Year-end is fast approaching in Biglaw. For litigators, the last two weeks of December are usually some of the calmest of the year. Even the hardest of adversaries are apt to adopt a “Christmas Truce” and halt the lobbing of discovery grenades at each other. Courts start to slow down, and most everyone is happy to “pick things back up” after the turn of the year. But like all things Biglaw, complacency at year’s end is impossible for a Biglaw partner — even when work is relatively quiet. Why? One word: collections.
For tax and other corporate structure reasons that your firm’s comptroller will be happy to explain to you (if you dare to actually engage a non-lawyer in conversation about the business of your law firm), most Biglaw firms want to have every single drop of revenue possible in the door by December 31st at 11:59 p.m. While your typical partner is fairly insulated from money matters at the firm all year, and mostly just wants no surprises when it comes to their compensation, at year’s end everyone is recruited and expected to give their all. To what? Collections!
How bad does it get? Pretty bad….
ATL has over the years featured some of the more strident pleas for collection performance from some of Biglaw’s colorful managing partners. I don’t envy them the task, but it is pretty clear that Biglaw’s “leaders” seem to relish their yearly exercise of power over their “partners.” The Biglaw beast needs feeding, and it likes to celebrate the holiday season by gorging on client dollars. The managing partner, with his guaranteed compensation and illusory “law practice,” is seated at the head of the table, and he is ravenous.
There is an almost palpable shift of responsibility that takes place during this frenzied period. Clients’ obligations to pay for services rendered are subsumed into a partner’s obligation to collect the money. Any failing in that effort is ascribed to the poor partner who is under the gun to collect from that particular client. Woe to those whose efforts are so lacking that they require a “visit” from one of the firm’s “collection specialists” — who seem to only appear at year’s end, like mall “holiday greeters” — to discuss strategies for bringing in those client dollars. Never mind that your client just outsourced their accounting to an outfit still waiting to get its U.S. bank accounts up and running. It is your fault for not bringing a credit card reader with you to the courthouse when you argued that summary judgment motion back in July.
Associates, and to a certain extent counsel, are insulated from this pressure. As an associate, any pressure I had to to collect from my personal clients at year’s end was self-inflicted. As a partner? The “gearing up” for the “collection drive” or the “Biglaw Firm X Year-End Collection Effort” starts in October. Depending on how the firm’s financial forecast looks (and as I have mentioned earlier, the accounting people are very good at this), the initial emails and discussions about the topic may start out friendly. But if meeting “projections” starts looking challenging, all bets are off. I have heard of partners called at home on weekends by firm leadership, asking them to “do more” to make sure their clients pay by year’s end. Coupled with explicit threats regarding compensation — not a fun mix.
It does not have to be so stressful. First of all, part of providing top-level client service involves knowing your clients’ business — not just being able to solve their immediate legal problems. If your client is publicly traded, read their 10-K’s and annual report to get a sense of their financial reporting schedule and accounting basis. Not every company “closes the books” at year’s end, so your request for accelerated payment may not be so easy for them to pull off — especially when you are asking on December 15. Conversely, some clients may have an interest in having the money allocated for their legal budgets exhausted by year-end. Companies in that position may be receptive to paying some of December’s billed time. You won’t know unless you ask, and your question will be better received if you do some digging beforehand. Look at historical payment schedules from the client, and start laying the groundwork for year-end collections as early as possible. Whatever you can do to avoid the rush, and needing to adopt a “demanding” posture with your clients — do it.
Knowing as much as you can about your clients is always a good idea. And part of that awareness is composed of knowing their comfort zone with regard to paying your bills. The end of the year is a time for taking a moment to reflect on the past year’s accomplishments, and girding oneself (and your surviving personal and professional relationships) for the upcoming challenges and opportunities to come. No Biglaw partner wants to leave clients with a “bad taste” due to late, haphazard, and overly aggressive collection practices. A little consideration and preparation can go a long way to making sure that the money gets collected on time and without stress.
So ignore the hysterics in your managing partner’s collection emails (they are not meant for you, because if you had a real problem you would have gotten a “visit” or two already), and focus on collecting what you can in a thoughtful and responsible way — with respect to both your clients and your firm. No one likes to hold their hand out, and they do not teach you this stuff in law school or as an associate. But it is a necessary skill, and when you are confident that you have delivered value for your client, it is one you can exercise with confidence. Good luck to all with their collections, and best wishes for a better year than the one that is wafting away.
Any collection horror stories, or ideas for making year-end collections go smoothly? Let me know by email or in the comments below….
Anonymous Partner is a partner at a major law firm. You can reach him by email at firstname.lastname@example.org.