With only a few months remaining in the year, it’s time to take a closer look at how much you’ve earned thus far. Of that, how much have you actually received?

At the office of CPA Ann Irons, a legal accountant in Holliston, MA, we see attorneys scrambling to collect unpaid fees before the end of their yearly accounting period. Unfortunately, this approach can be time-consuming and devastating to the financial health of your firm.

Risks of Delayed Collections

The vast majority of law practices use the calendar year as their accounting period, and most do not record revenue until it’s been paid by the client. What does this mean for your practice? If you are one of several partners within a practice, your compensation will most likely be calculated based not on the amount you billed, but for the portion of that amount that has been collected.

This is especially true if you are a solo attorney; you cannot pay yourself with money that you have not yet pocketed. Added to all this is the fact that the number of cases tends to dip in the fourth quarter. So begins the frenzy of collection efforts that consume these last few months of the year.

Coping With the End-of-Year Collections Rush

The easiest way to determine the value of revenue not yet collected is to prepare an aged accounts receivable report. If you haven’t managed your accounts receivable throughout the year, this can be quite an eye-opener. You may discover that you have far less cash on hand than you expect, or that you have a major undertaking on your hands as you attempt to collect these fees—not just in time, but in manpower and the money needed to compensate said manpower.

That said, the first step to collecting as much as possible before the end of the year is to approach your clients whose invoices are between 1-2 months past due. Generally speaking, these invoices will generate a higher return on your investment than those that are several months overdue.

If your current active clients have unpaid invoices, address non-payment issues. Yes, asking these questions of your clients while face to face can be a bit awkward, but it’s a necessary evil. Which is worse: a little awkwardness or writing off hundreds or thousands of dollars in bad debt?

Inquire whether your clients are satisfied with the services you provide. If they respond that they do not feel you are providing sufficient value in your services, this may indicate the reason for their failure to pay in a timely manner. Having addressed these concerns or shortcomings, you are more likely to see payment than if you had let these issues remain unspoken.

I also recommend stepping up collections efforts by billing every 2 weeks during these final months. More frequent bills means less money per invoice, which will be easier for your client to pay.