Financial Hygiene
Bills. No one likes them. From initial negotiation to payment, disputes and chasing of debt, most professional services colleagues would likely rank this aspect of their role very low in job satisfaction terms. As a result, it is estimated that £36bn in value is lost or written off every year due to poor financial hygiene.
Why should you be bothered? What’s is got to do with sales? A lot. Send a bill that is twice the estimate without communicating first with the client and watch the trust and credibility aspects of The Trust Equation crumble. Work tirelessly on a massive pitch only to have the agreed bill not paid and watch your commission walk out the door.
Stefan Ciesla-Grain, co-founder at ayora.ai., and this week’s guest on the Three Things takeover, is on a mission to fix this challenge. Using proprietary AI technology combined with good old fashioned nudge theory, Stefan and his team are building a product that prompts and support busy lawyers on timely client comms to get paid quicker, with less write-offs along the way. Here’s Ayora’s Three Things to improve your financial hygiene. Enjoy.
#1. Consistent client comms
One of the easiest ways to increase your chances of achieving a great recovery on your time is to keep the client updated on fees throughout the matter’s lifecycle. There are a few reasons for that:
- Client appreciation decays with time: this is very much a human factor. If you’re advising on a fast-paced M&A transaction, the client is more likely to truly appreciate the all-nighters your team pulled in the heat of the moment!
- Clients need to manage their internal budgets: clients are becoming ever more cost-conscious, and often need to go through their own internal process to get their legal budget increased. Give them heads up.
- Your leverage drops to zero post-factum: say you notice that an additional piece of work is advisable halfway through a matter. By cracking on with that without notifying the client first (and agreeing scope extension) you risk not getting compensated for that commendable initiative down the line.
#2. Bill regularly and bill promptly
As a rule of thumb, people and organisations prefer to pay their suppliers later rather than sooner. However, there are a few caveats here!
- If you stipulate that you will bill a client at a certain point in time (be it on a regular basis or once a milestone is hit), then you should follow through. The client will probably expect your invoice and a delay in receiving that will most likely only derail their internal processes.
- The sooner you raise the bill, the more likely you are to recover your time. This is largely because of the time decay of client appreciation described above. On that note, if you don’t have to wait until your monthly cut off date, don’t. Law firms inadvertently elongate their lockup days by up to approximately 15 days due to lawyers’ propensity to bill at the last minute. That is crazy.
- Understand your client’s priorities. If you are engaged by your client’s Treasury department, they are likely to attach some value to receiving your bill a bit later. If you are engaged by your client’s GC, they are less likely to think about the time value of your fees, and thus will probably not really appreciate your client-friendly billing practices.
#3. Know your value, and don’t be shy about it!
Every lawyer that doesn’t feel comfortable talking about their fees should recall the Roman emperor Vespasian’s saying ‘pecunia non olet’, or ‘money does not stink’ (it was about taxing certain unpleasant commodities). This is worth bearing in mind today too. Specifically, I would caution you against:
- accepting discounts too readily. Your rates are set at a certain level for a reason, and the client is talking to you for – you guessed it – the same reason. This is nuanced and there might be good reasons to discount rates, but there are equally many bad reasons to do that.
- being too eager to offer time write-offs too soon. Use your judgement, but there is a good chance that your and your client’s perception of the value you bring might differ (in your favour).
- ignoring unpaid and overdue debts. Whilst it’s advisable to let your credit control colleagues lead on collections, don’t forget your word likely carries a lot of clout with your clients, and you might be able to help unlock a tricky debtor situation with a single phone call. There is nothing unsavoury about that either.
