Credit Management Billing Issues in Law Firms Law Institute of Victoria Melbourne

1. Credit Management & Billing Issues in Law FirmsLaw Institute of VictoriaMelbourne Prepared & Presented by Colin Prosser FICM CCE The Credit Professionals August 2010 Will have handouts on these Slides; plus Example of a Credit Policy & Procedure, Early Warning Signs for Business failure; Cost of Collections; Listening Skills I may repeat certain things; as I see them as IMPORTANT to continually get the Point accrossWill have handouts on these Slides; plus Example of a Credit Policy & Procedure, Early Warning Signs for Business failure; Cost of Collections; Listening Skills I may repeat certain things; as I see them as IMPORTANT to continually get the Point accross

2. My Background 35+ years in Credit & Office Management & Accounting Hold Diploma in Business Studies in Accounting - 1988 AICM Member since 1985 Fellowship Membership with A.I.C.M - 2004 Hold Certified Credit Executive ( CCE ) Status – 1998 AICM Councillor – Vic / Tas Div’n – 1997 to 99 & 2003 to 2006 AICM President – Vic / Tas Div’n – 2005/6 Currently AICM Director – Member Services – 2006 to now Worked in various Industries over the years including Manufacturing, Media, Finance & Title Searching, Telecommunications, Local Govt, 3@Law, Supplier / Distribution – Retail, Wholesale & Service, Accountancy, Electricity Supply, Plant and Equipment, Construction / Building My Own Business “ The Credit Professionals “ – Consulting ( Policy & Procedures, Staffing & Systems ), tailored In House Training, Business Continuity Plans & Credit Bureaus. Assist Law Firm practices with Collection Issues AICM = Australian Institute of Credit Management Hold a LIV Professional Standards Certificate from November 2000 on Trust Accounting Worked @ Mills Oakley, Watson Cudlipp & Hughes, Herbert Geer ( & Rundle ) Assist amongst others Rothwell Lawyers, MAE Lawyers, Barry J Woods lawyers, Deacons ( Norton Rose ) Lawyers, Andrew Fish Lawyers, NcNab Starke lawyers etcAICM = Australian Institute of Credit Management Hold a LIV Professional Standards Certificate from November 2000 on Trust Accounting Worked @ Mills Oakley, Watson Cudlipp & Hughes, Herbert Geer ( & Rundle ) Assist amongst others Rothwell Lawyers, MAE Lawyers, Barry J Woods lawyers, Deacons ( Norton Rose ) Lawyers, Andrew Fish Lawyers, NcNab Starke lawyers etc

3. Credit Management & Billing Issues in Law Firms Credit Policy & Procedures Partners ( Equity ) Support Engagement / Retainer Letters Opening Accounts Billing Customers Collection Follow Up Handling Disputes WIP & Disbursements Trust Accounts Main Points I will cover this evening.Main Points I will cover this evening.

4. Credit Policy & Procedures Example Credit Policy & Procedure; is part of handout paperwork. Must have Equity Partners agreement & sign off Cover Credit Department function & authority Reporting – DSO figures; Aged Trial Balance; Disputed & Legal Accounts Internal Communication lines What is required to Open an Credit Account Terms & Conditions ( what is stated in Engagement Letter ) Payment Terms; Credit Limits & handling Disputes ( IDR / EDR ) Reminder & Demand Letters; Debt Collection & Legal Action WIP & Stop Work on Files Handling of Trust Funds T&C shouldn’t vary from Department to Department; & should appear on company Website Consumer & Commercial Disputes - IDR ( Internal Dispute Resolution ) written procedures & EDR ( External Dispute Resolution ) process Not sure if “ Professional Standards “ covers New Consumer Law for EDR There are currently two ASIC-approved EDR schemes (the Financial Ombudsman Service and the Credit Ombudsman Service) and one statutory scheme (the Superannuation Complaints Tribunal). T&C shouldn’t vary from Department to Department; & should appear on company Website Consumer & Commercial Disputes - IDR ( Internal Dispute Resolution ) written procedures & EDR ( External Dispute Resolution ) process Not sure if “ Professional Standards “ covers New Consumer Law for EDR There are currently two ASIC-approved EDR schemes (the Financial Ombudsman Service and the Credit Ombudsman Service) and one statutory scheme (the Superannuation Complaints Tribunal).

