Offering clients a discount at the conclusion of representation, in exchange for a lump sum payment in full, can be a smart business strategy.
“My philosophy,” Milwaukee family law attorney Megann Senfleben Hendrix said, “is it’s better to just get paid and be done with it, than to have to chase payments for months or even years.”
Start considering the practice now, she said, if you want to begin 2015 with fewer accounts receivable. To get the ball rolling, the attorney with Walny Legal Group LLC explained, you could send letters to clients in November offering something like 10 percent off if payment in full is made by Dec. 15.
Elise Clancy Ruoho, of Cullen, Weston, Pines & Bach LLP, Madison, said she offers such discounts on a case-by-case basis. The family law attorney said she considers many factors, including whether the total fees seem reasonable under the circumstances, the client’s payment history and whether there are concerns about the long-term prospects of collection.
An important corollary, Hendrix said, is to monitor advance-fee payments closely. When the first advance is depleted, she’ll ask for another. If the clients can’t pay, then and only then does she put them on payment plans.
“The goal is to stay on top of it,” she said, “because I don’t want to be chasing money at the end of a case when they’re not motivated to pay you anything because your work is done.”
Practice areas can make a difference on how you collect.
Mark Shiller, a business law and estate- and tax-planning attorney with Certus Legal Group Ltd., Milwaukee, said he estimates his total fees as closely as possible upfront and gets paid in full then. As a result, he doesn’t have large receivables.
But oftentimes with divorce clients, cash flow is tight. Hendrix said to look to assets they might be receiving in the final judgment. Sometimes it’s a portion of a retirement account, and if they’re receiving it via a Qualified Domestic Relations Order, clients may take a distribution, paying income tax but not early withdrawal penalties. Clients often take advantage of that, she said, to pay down debt or make a down payment on a new home.
Hendrix said she might also ask clients in such a situation to sign a promissory note reflecting a reduced total sum for fees, so that at the end of the case the balance owed is satisfied from that money.
“I’ve done that for numerous clients and they’ve been happy with that option,” she said. “And they’ve always been good about paying me when they get their money.”
But, does a discount convey the wrong idea?
“Some people worry about the message that it communicates with regard to devaluing the services provided,” Shiller said. “I would tend to agree with that.”
But Ruoho and Hendrix both said they didn’t think their discount offerings were perceived negatively.
“There’s the potential that they might feel like you’ve overbilled them in the first place,” Ruoho said. “But no one’s ever said that to me. Nor has anyone ever said, ‘You gave my friend a discount. Can I have one?’ If anything, this has brought us more referrals.”
“It’s a gut call you have to make, knowing the personality of your client,” she said. “I don’t think a lot of my clients feel that way. They’re really appreciative of my work and are happy with it.
“It doesn’t decrease my value; it increases their appreciation.”
For the “not insubstantial” percentage of attorneys who are uncomfortable with the idea of discussing billing in general, Shiller said, discount offerings can be a means to an end.
“They might agree to a discount just to get out of the conversation,” he said.
But attorneys should know their value and only offer such when they feel it is beneficial.
“You have to talk to clients in an open and direct way,” Shiller said, “and you owe it to yourself, as well as your clients, to be clear and appropriate in those communications all the way through, even if they’re uncomfortable.”