Andrew McDermott

How do you do it?

How do you get your clients to pay their invoices early? It’s a struggle to get the average client to pay on time. They’re quick to request work and slow to pay.

Is it possible?

Not only is it possible to get clients to pay early, it’s also reasonable. Let’s take a look at some strategies and tactics you can use to get clients to pay early.

Incentive #1: Make it easy for clients to pay early

This is the foundation you need to improve your collection realization rates. Offering Incentives without ease means you have no foundation. You’re more likely to frustrate your clients than improve realization rates.

How do you make it easy for clients to pay?

• Follow billing guidelines
• Flush out obvious and hidden billing rules
• Communicate with clients/accounting departments regularly
• Mention any billing variances (e.g. cost overruns, work additions or reductions)
• Make sure invoice line items are detailed and clear
• Send your invoice to clients on a consistent and predictable schedule
• Follow up with clients on a predictable schedule

This is obvious, isn’t it?

You’d be surprised at the number of attorneys/firms that struggle with these basic concepts. Incentives are meant to supplement billing best practices. If you’re missing the basics, incentives simply won’t work.

Incentive #2: Make it hard for clients to pay late

This is difficult for most firms.

Why?

Most firms lack a strong value proposition. The majority of firms are focused on doing everything they can to please their clients. This isn’t bad if clients are working to please them.

It should be a mutual exchange.

Often times it isn’t. Most firms do their best to please their clients. Their clients know this but they don’t reciprocate. Why would they? They’re in a dominant position.

When you make it hard for clients to pay late you’re setting healthy boundaries. This teaches them that they’re not in a dominant position, that you’re not afraid to walk away if they misbehave.

How do you do this?

• Larger upfront fees/retainers for new clients with an unproven track record
• A discount for auto/prepay and an increase for high-risk payment methods (i.e. check)
• Payment plans/payment schedules that are established ahead of time
• A freeze on work/communication if payment is not received by # days
• Successive late fees (e.g. $ after # days, $$ after ## days, $$$ after ### days, etc.)

It goes without saying that you’ll want to verify the legalities of these strategies and tactics in your area first.

Incentive #3: Reward early payments

Incentives work best when they’re held to the same high standards as a value proposition. I covered those in a previous article, remember what they were?

Let’s recap.

A strong value proposition is (a.) something your clients can only get from you. (b.) is something they value (c.) is credible, authoritative and/or trustworthy (d.) is understandable and clear.

• Provide early bird discounts
• Create a membership system that rewards your best clients with access to exclusive benefits (e.g. software, services, additional support, etc.)
• Vanishing rewards to clients who pay their invoice by # date (a one-time reward for each month)
• Irresistible offers for clients who’ve made [#] payments early
• Events/connections with thought leaders, key influencers or power brokers (e.g. entrepreneur lunch with a key influencer, client workshop with a government regulator, etc.).
• After service support (e.g. bankruptcy clients rebuilding their credit within 90 days).

Here’s the thing about incentives.

Most clients don’t care about the usual incentives (i.e. early bird discounts). They care about results or about the details that satisfy their needs.

What are their needs?

1. The need for significance. A prestigious award, public recognition or something noteworthy they can share (brag about).
2. Certainty and comfort. An assurance or reasonable confidence that the future will be better than the present/past.
3. A desire for freedom and growth. The ability to act without restrictions or obligations, the opportunity to live independently. That you’re being pushed and challenged to become more than you are.
4. Uncertainty and variety. Your clients are able to participate in activities they find stimulating, fun or enjoyable. That you’re able to provide them with an experience that’s surprising and challenging.
5. Love and connection. You fit in, you’re part of an in-group. You’re liked/loved and accepted by a group (personal or professional) that provides validation and safety.
6. Clients are able to contribute to those around you. They’re able to give, to make a difference, to leave a legacy. Contribution creates meaning and purpose.

What does this have to do with early invoice payments?

Meet these needs and your clients will pay your invoices early. Give them something others around them can’t or won’t provide and you improve your realization rates.

Here’s the issue.

This isn’t your responsibility! You’re not your client’s therapist, counselor or friend. You’re a highly skilled professional and you don’t have the time to indulge your client’s wants. You have important work to do.

I imagine most attorneys would agree.

But this is the price of excellence. Do what your peers can’t/won’t to get what they want but can’t have.

If this seems generic, it’s intentional.

Your practice area is different. Every firm is different. Use this framework to create incentives that are valuable and compelling to your clients.

See what I did there?

I just gave you the tools you need to create a strong incentive.

Incentivize your clients to pay early

How do you get your clients to pay their invoices early? It’s a struggle to get the average client to pay on time.

You use the right strategies and tactics.

You make it easy for clients to pay early and difficult to pay late. You reward early payments. You create a framework that rewards the behaviors you want.

It’s simple, but it’s not easy.

