January/February 2007

This issue contains the following articles:
  1. Is Silence Golden?
  2. Should Credit Cards Be "Legal"?
  3. Do You Want To Succeed?
  4. Are You Keeping Up As Technology Advances?


  1. Is Silence Golden?

    You've sent your bill to the client. It's been several weeks and they haven't paid yet but there's no reason to be concerned. After all, if there were a problem, wouldn't they tell you so by now?

    The answer, regrettably and inevitably, is often "no." If you defined your payment terms up front in your letter of engagement with the client, and the client has not lived up to those terms, it's symptomatic of a deeper communications problem - and you, the lawyer, must work with the client in order to resolve the problem. In my book, Collecting Your Fee: Getting Paid from Intake to Invoice, I suggest that there are five reasons why clients fail to pay their bills:

    • They didn't get your bill/statement
    • They didn't understand your billing and/or what you did for them and/or the value to them of what you did for them
    • They didn't ask you to do what you billed them for
    • Their cash flow is temporarily interrupted, despite the best of their intentions to pay you quickly
    • Their business has gone "south" and they can't afford to pay you.

    Better communication can prevent or manage each of these problems. The first three require the lawyer have more focus on each client's awareness of and response to the billing and collections process. The last two require the lawyer to learn about and be more sensitive to the needs and conditions of these clients. None of this requires constant calls or elaborate questionnaires. Simply meet clients over coffee and ask, "How are you doing? Did you understand my bill? Is there an issue that concerns you? Is there something I can help you with?" Given this opportunity clients will provide you with honest answers. And if there's a problem, it's better to know now than to keep haggling over an unpaid bill.

    It is vitally important that you move quickly to collect any overdue accounts. One study shows that a bill that is over 60 days past due can still be collected about 89% of the time. However, the collectability drops to a 67% after six months, and to 45% after one year. If you haven't been paid within the time period set in your terms of engagement, take charge of the collections process - while you still have the time.

  2. Should Credit Cards Be "Legal"?

    The importance of collections leads to another issue that I frequently find sole practitioners and small firms supporting and bar associations opposing: the use of credit cards for payment by law firm clients. I've spoken out before in this newsletter, saying that acceptance of credit cards benefits both the client (ease of payment) and the lawyer (quick access to funds), and also recognizes the reality of modern commercial life. Yet the State Bar of California's Standing Committee on Professional Responsibility and Conduct recently chose to ignore these facts in its Formal Opinion Interim No. 05-0009, which concludes that a credit card may not be used in California for advance payment of legal costs.

    The committee was concerned that accepting a credit card payment puts an intermediary (the credit card company) in control over client funds for a short period of time before being moved into the lawyers' control. In my formal objection to the committee's conclusion, I stated that there is very little difference between an intermediary for credit cards and the intermediary for acceptance of payment when checks are used. Neither is legal tender under the law and both require certain processes to be completed before money can be placed into the attorney's accounts. In effect, the intermediary is an agent of both the lawyer and the client. Using a credit card for payment is a voluntary act requiring the participation of both parties. While it may be advisable to apprise clients of any perceived risk of using credit cards, credit cards still remain today's commercially accepted means of payment of obligations.

    The credit card company does not control the funds, even for a second, without being under contractual license to both the client and the lawyer. The credit card company cannot act independently as to the clients' funds. Assuming the worst, that the credit card company will act on its own and mis-direct funds, both the client and the lawyer have recourse against the credit card company, the same as where a bank may mis-direct funds in the account of a lawyer's clients' trust account. Further, since the credit card company, in the case of deposited funds, can be viewed as the agent of the lawyer, the lawyer would still be responsible to the client for the deposited funds. And, for clients, there is an added advantage: the ability to protest a payment even after payment is made. Usually, up to six months, a credit card company will reverse the charge if a complaint is filed by the user.

