I sometimes speak to young lawyers who are being burned on their accounts receivable. I gently explain to them that it is their own damn fault, and they should do better.
In my first year of practice, Paul told me that if a client does not pay me, I should be personally offended, because it meant that the client did not value me. It took me many years to realize that although Paul was right, the way in which he was correct might not be immediately obvious.
Paul was right that non-payment means that you were not valued. But it was you who did not value yourself. If you had valued yourself, you would have taken the steps required to be sure that you were not working for free.
In other words, when you do not get paid, it is just about always your own fault.
Let me start with a simple proposition. Every businessperson who is not a complete and utter nitwit, requires a credit search before advancing credit. As far as I can tell, only lawyers and accountants extend credit without investigating the creditworthiness of their clients. And it goes downhill from there.
There are only two reasons that lawyers do not get paid:
1. The client cannot afford to pay them. That is the lawyer’s fault for not looking into their creditworthiness and/or obtaining a deposit, and/or obtaining an insufficient deposit, and/or not replenishing a deposit.
2. The bill does not line up with the client’s expectations. That is the lawyer’s fault for not providing an estimate (whether or not requested by the client) or setting a flat fee, and having the client agree to it. Alternatively, it is your fault by allowing the scope of work to change without providing an updated estimate or flat fee as the situation changes, and having the client agree to it.
Even if the client is simply a bad seed, it is likely the lawyer’s fault for accepting a new client without trustworthy references or ignoring what their gut was telling them. And, in any event, having a sufficient deposit should ensure that you will get paid, even by a psychopath.
There is only one exception. After you have worked with a client for a long time and have developed a mutually respectful relationship where all your invoices are paid promptly and without question, it is natural to drop the deposit requirement. Doing so is good business and strengthens the relationship. Provided that you continue to define the scope of work properly and to provide fee estimates (whether or not requested) or flat fees, you will likely get away with it. You will run the risk that if the client runs into sudden financial difficulties, you might find out that someone who wants to pay you simply cannot pay you. That is a reasonable risk to take, if you identify, and act on, the first bill that is not paid promptly.
To sum up, if you do not get paid, it is because you screwed up.
This article was originally published by Law360 Canada, part of LexisNexis Canada Inc.