Retainers: The Not-So-Secret Secret to Positive Cash Flow
Virtually all experienced attorneys insist on upfront payment, either by charging a flat fee for a case or by asking for an evergreen retainer to cover billable hours and expenses incurred while handling the matter. New attorneys are often reluctant to ask for money up front, and as a result end up with a lot of unpaid accounts. Using a security retainer monitored by CosmoLex law firm management software reduces your bad debt and improves your practice’s financial health.
Why Use Retainers?
One reason attorneys are reluctant to ask for advanced payment is they feel that is the same as saying their clients are dishonest. In truth, most delinquent payers are honorable people who simply have gotten in over their heads. Clients promise anything up front in order to get legal representation, but the reality of legal costs takes them by surprise. They say they can’t pay attorney fees until they pay for more important things like food and housing…and that expensive ESPN sports package, and that boat he’s always wanted to get, and that trip to Vegas, and so on. It’s even worse if the judgment goes badly, because who wants to pay a lawyer who lost the case?
Yes, some clients will balk if you ask for a hefty payment up front and may decide not to engage your services. Don’t worry about it. Any client who hesitates to pay a retainer probably wasn’t going to pay you anyhow. More importantly, in most states non-payment is not a valid reason to stop representing a client. Some clients know this and deliberately engage lawyers with no intention of paying them.
Proper Retainer Management
Asking for a retainer is only the first step. Advanced payments technically belong to the client. You aren’t allowed to spend the funds until you have earned it. You have to put the money in a trust fund or IOLTA account and draw it out to pay your invoices. Tracking retainers is difficult to do by hand so you need a tool like the trust account software built into CosmoLex.
Ideally the initial retainer covers all costs associated with a matter with a little left over to be refunded to the client. In reality you never know how much a case will end up costing. You need to send out low retainer reminders promptly to ensure your evergreen retainer never runs dry. CosmoLex allows you to send out a batch of replenishment emails in one click.
Retainers: use them, track them, and replenish them. Take advantage of CosmoLex legal billing software for lawyers to streamline the process so you don’t have to spend all your time chasing non-paying clients.