    The simple fact is that payment by credit card involves little or no risk to clients, and conveys great advantages in the payment of legal fees. For bar associations to expect payment only in cash or by check is absurd. Today email is accepted as correspondence in lieu of mail hand-delivered or posted by the U.S. Post Office. An electronic or faxed signature is accepted in lieu of physically signing a document. Credit cards, likewise, are accepted in lieu of cash virtually everywhere. It's time for bar associations to recognize this form of payment as "legal."

  3. Do You Want to Succeed?

    During the holidays I participated in a fascinating email exchange with members of an online listserv for sole practitioners. The exchange concerned quality of life, and in it a surprising number of lawyers expressed real reluctance about successfully marketing their practices and getting more business. Some of these lawyers said they barely had enough time now to meet their professional and personal obligations, and that new business would put them further behind. Others feared that new business would rob them of the flexibility to pursue a schedule and pace that they control and prize as solos. These lawyers all believed that setting limits on how much they could do and wanted to do was the best way to conduct their practices.

    My response was simply, why? Why can't you accept every GOOD client and good matter that walks through your door? True, if you want to be a one-person firm with no staff, there is only so much time in the day. But, if you're so successful that more people come to you than you expect or want, you can take one of two new paths: either raise your fee and earn more revenue per client and thus more revenue for less or the same effort … or hire another lawyer/paralegal to expand your firm

    Growing your firm is what most lawyers want. And if you don't want to grow your firm, then you face other challenges: You will always be an hourly worker - and you must hope you stay healthy because when (not if) you get sick, your revenue ceases. Without growth you will never be able to benefit from the concept of leverage (earning profits from the brow of others' labors - the capitalist ideal). Your firm will also have less, or perhaps little, value to sell or transfer at the end of your career, robbing your of the goodwill from all your years of hard and successful work.

    This is not just a life-style issue in the context of "balance (if there is such a thing, which I don't believe) of life." It is a very serious economic issue for the well-being of both you and your entire family. There is no balance at any single moment of time; the hope is that over time, there would be a balance that fits you and your personality. In other words, at some points in your life, you will be working harder and spending less time with family or in personal pursuits; at other times, you will be spending more time with family; at other times, you will be able to relax and spend more time on personal pursuits.

    My advice to any lawyer who is conflicted about growth is to spend some quality time reviewing your goals and coming to peace with your aspirations and expectations.

  4. Are You Keeping Up as Technology Advances?

    As many of you know, I have long felt that WordPerfect offers document processing advantages to lawyers that Microsoft Word does not. But, Microsoft and Word have reached and surpassed a critical mass of acceptance in the legal community. A recent LawBiz Podcast interview with Norm Thomas, Director of Business Development for Microsoft Professional Services Solutions, gave me some new insight on why this should be so. Norm emphasized that Microsoft is committed to outreach and dialog with suppliers, vendors and users to develop solutions for the legal community using Microsoft products. These solutions for lawyers increasingly emphasize the interaction of all the features of the Microsoft platform.

    These were some of the examples of this principal that Norm cited:

    • You can apply the outlining capability of Word to a complex document and use the outline directly in PowerPoint for making presentations.
    • You can combine both handwritten notes and audio notes into text documents through the use of the One Note software. (Norm offered to do our next podcast this way, combining visuals with the audio)
    • You can preserve the integrity of your internal documents as intellectual property through the use of Share point.
    • You can use the new Windows Vista operating system to do text searches across your local drive, your enterprise network, or the Internet itself.

    The point here is not to do a commercial for the folks in Redmond. However, as I've commented before, lawyers have an ethical obligation to meet the generally accepted standard of care in providing legal services - and that includes the use of technology. If your competitors are using the Microsoft platform to the fullest, and you remain committed to WordPerfect alone as your first and only technology, you run the risk of being willfully less competent than your competitors. That's malpractice . . . and business suicide.

    To hear the full text of this interview, go to our podcasts page at www.lawbiz.com/podcasts.html.

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