Go Green: An Evergreen Retainer Can Help with Collections

Law firm collection rates tend to be well below average.  That’s in part because law firms are great extenders of credit.  They’ll taka a retainer upfront, struggle to collect any more money, and then continue to work through a situation in which it’s unlikely they’ll get paid anything more.  This is precisely why most senior lawyers will tell their juniors to get paid as much as possible upfront, because another dime may not ever come. 

 

But, that’s bad advice in a market in which there is continued downward pressure on legal fees; and, it also encourages attorneys to avoid a fixable problem. 


 

It’s not the only solution available, but one method for dramatically increasing your collections is to adopt an evergreen retainer model.  The way it works is: the law firm sets a retainer amount for an initial client payment; and then, moving forward, it’s the client’s job to ‘top off’ that amount, on a recurring basis, when it falls below a predetermined threshold.  So, let’s say that your law firm takes a $1500 retainer, and sets the evergreen retainer amount at that number, while the payment period is the traditional monthly option; then, the math works like this:  law firm performs $500 worth of work in month 1, and the client’s obligation is to pay in another $500 to get the retained amount back up to $1500.  Pretty simple . . . but, highly effective, because it means that a law firm is never working in arrears. 

 

Add to the mix payment automation via credit card, and a stop work policy, and you’re in business. 

 

I talked over this concept (and other financial management best practices) on a recent episode of my podcast. 

 

. . .

If you can’t bank on a high collection rate, we can help! 

Through a unique partnership between the Maine Board of Overseers of the Bar and Jared Correia’s Red Cave Law Firm Consulting, Maine attorneys have access to experienced law practice management consultants at a special discounted rate. 

To get started, visit Red Cave’s landing page for Maine attorneys, and start running your law practice like a business. 

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