How can my law firm avoid bad debt?

Misbah Jalal Siddiqui

How can my law firm avoid bad debt?

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Bad Debts

Bad debt can take up a significant portion of a firm’s income. While it can be challenging to avoid bad debt entirely, law firms can minimize its likelihood by doing the following:

Be upfront with pricing

Make sure from the start that your client is aware of what the payment amounts will be. If you have a flat-fee structure, lay out the full amount along with any possible additional expenditures. For hourly billing, state the hourly rate and provide an estimate of the hours for the case. While those hours can certainly change depending on the nature of the case and its progression, it can be helpful for the client to understand whether or not the anticipated cost is within their price point[1].

Set clear payment expectations

Are your payment terms 30 days? Do you send invoices every two weeks or once a month? Do you accept payments by credit cards?

Let your clients know how often they can expect to receive invoices, how they can make a payment and when it’s expected by.

Use retainers

Retainers can help provide reassurance that clients have the available funds to pay their invoices. While clients should still review and approve invoices before funds are drawn from a trust account, having the funds available means you’re more likely to get paid[2].

Have consistent, timely billing

If you forget to send invoices and send multiple months at a time or delay sending them, the client may forget the value of what they’re paying for. Keep a regular schedule for sending out invoices.


1. What’s Your Collection Rate?
2. Collecting Bad Debt From Your Law Firm Clients

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