Debt Recovery

This is one of my favourites, as it is perfectly suited to document assembly. Yes, perfectly suited. Debt Recovery in the law firm could be loosely defined as basic, undefended litigation, where the majority of matters remain undefended. The focus of a debt recovery system is procedure - sequential procedure and processing of large volumes if simple documents which can be split into 3 major areas:

• All court documents relating to undefended proceedings: Claim, Statement of Claim, Judgement.
• Post judgement/execution proceedings: warrants generally.
  
• All letters, memos and correspondence associated with the above.

Many firms simply don't wish to "do" debt recovery, as it is done by many firms at the court scale or a percentage of that scale, which leaves little to no room for profit for most firms. So the question arises: how do some firms base the majority of their bottom line from charging a percentage of scale, while other firms simply cannot entertain doing debt recovery at all because of the lack of profit margin? The answer is one simple: their systems do most of the work for them.

Much like conveyancing, firms that are able to undertake bulk work while charging low rates inevitably have document assembly and/or workflow systems in place. These systems ensure that the time expenditure of each file is minimized, which maintaining a specific quality of work product. This article deals with a document assembly system to enable this "bulk work for low charge out" type of work to be profitable. Remember, the reason an area of practice is a loss leader or low profit for your firm, is usually that it is a high volume profit monster for another firm or company. It is never that "there is no money in it" but simply put, another firm is doing it at rate with which you cannot compete.

Aims of the System

Generally

• Enable every document to be produced from a single location, without much navigation.
• Group templates into "packs", such as a "Claim Issue pack" and a "Judgment" pack, where each step of the debt collection process has several associated documents.
• Collect a large amount of data regarding the matter "up front" with minimal data entry times for the remainder of the file (file creation is the largest single time a debt recovery file is handled in this scenario).
  
• After the initial data collection, attain a benchmark of approximately 2-5 minutes to complete any 'step' of the debt collection process.
• For most firms, the capacity for a single plaintiff is sufficient.
  
• Multiple defendant handling, including automatic calculation of all plural references. Include "defendant selection", which provides the ability to proceed with (for example) an Enforcement Warrant against a particular defendant, not just "all defendants".
  
• Ability to report on all data on a given matter as a means of proofreading, to avoid having professional (or semi-professional) staff proof read 2-3 documents to ensure accuracy. Once the system proves that "good data = correct output", you proof read summaries of data, not multiple page documents.
  
• Store all previous actions on the file, and the dates thereof, so that a user is immediately presented with a list of all action taken on a file.

Claim & Statement of Claim Drafting

• Draft the majority (80%+) of Claims and Statements of Claims in under 10 minutes first time, every time (5 minutes if this drafting stage is not combined with the initial "data collection" stage).
• Provide a structure under which new clients and claims can be added quickly to minimize client induction headaches and remove repeat-drafting of pleadings.
• Ensure that when presented with a Claim screen, only the variables required for that particular claim are visible to remove confusion.

Mathematics

• Automatically calculate all professional fees at appropriate scale.
• Automatically calculate all filing fees (but not bailiff/warrant fees or search fees) at appropriate scale.
• Provide an easy mechanism to modify the system's scale figures at need.
• Provide a current total for any Statement of Claim, judgement or post-judgement document, and also permit the user to modify that amount if needed.
• Calculate flat rate interest amounts, including "from/to" day calculations, rounded to 3 decimal places and truncated to 2 decimal places.
• Calculate interest on reducing balances. If required, calculate on reducing balances across shifting interest periods.

Key Points of the System

• Plaintiff data is optionally linked to client data. For law firms undertaking debt recovery on behalf of a debt collection agency, this is crucial as quite often, the Plaintiff is NOT the client. In such a system, Plaintiff and Client data are handled totally separately, with an option to enable the two sets of data to be mirrored, that is, the Client data will appear in the Plaintiff data set.
• The system needs to be able to handle multiple defendants. In respect of each defendant, a full array of data should be collected, including name, address, ACN/ARBN, registered office and the like. For post-judgement proceedings, the system should be able to quickly "single out" a defendant for action. For example, to issue an Enforcement Warrant/Garnishee against the First Defendant, and a separate Enforcement Warrant/Possession of Land against the Second Defendant.
• Claims and Statements of claim are heavily and extensively programmed to ensure that a 2-5 minutes and a few clicks will quickly and accurately complete any statement of claim. If this sounds like an outlandish claim, please refer to this post : it is very doable. All amounts and claim amounts are automatically calculated, with the ability to modify same if necessary.

The focus of the system is three fold:</p>

• To allow the Claim & Statement of Claim to be drafted at light speed - relatively high scale fees and most matters start with one.
  
• Allow judgement documents to be drafted quickly and accurately, while claiming all costs and flat-rate interest without needing to manually calculate (which represents the majority of the time assembling judgement documents in debt recovery).
• Allow all post-judgement proceedings to be issued almost immediately, with not much to be done past selecting what you wish to issue, against which defendant, and what previous costs have been incurred.

Cost -vs.- Profit

To draft this type of system in HotDocs, my starting price would be around the $7,000.00 mark, if you had relatively few clients (for example, you do the work for 2 banking clients and no others). If you were a firm undertaking bulk work on behalf of 2 or more debt recovery agencies, a couple of banks, a factoring company and some industrial companies with their own credit applications, I would be looking at a starting price of around $10,000.00 upwards. The cost is largely a reflection of how many clients you wish to have claims automatically programmed for. Most of the system to be designed is simplistic however, designing a structure to handle and produce (for example) 40+ Statements of Claim is...time consuming.

Make no mistake - such a system would allow you to do a Claim & Statement of Claim, Judgment and Enforcement Hearing Warrant in approximately 30 minutes total (including initial data entry and proof reading times). Lets look at some associated fees scales (current as of September 2009).

Not bad for half an hour of a paralegal's time - or more likely an hour when you take into account receiving instructions, a search or two and a phone call. Even on the lowest possible scale, your are no longer losing money, which is a real issue for debt recovery practitioners. On any debt over $1,501.00, you are running a nice profit margin. Profit potential is then limited only by the number of matters you can have flowing through your new system at any given time.

Conclusion

This may seem a lot to expect from a system and may also seem a large amount of money to invest in a system. Rest assured, I've already done it, as have other vendors. I'm not kidding when I say that if you can find the volume workflow, this system will be printing money for you. A key point to be aware of with systems (any systems, not just document assembly)....

If the system is doing its job and substantially reducing handling times, then you have a massive benefit that is often overlooked: ability to expand and replicate. When you have a system that allows healthy profit marigns on every action, each staff member generates a higher rate of return. At the point your current staffing levels cannot meet the workload, your profit margin should be more than ample to meet the costs of a new staff member. All that is left to expand naturally and in a stable manner is to get new clients - handling and servicing the work is already done for you.

It is worth noting that a practice managment and/or workflow system would go hand in hand with this type of system, to ensure fast and efficient tracking of all matters. Outlook "might" do the job well enough, to track things like the date you can go to judgement, or a date to chase up a client for instructions. But there are far more suitable products out there which would only add value to your investment.

Is the workflow management more important than the document assembly? Possibly. It depends on the firm: look at your processes and speak with your staff. Do they spend more time tracking dates and managing their files? Or do they spend more time dictating/drafting & proofing/finalizing their documents?