OOPS!... Good Management Subsumes Risk Management:

Changing the New Client Acceptance and
Management Processes in Your Firm

By Bob Beyer & Steve Parker

You are responsible for accounts receivable quality and collection. That means you need to be involved in the decision process regarding which clients are accepted by the firm and which are not represented; which pay up front and which are extended credit; which fit the firm and which don’t... You don’t participate in or make these decisions? Then, it is time to set some objectives for change in your role in the coming years.

New business decisions are the most crucial decisions made by a firm. The clients accepted determine the amount of fun the attorneys will have in their work thereby determining how enjoyable everyone’s work experience will be in the firm; the long-term financial health of the firm; the likelihood of professional liability claims arising from representations; and, a myriad of other things to do with the quality of law firm life. Some administrators are deeply involved with new client management while others are the recipients of the decisions made by others.

You can set three clear objectives with your partners to be mutually pursued over a period of years with one goal: To improve overall firm results. Each firm looks at results differently due to the significant variations in firm practices, so you would have to agree with your partners on the results desired—and maybe there will be some surprise benefits as well.

OBJECTIVE 1:   To identify methods for managing new business in a law firm.

OBJECTIVE 2:  To identify tools for screening and selecting new business.

OBJECTIVE 3:  To pinpoint ways to remove administrative errors from the client intake      process.

These three objectives are not short-term moves, rather they represent significant changes in the culture of some firms—in other firms, all of these things occur and the administrators should be writing the sequel to this note.

We have prepared checklists to go with each of the three objectives.  Implementation regarding each objective will be different in every firm.  The basic questions should not change.  The intent is to give you a frame of reference for considering change rather than a clear road map.  If you set your objectives, and have a framework for change, then motivation, culture and sales become the key issues.  Now, on to the lists—a form of notes to aid in asking questions and pursuing changes.  Please feel free to augment, expand and modify these to fit your firm’s ability to change.  There is no magic to these lists, they represent our thoughts on some of the issues to be resolved in the new business management process.  Your ability to manage new business, ultimately, may be the key to the overall financial performance of your firm—so chart a course for change with clear objectives and a commitment not to get sidetracked by the static that will arise in implement change.

WHEN NEW BUSINESS IS PROPOSED

Is the topic of the work within the scope of the practice?

·         Is the work a one-shot assignment or an opportunity for a long-term relationship?

• Is this a new relationship?
• Are the key people known to your firm?
• How did the proposed client come to the firm?

·         Referral by someone known to the firm?

·         Dissatisfied with their existing relationship?

·         General open market (phone book, walk-by) solicitation of the firm’s services.

·         Others in town won’t represent.

• Is there a conflict of interest or a possible perception by an existing client of a conflict of interest?
• Are any waivers needed?
• Are there familial and/or business relationships that could create the appearance of a conflict?
• Will this engagement preclude representation of any clients the firm has been pursuing?

Who is the client?

·         An individual?

• A partnership?

·         Does the entire partnership seek representation or just a portion of the partnership?

·         A partnership and related limited partnerships?

• A corporation?

·         Are there subsidiaries, parents, joint venture partners or affiliates that create conflict potentials?

• A mixture constituting a joint venture or set of affiliated organizations and/or individuals?

Who will pay the bills?

·         The primary contact?

• Some other party?
• A combination of the immediate client and one or more other parties? Will the client pay in advance?
• If the client requires credit (billing after services are rendered), on what basis are you extending credit?

·         Dun & Bradstreet reports?

·         TRW report?

·         Personal knowledge of the entity’s financial standing?

• How much credit is the firm willing to extend? Are there any special requests that the new client is making as a condition of representation?
• Is it a short fuse project?
• Do they want special financial arrangements?
• Do they have a matter that they think will be so successful that they will have tons of money to pay all of the bills in full?
• What is the key working attorney’s GUT reaction to whether this will be a good representation?

New Client Approval

·         The attorney securing the business approves?

• A second partner must sign off on new business?
• Firm management must approve the new business including:

·         Engagement Letter/Contract?

·         Scope of work?

·         Conflicts clearing and/or waivers?

·         Financial arrangements?

·         Duration of representation?

·         Team of attorneys to service the client?

·         Budget for the proposed work?

·         Venue for dispute resolution? Mediation? Arbitration? Jury trial?

·         Client signed fee agreement?

·         Clients are encouraged in writing to discuss their bills with their attorneys?

·         A time limit is specified for the engagement?

·         Credit terms and late payment charges are specified?

·         If a joint venture partner is involved in meetings, has a written document been prepared that documents which party(ies) the firm represents?

·         The client cannot be billed until all requirements are met, even if work is performed!  Any number of system control procedures can permit this, cycle billing controls or a step as simple as not entering the billing address into the system until all requirements are met.

Managing the New Client Relationship

·         Timely Communications.

• Formal checklists that accompany all tasks.
• Firm-approved forms for establishing and approving new clients.
• Quarterly review of new client files by parties not in the process to verify that all requirements of the firm are being met.  Attorneys need not be involved in the review process.
• Monthly review of accounts receivable and client payment history.
• Process to review the replenishing of retainer funds.
• Quality standards review.
• Method to regularly review staffing needs required for the client engagement.
• Delivery of first client bill by billing attorney.
• Verify that the billing format is consistent with the client’s organizational requirements.

One of the most important contributions an administrator can make at their firm is the orderly management of new and on-going business.  The firm’s financial and mental health are dependent on the financial health and performance of its clients. Administrators can help their firms improve the selection and management of clients, creating a better overall result for the firm.  If you do not cover all of the foregoing items in your on-going work, pick and choose a few at a time.  Change is slow but constant. The setting of clear objectives can enable you to maintain sight of the larger picture of firm results while you work on the many details that are involved in supporting your attorneys as they establish and represent clients.

Bob Beyer is the Administrator of Limbach & Limbach L.L.P. in San Francisco and San Jose, and the Executive Vice President of PilotLegis. At the time this article was written, Steve Parker was a Vice President at Minet Insurance Services. Minet was acquired by Aon. This article was first published in the ALA Chapter Newsletter – The Bridge.