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Uploaded byJocelyn Nager, Esq.
Improving Realization Rates
The document discusses ways for an accounting firm to improve their realization rates, which are the percentage of billed fees that are actually collected, by tightening risk management policies, using engagement letters that outline payment policies, diligently recording all time spent on clients, actively pursuing collections, and consulting liability insurers before taking legal action over unpaid fees.
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Improving Realization Rates
- 1. IMPROVING REALIZATION RATES Frank, Frank,Goldstein & Nager, P.C. 1430 Broadway Suite 1615 New York, NY 10018 Tel: (212) 686-0100 www.ffgnesqs.com
- 2. Realization Rates Realization ratesshould be approximately 90 to 95 percent. 90 % 95 %
- 3. Issues to Consider Policyholders Notall time on engagements billed Late billing by firm Liability carrier exclusion for fee disputes Strict adherence to liability policies may prevent cancellation or suspension of policy and benefits Economic reality of lawsuits Accounting Malpractice Statute of Limitations
- 4. Objective: Increase realizationrates Overview: Tighten risk management and assessment policies. Secure engagement letters which include policies regarding payment of fees and fee disputes. Record all time spent on client engagement. Act diligently to collect current and aged receivables. Evaluate work papers and files for possible error's (anticipated counterclaims and suit.) Consult with your liability carrier prior to referring the claim for collection. Use collection counsel with experience handling accounting fee disputes.
- 5. Risk Management andAssessment Policies 1. Due diligence on Prospective Client Internet search Check public records for lawsuits, judgments, liens, and pending litigation. Check public records for assets.
- 6. Risk Management andAssessment Policies 2. Identify High Risk Clients Clients with cash flow issues and/or poor internal controls Clients with lack of stability Clients who require expertise not possessed by the firm Clients who negotiate initial retainer Clients that are unable or unwilling to pay fair fees Clients who have repeatedly changed accounting firms Clients with multiple judgments and lawsuits Client engagements that "feel wrong"
- 7. Risk Management andAssessment Policies 3. Engagement letters Standard clauses Fees Specific work being performed Limitations Dispute resolution clause(s) Reservation of right to withdraw or terminate engagement Specific clauses which will protect the practitioner Rates subject to change
- 8. Risk Management andAssessment Policies 3a. Engagement letters Do not proceed without the signed engagement and initial fee retainer.
- 9. Risk Management andAssessment Policies 4. Addendums to Engagement Letter. Change in scope or additional work to be performed Change in fees or rates Client must sign off on addendum before performing additional work
- 10. Billing Practice 1. Recordand account for all time on engagement. Bottom line effect Staffing issues Profitability
- 11. Billing Practice 2. Activecollection efforts on current and aged receivables. Bill timely Contact client for payment in a phone and email Establish a collection policy
- 12. Fee Disputes andNon-Payment: Always Anticipate a Dispute Fee Dispute Provisions Mediation Arbitration Litigation Include a provision limiting your firm’s liability
- 13. Other Considerations Cost andBenefits Professional Liability Carrier Coverage Deduction Terms of policy Approved
- 14. Call us at(212) 686- 0100 or email us directly at Jnager@ffgnesqs.com for further information and/or to help you get paid now.