The Loss Prevention Specialists at CAMICO consult with policyholders on a variety of topics, providing practice and risk management advice. In his video, Duncan B. Will, Loss Prevention Manager, shares an example of how CAMICO helps CPAs via our Advice Hotlines. One of the topics he mentions is fee collections – CAMICO frequently receives calls from CPAs seeking advice on this problematic area. Here are some practical tips on dealing with some of the issues.
Basic steps can be taken to avoid or manage most billing and collection problems. Client screening and engagement letters are the first steps toward controlling losses and enhancing your clientele, but better billing and collection practices are also valuable ways to enhance cash flow.
If the bill or its description of services is unclear, clients will be inclined to put it aside and to call about it later, lengthening the time it takes to pay the bill. Bills that are standardized, clear, concise and descriptive are more likely to be paid sooner.
All professionals with the firm should be accountable for their timesheet and billing deadlines, but their billable time should be protected by using administrative staff with appropriate training and support to prepare bills and collect payments.
Timely billing leads to better collections. It’s sometimes best to bill more frequently than monthly, as smaller bills are generally paid sooner than larger ones.
Different services often require different billing practices. Consider alternative fee structures, such as hourly rates, fixed fees, value pricing, refundable advance retainers and replenishment, or a combination of structures. If you need professional help for billing practices, don’t hesitate to get it.
Communicate frequently with the client and gently remind the client of future services needed. Speak to the person in charge of authorizing the bill payment when it’s due. If it’s a large balance due, call 10 days before the due date to be sure the invoice has been received.
Collection calls are relatively effective, inexpensive, immediate, personal and informative. Staff should be trained on the rules under the “Fair Debt Collection Practices Act” (FDCPA), which prohibits unintentional harassment of debtors. Anger management and mediation training will also help staff deal with difficult people.
Once you have sent 30-, 60-, and 90-day letters, turn the account over to a professional collection agency to avoid spending valuable time and resources on deadbeats. If a client offers a reasonable partial payment, consider taking it and disengaging. This will free up more of your valuable time to pursue better clients who pay their bills on time and in full.
Client screening is the first step toward controlling losses and enhancing your clientele, services, and fee structures. The basic process utilizes a checklist to flag problem clients. Some of the questions include:
- Is the client the kind of client the firm would like to have?
- Does the client demonstrate integrity?
- Is the client financially viable?
- Why did the client choose our firm over other firms?
- What does the client like about our firm that causes them stay with us?
- Are the client and engagement still a good fit for our firm?
If the client or engagement is not a good fit, do not accept the engagement. Due diligence is also essential to client screening and should include the following steps:
- Performing background and credit history checks
- Obtaining and assessing the quality of references, and obtaining additional references to check, if necessary
- Checking with the predecessor firm after obtaining permission from client
Some firms create a list of their top five clients with descriptions of why they like these clients above the others. The descriptions then point the partners in the direction of the clients they want to attract.
At the same time, learn to recognize higher-risk engagements and plan your billing and collections according to the risk before you begin. Buy-sell transactions, public offerings and initial public offerings, limited partnerships, financial services, real estate and construction engagements all tend to be higher risk.