Fronting Money for Clients

One thing we learned the hard way, many years ago, is that advancing money on behalf a client is risky. On one of our first cases, we were given the verbal go ahead by an associate level attorney whose boss had told him to do so. We were very excited to work with this attorney, whom we had known for about 2 years. He was an interesting guy, a successful plaintiff’s lawyer, and we’d talked directly with him about the case. I wrote a check to our jury recruiter, advancing the up front cost to the recruiter on behalf of the client. I had no reason to doubt that this was “a go” until a few days later, when he said he never approved, wasn’t going to proceed, and too bad for us. We never heard from him again. I was out the money, but lesson learned. As a result of that incident, we’ve insisted on an up front retainer and signed agreement from all clients. It was not that we make all our decisions on the basis of one experience. There were others where clients were slow to pay. With costs outstanding, it is hard to be the bank for the client. I know plaintiff’s attorneys typically advance costs for their clients, but our fees are much smaller than theirs. And, while we know defense clients, such as insurance companies, will pay, the question becomes when. We have little leverage in the scheme of things except to request up front payments and getting paid prior to our research or consultation. Within the last week I’ve been dealing with a client whose payment was needed faster than their payment system typically allowed. They were transparent and helpful in the process, but they were unable to do a wire transfer or ACH payment to expedite the payment. An overnighted check was fine with me, but by the time they were able to get the check written, another day had passed. Then there was a holiday. We would have lost 4 or 5 days of mock jury recruiting time had we not decided to front the recruiting fee. Then there was the substantial research facility commitment. All of which meant that I had spent thousands of Magnus’ dollars on behalf of a multi-million dollar company. These are the types of things that cause stress, sweat and lost sleep. Fortunately, we’ve had a happy ending. The check arrived the day after the holiday and we are on track to do the project. But nothing is simple; it is always something when one operates a small business.

The majority of Magnus’ clients are large corporations, such as insurance companies, financial institutions, and health care conglomerates, all of which have “mega bucks,” especially when compared to our small business.  Because of this, it is quite irksome when Magnus is expected to advance funds to pay our clients’ expenses.  Every time we conduct focus groups, mock trials, or attitude surveys, there are numerous costs we incur on behalf of our clients.  For example, every hotel where we rent conference space requires a sizable deposit to guarantee the space on the dates we need it.  In a similar fashion, the company that recruits our research participants requires a retainer of half their fees prior to contacting anyone about attending our research program.  And, airlines always require full payment at the time a flight is reserved; the same is true for rental cars. Without a retainer from our client, Magnus would have to use money from our operating budget to fund these expenses. Thus, we need our clients to retain us, with money, not a promise that “the check is in the mail,” in order to conduct our work on their behalf.  As David mentioned, we learned the hard way that, until we receive our retainer funds (in the form of a check, wire transfer, or ACH payment), we have to bide our time and not make any preparations for the client’s case that require paying someone for something.  As much as we like many of our clients, we are unable to move forward without cold, hard, cash.  As The Beatles once sang in the song “Money” (which was written by Janie Bradford and Barry Gordy and originally recorded by Barrett Strong in 1959), “The best things in life are free.  But you can give them to the birds and bees.  Now give me money (that’s what I want).”  Word to our clients: We have lots of work to do at your request, and on your behalf.  As soon as we are retained, we are ready to go! Thank you for hiring us!

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