The four rungs of collection

A way of saying when your firm collects its fee, relative to when the client gets the work. Firms sit on one of four rungs, and almost every bad-debt story comes from the bottom two. The fix is not to jump from one to four in a week. It is to move up at least one rung.

1. Rung 1

   Invoice after lodgement

   The work is filed and out of your hands before the client sees a number. Every dollar is collected on trust.

2. Rung 2

   Invoice with the draft, hold the lodgement

   Safe only against clients who would have paid anyway. Once the client has the draft, they have the figures.

3. Rung 3

   Deposit before starting, balance before the draft goes out

   A signed engagement, part payment on acceptance, and the review copy released when the balance clears.

4. Rung 4

   Paid in full, or payment details captured, before any work starts

   The quote is accepted, a card or direct debit authority is on file, and the fee is collected on the day the draft is ready.

Why holding the lodgement is rung two, not four

“We don’t lodge until we’re paid” feels like leverage. But the draft you send for review is the product: every figure and every treatment. Once the client has it, lodging is a formality they can do themselves. A hold only works when the thing you are holding can’t be got another way.

Moving up a rung

• Write the engagement letter so the fee is for preparation, payable on delivery of the draft, with stop-work and recovery costs spelled out.
• Quote first, take a card or direct debit authority at acceptance, then open the file.
• Use a deposit for larger jobs: part on acceptance, the balance before the draft goes out.
• Move existing clients across at their next engagement renewal, not by surprise.