The Colorado River in the southwestern United States and northern Mexico no longer flows into the Sea of Cortez. Instead, due to diversion for irrigation upstream, it evaporates in the desert about nine kilometers away.
Many law firms are experiencing an analogous situation with cash flow during the COVID-19 crisis.
But not all of them.
During the past eight weeks, our conversations with our clients in law firms worldwide have confirmed that now -- and probably for the rest of 2020 -- cash flow is king. However, some law firms have avoided the tight constriction of revenue streams that are challenging most law firms.
Here are three tips to keep at least some money in your firm's revenue pipeline during these difficult times.
1. Reinforce that collecting fees is primarily a partner's responsibility.
Firms that already have clear responsibilities and expectations for partners to manage their accounts receivable are doing better than most law firms. In fact, one of our firm's clients reported that their first quarter revenue was substantially above budget, due in large part to collections policies and practices that they already had in place. Even if your firm has alway been weak in the management of accounts receivable, it is never to late to start practicing good business hygiene.
2. Prioritize the work.
Remember that most law firms are toward the bottom of the cash flow -- somewhat like being in the Sonora Desert looking for the water from the Colorado River. When possible, try to give priority to cases and transactions that will put money into the client's hands soon, so that the client will have the cash to pay your bill.
3. Be proactive in discussing outstanding bills.
Rather the wait -- and wait and wait -- for the client to alert you that they might not be able to pay your current bill, take charge of the discussion. In other words, turn a transaction into a stronger relationship. Shortly after sending the bill, the billing partner should contact the client and offer to adjust the payment schedule to help the client get through their own financial difficulties. Many clients will decline this offer, but almost all of them will remember it favorably as an indication that your firm really does care about your clients.