5. Partners ( Equity ) Support Copy of Credit Policy & Procedures, agreed to by Partners. Gain sign off, so no disagreements in the Future. Organise Monthly Meeting with each Department head Any Collection or Dispute issues refer to Equity Partners Meetings to discuss any Billing issues; Disputed Accounts, Collection Issues, use of Debt Collection Agents or Legal Action If not resolved inform Equity partners to decide; I used to give Monthly report @ Equity Partners meetingsMeetings to discuss any Billing issues; Disputed Accounts, Collection Issues, use of Debt Collection Agents or Legal Action If not resolved inform Equity partners to decide; I used to give Monthly report @ Equity Partners meetings

6. Engagement / Retainer Letters Initial Discussions ( Quote on Matter, Hourly Rate$, Payment terms, disbursements, dispute resolution, review of WIP etc ) Letter ( cover above, signed copy returned, review status ) Ongoing Business, reminder Letter covering main points. Upfront monies for Trust Account, to cover Disbursements as a minimum. Watch for Type of Matter & / or Client – Insolvency – Individual or Commercial , Interstate / Overseas. Becomes Credit Departments “ Tools of Trade “ other than standard Terms & Conditions, outlines to Client your Procedures & expectations Also used for setting a Credit limit; so can keep Fee earner, Client & Firms Exposure in mindBecomes Credit Departments “ Tools of Trade “ other than standard Terms & Conditions, outlines to Client your Procedures & expectations Also used for setting a Credit limit; so can keep Fee earner, Client & Firms Exposure in mind

7. Opening Accounts Identify Client / Business Part of Terms allow for Credit Check of the People & / or their business. Businesses check ABN refer www.abr.business.gov.au Letter sent to Client advising of Account No & initial Credit Limit ( Matter to be reviewed regularly – initial Letter best guess & current WIP situation ) Copy of their Driver’s Licence; Business card; Company Letterhead; more detail the better – Ph No, Fax No, Email address, Mobiles, Direct Phone Nos, Home Ph No etc Credit Check through Veda Advantage ( ABR Big $$ Commercial Accounts ) or Dun & Bradstreet; check ABN refer Website on slide Can check ABN, CAN & Business name May have quoted around $10k for a matter; on review Billing & WIP are at $8k & still months before finalisation of Matter; need to reaccess & consult ClientCopy of their Driver’s Licence; Business card; Company Letterhead; more detail the better – Ph No, Fax No, Email address, Mobiles, Direct Phone Nos, Home Ph No etc Credit Check through Veda Advantage ( ABR Big $$ Commercial Accounts ) or Dun & Bradstreet; check ABN refer Website on slide Can check ABN, CAN & Business name May have quoted around $10k for a matter; on review Billing & WIP are at $8k & still months before finalisation of Matter; need to reaccess & consult Client

8. Billing / Invoicing Customers When to Bill, How often, Disbursements only, Monthly etc? Finance available Always attention Bills to whom you have been dealing with. Details in the Bill ( Which Matter, Interim or Final Bill ) Billing Periods ( as Customer requests, by 25th of each month or Departmental Monthly by staggered Dates 7th, 14th, 21st ) Ensure Payment terms are stated Clearly on Bills & Statements; standard T&C’s should be on your Website. Might be a prior agreement on when to Bill. Some Law Firms, refer Clients to use a Finance Company to supply facilities to cover costs$ of a large matter ( Hunter Premium Finance, might use them to cover Insurance or Professional Indemnity ) In a Large Business ( BHP ) an un attentioned Bill might not reach person to authorise. Not just for Services rendered; be specific or might be a need to be a Specific Format or include Order or Referencing Nos ( eg: Insurance Companies ) Might be working on more than one matter. Billing by 25th of Month, can be processed, sent by mail & received in current month & will be taken up by Client as current month ( improve Collection times )Might be a prior agreement on when to Bill. Some Law Firms, refer Clients to use a Finance Company to supply facilities to cover costs$ of a large matter ( Hunter Premium Finance, might use them to cover Insurance or Professional Indemnity ) In a Large Business ( BHP ) an un attentioned Bill might not reach person to authorise. Not just for Services rendered; be specific or might be a need to be a Specific Format or include Order or Referencing Nos ( eg: Insurance Companies ) Might be working on more than one matter. Billing by 25th of Month, can be processed, sent by mail & received in current month & will be taken up by Client as current month ( improve Collection times )

