Cash flow is the most important financial variable of businesses of all types and sizes, including law firms. Delinquent accounts can take a large bite from your working capital and impede your ability to pay your own expenses on a timely basis. Law firms, therefore, must ensure that they are paid on a timely basis, or they will face financial problems.

The Difficulties of Delinquent Accounts in Law Firms


A recent survey by the Commercial Collection Agency Association revealed that the probability of collecting a delinquent account after three months was 73 percent. After six months, the probability drops to 57 percent, and after one year, the probability of collecting is 29 percent. The probability of collecting after one year falls as low as 10 percent. Another way of looking at this is that, after one year, your $10,000 client account receivable is worth $2,900, or 29 percent, based on these statistics.

Between now and Dec. 31, assuming you use a fiscal calendar, you will be attempting to collect on services rendered during the past eight months. Regrettably, you also may have receivables to collect from last year.

Here are some steps you should undertake to prevent financial problems later, assuming that you are rendering your invoices on a monthly basis.