is employed, for how long, and whether they can make one more monthly payment.
She adds that she'll always do an evaluation of whether the potential client may be appropriate for legal aid. If she decides the client cannot afford legal fees, she will limit her consultation to 10 minutes.
Storey Hillenbrand also stresses the importance of a good retainer up front, and regular payments throughout. "We had problems last year with [clients] going into bankruptcy," she says, something that caused her firm to alter its fee practice.
Now, a lawyer may ask clients to make smaller monthly payments in the range of $250. This amount grows over time and with it, a good faith relationship develops. If money is not received, the lawyers and the client discuss the matter and come to a decision whether to continue. "That has been successful," she says.
Whether or not a retainer is required is partly dependent on a lawyer's area of practice, says McLaughlin. In criminal law, where repeat business is less common, retainers are recommended, as they are in many family law cases where matrimonial assets are not substantial. But he believes retainers are unnecessary in corporate/commercial law, for instance. "If you need a retainer [there], you don't have a relationship of trust with the client."
At MacPherson Mitchell in Moncton, Judith MacPherson uses a variety of payment methods. "Some matters are on contingency here: 25% of the settlement amount," she explains. "Another method is fee-for-service - the payment is up front, or in installments."
In some litigation matters, MacPherson gets a retainer. However, she says, "you can be as creative as you want with payment," noting that one Ottawa law firm with a high-tech practice takes shares in its corporate clients as remuneration.
McLaughlin also sees in lawyers "a failure to revise a file based on changes in a client's state." For example, a client going through divorce proceedings may be upset. But months after the case has concluded and the file is closed, that client may be feeling stronger, less reliant on her lawyer, and may even feel her lawyer has taken advantage of her financially. "You have to be aware of the changing state of your client."
Generally, excellent client communication is the key to getting paid, just as it is to securing repeat business and gaining referrals. If an account isn't being paid because the client doesn't feel she is receiving good value, this should be discussed sooner rather than later.
Elizabeth Raymer is a business and legal affairs writer and editor in Toronto.