9. Collection Follow Up Part of Credit Policy Computerised Reminder & Final Notice Letter/s & Monthly Statements. Follow Up Phone calls, SMS, Fax or Emails If an Individual “ Refer Debt Collection Guidelines “ on number of contacts & undue harassment clauses http://www.asic.gov.au/credit Cannot Collect need 3rd Party interact ( consider Debt Collection ) Use Terms & Conditions as “ Tools of Trade “ Try to keep relationship or not Agree on Standard Policy for follow up with Clients. EG: two phone calls; standard monthly Statement; reminder Letter; consult Fee earner – they call or send Demand letter etc Phone 7.30am to 9.00pm Face to face 9.00am to 9.00pm Work 9.00am to 5.00pm Weekly three ( 3 ) Times Monthly ten ( 10 ) times Careful for unnecessary or unreasonable contact harassment GET CLIENT TO RING YOU Penalties Individual $ 220k or Business $ 1.1m Agree on Standard Policy for follow up with Clients. EG: two phone calls; standard monthly Statement; reminder Letter; consult Fee earner – they call or send Demand letter etc Phone 7.30am to 9.00pm Face to face 9.00am to 9.00pm Work 9.00am to 5.00pm Weekly three ( 3 ) Times Monthly ten ( 10 ) times Careful for unnecessary or unreasonable contact harassment GET CLIENT TO RING YOU Penalties Individual $ 220k or Business $ 1.1m

10. Handling Disputes New Credit Laws ( NCCP ) require Internal & External Dispute resolution processes. ( IDR & EDR ) for Individuals Usually 60+ days before aware of Dispute ( Client hasn’t paid or advised of dispute ) Need to act quickly to resolve Review of File by Responsible Partner with Credit Department ( Quoted Price vs Charged; WIP; result on Matter etc ) Supply details requested by Client. 3rd Party involvement maybe needed to resolve issues or find solution. Internally have an agreed Procedures which involves both Responsible Partner ( Department head ) & Credit Department, who is to contact Client, details / Paperwork reviewed & supplied if requested within 48 hours. Externally you go through “ Professional Standards “ system Internally have an agreed Procedures which involves both Responsible Partner ( Department head ) & Credit Department, who is to contact Client, details / Paperwork reviewed & supplied if requested within 48 hours. Externally you go through “ Professional Standards “ system

11. WIP & Disbursements Should run off weekly Report on WIP & disbursements by Department & Matters ( who is handling etc ) Discuss with Solicitor handling, if missed previous months WIP or Disbursements ( Write Off ? ) What has been Billed, what hasn’t & What has been given as Guesstimate. Final Accounts to go; check status on WIP & Disbursements nothing missed. Billing ( no time recorded ) but WIP ? ! ; still need to Bill for Disbursements ( recoup outlay or Creditors still need to be paid ) Each Fee earner & Partner should be able to run as required WIP lists showing Matter/s, who is handling, their time & any Disbursements – Barristers FeesEach Fee earner & Partner should be able to run as required WIP lists showing Matter/s, who is handling, their time & any Disbursements – Barristers Fees

12. Trust Accounts Print weekly Reports by Department & Matter, remind those handling Matter to complete Journals & gain signoff; not just deduct from Bills raised. Discuss with Department Head partner on any issues. By transfer of trust monies when able; helps Cashflow & / or payment of Creditors ( Barristers Fees etc ) Found Accounts to be closed with Still money in Trust. Similar to WIP; can get printouts as required. Remember sign off of Journals requiredSimilar to WIP; can get printouts as required. Remember sign off of Journals required

13. Questions Happy for you to ring or email me; if I can be of any further assistance Email colin@creditprof.com.au or colinp@effectiverecoveries.com.au Website www.creditprof.com.au Ph / Fax 03 9363-2659 Mobile 0412 209 984 My Contact DetailsMy Contact Details