Why Do Law Firms Struggle to Get Paid?
CollBox Team
Most law firms struggle to get paid for one simple reason: they have no accounts receivable process at all. That was the central message from CollBox co-founder Matt Darner in a recent conversation on the Alpha Lawyer Podcast with host Jason Marsh. Over the course of the episode, Matt explained why collections breaks down at firms of every size, how the problem starts long before a bill goes unpaid, and what attorneys can do this week to turn earned revenue into collected revenue.
Here are the takeaways worth sharing with your partners and your billing team.
The problem is the system
Matt’s first point reframes the entire issue. Firms tend to assume their collections process is malfunctioning. In reality, most never built one.
“It’s not a broken system. It’s a non-existent system.”
The vast majority of law firms are small businesses, and they are deeply client-centric by design. That instinct serves clients well, but it gets in the way when firms cannot separate taking great care of people from running a sustainable business. The result is a firm that does excellent legal work and then leaves the money for that work sitting in aging receivables.
This is exactly the gap CollBox was built to close. CollBox provides purpose-built AR management for small and mid-sized law firms, combining automation with human AR specialists to recover outstanding invoices, and the firm has recovered more than $140 million for its clients to date.
Why “collections” feels like a dirty word
Part of the hesitation is cultural. From law school forward, attorneys are taught not to chase payment. Matt drew a useful distinction between two very different things hiding behind the same word.
Capital-C Collections conjures up baseball bats and aggressive third-party agencies. Lowercase-c collections is something else entirely: gentle, empathetic accounts receivable follow-up. Fear of a bar complaint pushes attorneys to avoid both.
That fear is largely misplaced, Matt argued, because the reality of non-payment is rarely about bad actors. Clients in family, immigration, criminal, and consumer law are often going through the hardest moments of their lives. When they cannot pay, it is usually driven by financial hardship and embarrassment, not malice. They do not fight. They go quiet and start ducking calls.
Collections actually begins with intake
One of the strongest themes in the conversation was that the collections problem begins long before any bill is late. It begins at intake, with expectations.
Matt pointed to the Foonberg Gratitude Curve: a client’s gratitude peaks at the moment of value creation and declines steadily afterward.
“The worst time to collect is at the end of a case.”
The fix is to set real expectations on cost up front. A family law client who is halfway through a divorce with no sense of the total cost is in a dangerous position, both for themselves and for the firm. Attorneys should mine their own historical data in Clio or MyCase to understand what cases like this actually cost, then communicate that early. Do not lean on the fee agreement alone. Walk clients through the initial retainer, and if it is an evergreen retainer, exactly when and how it needs to be replenished. A $5,000 retainer may already feel like a stretch. If the client never learns the matter will run to $25,000, that is when they disappear.
Inconsistent billing trains clients to deprioritize you
When billing slips, clients notice, even if no one says anything.
“If you don’t bill regularly, you unconsciously teach clients that getting paid isn’t a priority for you.”
Matt’s advice is to get monthly billing down to a science before doing anything fancier, then consider moving to twice a month. He also recommended billing against milestones. If a custody hearing is coming up, make sure the retainer is funded before you walk into court, because a judge is unlikely to let you withdraw on short notice.
He noted that a new wave of AI-powered billing tools is making the meticulous, time-consuming work of capturing billable time far easier, with one firm surfacing an average of $14,000 in previously unbilled hours per user per month. The supporting metrics worth watching come from Clio: realization lockup, which measures how long it takes just to get a bill out the door, and collections lockup, which measures how long it takes to get paid after the bill is sent.
The three reasons clients do not pay
When a bill goes unpaid, Matt sees three root causes. The client genuinely cannot pay. The client has decided not to pay because of a dispute. Or the client is paralyzed and has buried their head in the sand to avoid the confrontation entirely.
The job of a good AR process is to tease out which one you are dealing with, gently. His recommended posture: treat every follow-up as a client service call first and a payment reminder second. Check on how the client is doing. Mention the bill after.
Automate the reminders, but someone still has to call
Matt’s view on automation is pragmatic. Start reasonably. Most firms are not even using text messages yet, so automated email and text reminders are a strong first step. But email alone will not get you paid.
“Someone needs to pick up the phone.”
The escalation ladder
When follow-up is not working, Matt described a clear sequence. Map your milestones to a timeline and escalate as the days past due climb. Internally, the strongest lever is the threat of withdrawal: stop work on the file if the trust account is not replenished. He referenced the old-school “red rubber band” rule as a simple way to flag a file and halt new work.
If representation ends with money still owed, lead with the carrot before the stick. Offer payment plans or a settlement. Reserve demand letters, third-party collections, and lawsuits for last, since filing suit carries real risk of a bar complaint and can affect your E&O insurance.
The most important rule across all of it: secure payment before you hand over the final, highest-value deliverable, whether that is a green card, a finalized agreement, or a trial result.
Who should actually own collections
Billable attorneys should not be doing the chasing, both to protect the client relationship and to protect their own time. Matt also offered a sharper distinction. The meticulous personality that makes someone great at billing is rarely the charismatic, thick-skinned personality that makes someone great at collections. Asking your billing clerk to do both often fails. Firms should assign collections to administrative staff who can handle rejection, or outsource it to fractional AR specialists.
Review the numbers on a rhythm
Weekly AR meetings are becoming standard for managing active issues, with monthly, quarterly, and yearly reviews to spot trends. The two numbers Matt highlighted are your collection rate (Clio’s average runs in the high 80s to low 90s) and your lockup times, both available in your practice management reports.
The mindset shift that ties it all together
Matt closed on the point that underlies everything else. The reluctance to ask for payment comes from a good place, but it quietly undermines the firm.
“You are not a bad person for wanting to be paid for your hard work.”
You built a business to help people. You cannot keep helping them from a place of financial instability.
Frequently asked questions
Will following up on payment trigger a bar complaint? Gentle, professional accounts receivable follow-up is a normal part of running a firm and is very different from aggressive third-party collections. The higher risk usually comes from filing suit, which can invite complaints and affect E&O coverage, so most firms reserve that as a last resort.
When is the best time to collect? As early as possible. Client gratitude is highest at the point of value creation and declines afterward, so front-loading expectations, retainers, and consistent billing works far better than waiting until a matter wraps up.
Who should handle collections at a small firm? Not your billable attorneys, and often not your billing clerk. Look for administrative staff who can handle rejection comfortably, or bring in fractional AR specialists so your team can stay focused on legal work.
How automated should collections be? Automate the reminders with email and text, since most firms have not even started there. But plan for a human to make phone calls, because automation alone rarely closes out a past-due balance.
What metrics should we track? Watch your collection rate alongside realization lockup (time to send a bill) and collections lockup (time to get paid after billing). Most practice management systems like Clio and MyCase report these directly.
Ready to build the system you never had?
If Matt’s breakdown sounds like your firm, the good news is that you do not have to build an AR function from scratch or hand it to an attorney who would rather be practicing law. CollBox takes over past-due follow-up for a flat monthly subscription, integrates with Clio, MyCase, and Smokeball, and assigns North American AR specialists who represent your firm directly. You keep your existing payment methods, and clients pay you, not us.
