A number of different lawyers cautioned me upon hearing I was hanging out my shingle saying, “Be sure you get paid. Many people want a lawyer; fewer want to pay for one.” Most solos/small firm lawyers (as well as big firm lawyers) have horror stories about getting stiffed on the bill, and I think writing off some receivables is an inevitable fact of life, and should be built into your business model/projections. That said, there are tools to help you collect:
- Send regular bills. Don’t let a big receivable pile up by not sending out an invoice every month.
- Ask for a substantial retainer. If a potential client balks at a $5,000 retainer, that may be a red flag even before you bill an hour.
- Get an evergreen retainer. If the client’s always ahead, you don’t have to chase.
- Get an enhanced retainer as trial approaches. If you’re going to be limited in your ability to withdraw, get a big chunk of money from your client in advance to limit your downside (if you lose at trial).
- Have provisions in your engagement agreement that specifies that any judgment or settlement will be paid to your trust account AND that the client agrees to your subtracting any outstanding balance owed from said judgment or settlement before paying your client.
- Meet the potential client in person, and trust your gut instincts about them.
- Credit checks – I’ve never run one, but in theory it’s a good idea. My engagement agreement authorizes me to run a credit check on the client.
- Don’t be timid about following up and demanding that you get paid.