Page 15 - Law Society of Hong Kong MPMC Manual v8 - With checklists (1 March 2018)

Practice Management Course | Unit 2
Financial Management

the debt is nearly three times more likely to be collected than a debt that is left to
90+ days.

23. There are three elements to minimising doubtful debts:

(1) Effective file management for costs recovery.
(2) Essential elements of bills or invoices included.
(3) Effective debt collection procedure.

24. There is a need for lawyers to maintain good relationships with their clients and not
have a conflict of interest with regard to debt collection. Thus, in the majority of
practices, the actual collection of outstanding fees is left to accounts staff.
However, that does not mean that practitioners are helpless with respect to
minimising doubtful debts.

25. In terms of file management, practices should assess their potential clients’
financial position carefully before engaging them. You should get the money in trust
and have frank and transparent conversations with your clients to educate them
with respect to payment requirements. In addition, you should keep them informed
of the fees. In fact, you should take the time to communicate the value of your
work to clients and make sure that clients do understand and appreciate the value
of your work.

26. The bills themselves should articulate the value of what you have done for the
clients – what is the benefit to them? A phone call to explain the bill and answer
queries might be necessary. If clients receive regular bills from you, it should also
be easy for them to understand what they are paying for this time. Your bills should
use the terminology ‘Current’, ‘Overdue’ and ‘Pay Now’, instead of ‘30 days’, ‘60
days’ and ‘90 days’, as the latter indicates to the client that it is acceptable to pay
in three months’ time.

27. An effective debt collection procedure is normally:

• Automated in the practice management system.
• Centralised.
• Followed all the way through to recovery on a regular, consistent and
managed basis.

28. It is important to monitor your doubtful debts regularly. Start by identifying the
most common reasons debts go over 60 days in your practice (e.g., some clients
are given more flexibility in paying their bills). Then, set and implement some rules
to prevent debts going more than 60 days overdue and to improve performance
with respect to debts.

29. In addition, regularly assess whether the rules are working. If not, re-analyse and
make new rules.

Rules to implement to prevent debts going more than 60 days overdue
1.
2.
3.

© The Law Society of Hong Kong (2018) Page 11