Law Practice Management Asked and Answered Blog

Category: Collections

Oct 23, 2019

Associate Attorney Compensation – Incentives Beyond Billable Hours and Working Attorney Collections


I am the owner of a five attorney firm, myself and four associates, in Bakersfield, California. While we are a general practice firm, much of our practice is focused on commercial real estate, estate planning/probate, and corporate/business law. All of the associates have been with the firm over five years. The associates are paid a salary plus a bonus based upon their individual working attorney collections that exceed a quarterly threshold. While there have not been any complaints with this system I am not sure that it is the best system and that I am providing the right set of incentives. I would appreciate your thoughts and any ideas that you may have.


Many firms use a system such as your system. However, other firms add more factors into the equation. A system that focuses on billable hours or individual working attorney fee collections often creates a firm of lone ranger attorneys that:

You might want to consider additing a component that recognizes delegation to paralegals and other attorneys (responsible attorney collections) and client origination (originating attorney collections). Some firms rather than rewarding client origination directly pay a bonus for handling new client intakes and successfully closing new business in the form of a flat dollar bonus after designated thresholds. You could also pay flat dollar bonuses for contribution to firm and business development – not time or activity – but for specific results such a having articles published, implementing a document assembly system, or writing a procedures manual. If you wish to avoid a formula approach simply use a discretionary bonus to reward firm these other factors and firm contributions. However, be clear about the factors that are be rewarded and the importance/weight of each.

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John W. Olmstead, MBA, Ph.D, CMC


Jun 06, 2017

Law Firm Collections/Retainer Management – Using a Retainer Follow-up Report


I am the managing partner of a nine attorney general practice firm in the Chicago suburbs. We practice in the areas of estate planning/administration and family law. While our estate planning and uncontested family law work is done on a flat fee basis our estate administration and contested family law work is time billed. We collect initial retainers for these matters but we fail to insure that the retainers are replenished. We are having accounts receivable collection problems as a result. I would appreciate your thoughts.


This is a common problem that I see in firms doing estate administration and especially family law. The best way of managing your accounts receivable is to have less in outstanding accounts receivable in the first place. You do this by staying on top of your retainer balances compared to your work in process and ask the client for additional retainer before the work in process exceeds the retainer balance. In order to stay on top of retainer replenishment you need to develop what I call a retainer replenishment report and have someone assigned to reviewing the report daily and advising responsible attorneys to contact the client when work in process has hit a certain threshold (percentage of retainer used). Some firm’s present the report at a weekly attorney meeting and determinations are made regarding additional retainers to request. Other firms assign the responsibility to the firm administrator to automatically bill for the additional retainer. It is also important to insure that ongoing work is managed in a way that an excessive amount of work is not committed to a matter until the additional retainer replenishment is received.

A retainer replenishment report is not a standard report in many billing systems. You may have to create a custom report in your billing system using a report writer or in a worst case drop a accounts receivable report to an Excel file and add in some columns for the other information.

Here are the suggested data fields/columns for such a report:

Responsible attorney
Client/Matter name
Retainer Balance (typically this would be the balance in the trust account)
Unbilled WIP Fees
Unbilled Cost
Total Unbilled WIP
75% Retainer Threshold
Amount Over/Under Retainer
Additional Retainer Requested
Total Amount Retainer to Bill (Amount WIP over retainer plus additional retainer requested)

Many family law firms have advised me that after learning the hard way they are now doing a good job at this and advising me that they have minimal accounts receivable issues.

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John W. Olmstead, MBA, Ph.D, CMC





Dec 06, 2014

Law Firm Collections – Reducing Accounts Receivable Writeoffs for Family Law Matters


I am the managing partner in a eight attorney firm in Nashville, Tennessee. We are exclusively a family law practice and while we charge a few client on a flat fee basis – most clients are time billed. We ask for a $5000.00 security retainer up front. After the retainer is used we invoice clients for additional time spent on a monthly basis. We are having problems getting paid and are having to write off a large amount of accounts receivable. I would appreciate your thoughts.


This is a common problem that I hear from family law as well as other firms representing individuals. The law firm collects the initial retainer, the retainer is used up, additional work is done, – often to the conclusion of the matter – the client is invoiced for the remainder of the time expended, and the bill either does not get paid or is paid partially. The law firm ends up writing off the balance.

The best solution is to require the retainer be replenished at a certain point and, within your state's ethical parameters, not perform additional work until the additional retainer is received. Recently a client told me that his office manager's number one responsibility is a daily review of unbilled time compared to unused retainer. When the unbilled time get to 90% used the client is invoiced for additional retainer. When 100% is reach work is stopped until the additional retainer is received.

With today's client billing systems that have integrated trust accounting, assuming that timesheets are entered directly and daily, an office manager or bookkeeper can simply print or review on screen a summary work in process report that shows for each matter the unbilled values for fees and costs, unpaid receivable, and retainer balances in the trust account. Matters with unbilled fees and costs approaching the retainer balance can then be invoiced for additional retainer. The key to making this work:

  1. All timekeepers must enter their own time via direct time entry and daily.
  2. Someone must be assigned the responsibility for daily monitoring and daily invoicing for additional retainer replenishment and help accountable.

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John W. Olmstead, MBA, Ph.D, CMC



Dec 26, 2009

Dialing For Dollars: Tips For Collecting From Your Clients

Q.     These economic times have been challenging for our firm at best. A major problem for us is collecting our client receivables. Do you have any suggestions?  


A.     Regardless of whether economic times are good or bad cash flow is always a matter of prime concern for law firms. With it taking in general 3-4 months to convert client work to cash anything the firm can do to speed up the collection cycle is always desirable. Here are a few ideas:      

    1. Do everything you can to keep receivables from going out to 90 days. Receivables aged one month are 93.2% collectable; three or more months are 72.3% collectable, and one year or more are 28.4% collectable. 
    2. Call – don't waste time with mailing follow-up letters. 
    3. Treat collection calls as an extension of client service. Calls should be treated as client service calls – not collection calls.
    4. Caller should be someone other than the attorney who did the work for the client, qualified staff member or outsourced Accounts Receivable Account Manager.
    5. Calls should be made by a trained Accounts Receivable Account Manager with client-friendly people skills.
    6. Calls should be made on each account as soon as it reaches the due date.
    7. Accept credit cards and offer it as a payment option.
    8. Discount bills when necessary if it will expedite payment and engineer payment plans.
    9. Diary, calendar, and follow-up.
    10. Consider outsourcing to an Accounts Receivable Account Manager – not a collection firm.

      Consider our firm for outsourcing this effort.

John W. Olmstead, MBA, Ph.D, CMC


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