Not only is it possible to get clients to pay early, it’s also completely doable. Create the right structure and you’ll find possible becomes frequent.

It’s the worst part of billing.

You worked hard for your clients. You consistently produced exceptional results. You delivered miracles, saved them from disaster. They were incredibly happy and thankful for your help.

Until they received your invoice.

Their whole demeanor changed at that point. They were no longer the happy and thankful clients from before. They suddenly rejected your invoice.

What happened?

How did your client relationship sour so quickly?

Something you did triggered a billing dispute

What was it?

Was it your approach? Perhaps your fee was too high or the work wasn’t delivered as expected? Whatever the cause, it’s significant. Your clients are refusing to pay.

Firm revenue is at stake.

How do you turn this difficult situation around? How do you resolve these billing issues decisively and prevent future disputes? There’s a single word that encapsulates your ideal solution.

Communication.

The vast majority of billing issues can be narrowed down to communication. Here are four strategies you can use to avoid and prevent a billing dispute.

Strategy #1: Create a map of expectations

Your clients have billing guidelines. When we receive these guidelines they’re often a jumbled mess. Even more frustrating, they’re incomplete. Client “guidelines” are often missing rules. If you follow billing guidelines to the letter your invoice may still be rejected.

Why?

Your clients (e.g. decision-makers, billing department, etc.) have a set of implicit rules. Rules they assume you already know and can’t be bothered to explain. These hidden rules should become explicit rules.

How?

Reach out to select members of the billing department (or your point of contact) ahead of time. Introduce yourself, then ask them how to make their jobs easier.

You’ll want to identify:

• What’s required/permissible
• What requires approval by the client
• What’s forbidden/unacceptable
• Stop words and hidden rules that immediately flag your invoices for review

Take notes, then create a summarized set of billing guidelines. Then, once you’ve learned the rules, the billing guidelines your clients expect you to follow, obey them.

Strategy #2: Automate with helpful if-then statements

Automation is key.

If-then statements enable you to automate or semi-automate key tasks in your process.

If A, then B.

If billing guidelines are received, then they’re immediately forwarded to [name]. If an action item is mentioned in a meeting, then [name] is notified. [Name] will create and upload the appropriate content to the firm’s document management system. All relevant parties will receive access.

Did you catch that?

The strategy provides a simple and straightforward process you can use to automate/semi-automate the work that needs to be done. Whenever possible, use technology to do the heavy lifting (e.g. use software to verify that time entries are appropriately recorded).

Why?

Good software completes requested tasks. Great software completes, teaches and corrects staff simultaneously.

If-then statements create consistency.

They create a procedural approach that’s easy for clients to adapt to. The added bonus here is that each of your invoices appears to been written by the same hand. This tells clients you’re reliable. You’ve adopted consistent, firm-wide billing practices.

Strategy #3: Treat your timesheets like the precious cargo they are

Your time entries are like gold.

You want to treat your timesheets like treasure or precious cargo. Your line items like important inventory in your store. You’ll want to do this because that’s what they are.

Each line item is a unit of revenue.

Every improvement you make to the quality of your timesheets/invoices increases the acceptance and collection realization rates for your firm.

This is the problem.

Most firms believe they make their money when they send out an invoice or bill for their time. But you actually make your money before that point. Your firm makes money when you: (a.) Map/identify the obvious and hidden rules in your billing guidelines (b.) You verify that all time entries are real-time compliant and automatically recorded as-it-happens and (c.) every time entry, every line item, is specific, detailed and precise outlining the who, what and why of a particular task.

This creates structure.

This structure eliminates the invoice rejection/review process, automatically increasing collection realization rates. Your client is happy. Your staff is happy. Revenue skyrockets automatically so your partners are happy.

Strategy #4: Deliver unexpected news preemptively

Don’t ignore a significant variance.

Have you deviated significantly from a pre-established budget? Are you planning on adding an unexpected item, expense or fee to your invoice?

Communicate.

Pick up the phone and reach out to your point of contact. Reach out to the billing department. Let them know what’s going on. Explain the who, what and why of the situation. Then add that explanation to the invoice. Let decision-makers, your point of contact and the billing department know what’s coming ahead of time.

If they disagree? Negotiate.

Whether it’s good news or bad news reach out to clients. If it’s bad news explain why it happened and how you plan to address the problem. If it’s good news spell out the benefits. Show them how you can replicate this windfall with future projects.

You can avoid and prevent billing disputes

It starts with communication.

Your clients are looking for clarity. Clarity on their invoices. On each line item. In each statement. They expect you to keep them informed. A billing dispute means your clients are attempting to pump the brakes.

It’s a request for more information.

When unhappy clients go cold it is not always an attempt to dodge or avoid their obligations. Billing disputes are unpleasant, especially when you’ve done amazing work. Give clients the clear, consistent communication they need and you’ll find you’ve eliminated the worst parts of billing.