Practice Management

This was the headline screaming at me over my blog reader today from More Partner Income.  I read it and thought to myself - WELL DA!  That is kind of an understatement.  And, what is with all of this language like "metric".  Cash flow is not a "matric", is it?  It is the lifeblood of any lawyer or any law firm.  You need lots of money quickly and assuredly to survive.  I am not certain why we have to temper this obvious fact with this kind of speak, but then I am just a country boy and know no better.

But, ultimately, I got into the post and More Partner Income relays some important information.  The issue is as much about how quickly you collect your money as how much you bill.  Both are important, but you need to be mindful of both amount billed and how quickly you collect.  Either one of these can cause you great problems.

The average law firm cash flow cycle is 169 days from billing to collecting.  Some practice areas, like insurance defense, will only pay on 60 days from invoice and will only accept invoices quarterly.  Some areas of law need to be prepaid.

I think lawyers need to think carefully about what areas in which they want to practice.  Abuse by insurance companies might mitigate against working for them.  Life is just too short putting up with this garbage.

I get my money upon settlement with creditors who violated federal court injunctions.  Like all litigation, most cases are settled.  Within the last year or so we have been battling with this problem of time between the agreement to pay and when the check is tendered.  With large banks and insurance companies it is obvious that they are taking longer and longer to pay when technology and communications would suggest that the cycle should be making the process shorter and shorter.  And, this from the same financial companies that expect prompt and immediate payment from their customers or else they impose punitive liquidated damages on them.  Overdraft a check at your bank for a couple of dollars and nurse on the $35 the bank charges for the privilege.   Be late on your car payment a few days and be prepared to pay them a substantial penalty.

The problem in representing consumers in Chapter 13 bankruptcy, for example, is  the impediments and substantial delays, that many local courts place attorneys getting paid.  And, this is often decision by judges who worked for Big Law and should readily understand the cash flow cycle dilemma lawyers face. 

Life is just too short for these types of money problems or these types of delays on payment.  If you cannot strong arm better conduct from those that pay you, then maybe you need to consider exiting the practice area all together.

As my Dad says, "time is money".  He is exactly right.  And when you are not paid for 2 or 3 or 4 or 6 months it is costing you dearly.  Take that into consideration when deciding to work on any client's behalf.