WSJ: Lawyers Stuggle to Collect at Year End Without Alienating Clients

By Stephen Furnari - December 24, 2013
WSJ: Lawyers Stuggle to Collect at Year End Without Alienating Clients

BigLaw partners scramble to collect by year end, while small firm attorneys in NYC shared office space hope checks don’t arrive until January 1.


Dear Santa:

All I want for Christmas: To get paid.

–BigLaw Partner, Esq.


The Wall Street Journal ran an article yesterday about end of year collections in law firms. The “Law Journal” piece focused on BigLaw firms, many of which operate on a cash basis, so client billing revenue isn’t recognized until invoices are paid. With compensation often tied to the amount of work brought in, BigLaw Parters often find themselves scrambling at year end to preserve their piece of the pie.

The end of year collection sprint stokes the ire of clients.

According to the WSJ, the result is a collections sprint as the year closes, complete with invoices hand delivered with pre-paid return FedEx envelopes and a fair amount of cautious partner groveling, as firms try to gently persuade clients to part with cash before the ball drops in Times Square. Law practice consultants suggest that the last minute holiday invoice rush can stoke the ire of clients, whose finance departments usually have 30 to 45 day payment terms.

Of course, at the other end of the legal spectrum, as is found throughout the hallways of Law Firm Suites’ NYC shared office space, you get the opposite problem. We’re hoping clients don’t pay before year end — and we’re looking for any excuse to prepay expenses to reduce profits (and thus our tax liability come April).

Law firm collection rates decline precipitously.

As many of you know, the billable hour rates at BigLaw firms have escalated significantly in the past few years. However, according to the WSJ, collection rates have not kept pace. Just six years ago, firms collected, on average, 92 cents of every dollar billed. Now firms are getting only 83.5 cents per dollar billed.

WSJ: Attorneys are weak at collections.

In a recent Community Counsel article about attorney collections, we discussed our profession’s reluctance to be aggressive about clients collections. The WSJ concurred, stating:

Occasionally firms sue clients over unpaid bills, though most are loath to do so unless the balance is substantial and other avenues have been exhausted. Taking the matter to court can bring unwanted publicity and increase the likelihood of a counter-suit claiming malpractice.

According to the Journal, many attorneys just feel uncomfortable pressing valued clients to pay. In fact, quoting Husch Blackwell LLP firm chair Maurice Watson, a 600-lawyer firm, “[i]n many cases lawyers don’t even like to send bills.”

NYC shared office space

Law Firm Suites is the leading NYC shared office space for solo attorneys and small law firms. At Law Firm Suites, attorneys get headache free, sublet office space and virtual law suites, membership in a community of lawyers who are eager to help them succeed, and referrals to increase the bottom line. Law Firm Suites estimates that attorneys in each business center exchange over $2.5 million in legal business per year.


photo credit: miuenski via photopin cc

About Stephen Furnari

Stephen Furnari is a self-employed corporate attorney and the founder of Law Firm Suites, the operator of coworking spaces for law firms. Through Law Firm Suites, Furnari has helped hundreds of attorneys launch and grow successful law practices. He is the author of several eBooks, including “7 Deadly Mistakes that Prevent Law Practice Success” and “An Insider’s Guide to Renting the Perfect Law Office”. Stephen has been featured in the ABA Journal, Entrepreneur, New York Daily News and Crain’s New York. Connect with Stephen on Twitter (@stephenfurnari).

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