Best Practice: Law Firm Retainer Management - Replenishment
Asked and Answered
By John W. Olmstead, MBA, Ph.D, CMC
Q. Our firm is a five attorney estate planning/administration practice located in Kansas City. Our estate planning work is handled on a flat fee basis for our clients. We collect one half of the fee upon acceptance of the signed engagement letter and the other half upon signing of the estate planning documents. This has worked well for us. However, we are not doing so well with our estate administration work. This work is time billed against a retainer. We do a good job collecting the initial retainer but then we fail to ask for replenishment retainers and when we bill for the remaining work we have collections problems. We have over six hundred and fifty thousand dollars in accounts receivable over 120 days old. We would appreciate your thoughts.
A. This is a common problem that I see in estate planning/administration and family law practices. Here are a few suggestions:
- Assign someone in the firm to review a Summary Work In Process Report or similar report that shows the dollar value of unbilled work in process and the dollar value of used retainer at least once a week. (Some firms do this daily)
- Flag matters that are at 90% of retainer (unbilled work value to unused retainer) and bill clients for retainer replenishment in accordance with firm policy.
- Advise responsible/billing attorney of the retainer status, that a bill has been sent for replenishment, and again when the payment of the additional has been received.
- Responsible/billing attorney should consider the retainer balance status when scheduling work on specific matters that have reached 90% of retainer balance.
- Send retainer replenishment bills as frequent as necessary. It is easier for clients to pay small bills than very large bills.
- Stay on top of your receivables - smile and dial (call) after bills have been outstanding for thirty days. Reminder bills and statements are a waste of time.
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John W. Olmstead, MBA, Ph.D, CMC, (www.olmsteadassoc.com) is a past chair and member of the ISBA Standing Committee on Law Office Management and Economics and author of The Lawyers Guide to Succession Planning published by the ABA. For more information on law office management please direct questions to the ISBA listserver, which John and other committee members review, or view archived copies of The Bottom Line Newsletters. Contact John at jolmstead@olmsteadassoc.com.