Not to appear to be piling on, but here is yet another call for the
introduction of merely sane and rational, everyday business management
processes into law firm land.
In this case, the topic is not recondite in the least: Plain old
cash management and timely collection of accounts receivable. Big
yawn? Well, consider:
- If a firm’s weighted average cost of capital is 7% (scarcely an aggressive
estimate); - And if a $10-million fee has been billed but is being "neglected;"
- The outstanding receivable is costing the firm $13,500 per week.
Any number of reasons are evinced for firms’ being less than assiduous
in minding their receivables, but they add up to a flat-footed failure
to recognize that law firms are not magically exempt from the rules of
Management 101:
- No single person oversees all of the outstanding bills to a single
client; they’re "overseen" (indulge us in applying the term) by each
partner for his/her matters. - A client may be debating or protesting a specific bill on one matter,
so the firm feels hobbled in pursuing all other non-disputed bills. - It’s awkward to have a conversation about the $10-million outstanding.
The rebuttals to which, in order, are:
- Appoint a "fixer."
- Are you serious? Would the client be so indulgent with its
customers? - See #1.
Here again we have law firms in a behavior pattern that would be laughable
in corporate-land; it’s the equivalent of a major company assigning its
customer collection follow-up to the troops on the factory floor, or
to its sales force.
Adopting straightforward cash management disciplines is not an act of
hostility towards your clients: Imagine, they might even view it
as an indication of professionalism.
