A Better Way for Mediators to Get Paid

There are many ways to get paid for services — including mediation services — each with their pros and cons. Those of us who come from the legal world are all too familiar with retainers and all the headaches that come with them: explaining them to clients (including the difference between retainers, quotes, and fixed fees); the added accounting overhead; asking clients to replenish retainers; etc. These hassles are only exacerbated when you're dealing with two clients on the case rather than just one.

Pay-as-you-go makes a lot of sense in mediation, where the number of sessions and overall cost of the process can be highly variable. The question then becomes: how do you handle payment? Do you take payment at the beginning of the session? At the end? Do you bill periodically and trust that clients will pay your bills in a timely manner?

However you time your payments, I hope you're already taking credit cards. Most people don't walk around with their checkbooks, but nearly everybody carries a credit card with them. There are numerous services — LawPay, PayPal, and Square, to name just a few — that make it incredibly simple to type or swipe a client's credit card and take payment on the spot. Yes, you will pay a small processing fee — but consider that the fee is likely much smaller than the value of the time you would otherwise spend handling bills and accounting for retainers. It's certainly less than the cost of an unpaid bill; 97% of something is much more than 100% of nothing.

Back to the question of timing, though — when do you ask the clients for their cards? I don't like asking for payment at the beginning of a session, because the payment becomes a flat fee regardless of the actual length of the session. I also don't like asking for payment at the end of a session, because by that time, people are often tired and don't want to think about money — particularly if they've just had a difficult conversation about finances. Also, neither of these options takes into account time spent on the case between sessions: emails, drafting, etc. Periodic billing is what you want, and if you're confident that all your clients to pay their bills in full and on time, that's great. But what if you want more control over when and how you get paid — without requiring a retainer?

There is an elegant option that addresses all these points, but which I haven't seen very many professionals using. At one of his seminars last year, Woody Mosten turned me onto this option, and it has completely transformed the way I get paid (both as a mediator and as an attorney).

The answer is simple: you only take credit cards, and you ask your clients for their cards only once, at the beginning of the case. Here's how it works.

1. Get Preauthorization

Presumably, your clients sign a fee agreement at the beginning of the case. In the fee agreement, include language that pre-authorizes you to charge their credit card periodically. LawPay provides an example of a preauthorization form, but this version requires your clients to provide their full credit card number — and then you have to worry about how you store that information. It's even better if you can avoid ever having to store the card information yourself (clients like to hear this, too). To do this, you just need to get the client's card information on file with a card processing service.

2. Get the Card Information on File

As I mentioned, rather than store clients' full card numbers yourself, it's better to get their card information on file with a card processing service. Stripe allows you to store credit card numbers, but first you have to manually create a customer in your Stripe dashboard and then manually add a card number to the customer record. Consider instead using LawPay, which provides a web-based dashboard though which you can recharge the card of any client who's already made a payment. It also integrates with Clio and other practice management services. For preauthorization purposes, that means you just need to take that first payment. It could be payment for the first session, a consultation fee, a refundable "preauthorization charge" — whatever makes sense for your mediation process and fee structure. The preauthorization form includes language noting that the client made (or will make) the payment and authorizes you to reuse that same card for future invoices. You can easily modify the LawPay form I linked above to achieve that purpose.

3. Charge the Card at Invoicing Time

Here's where the benefits of this method really come into play. When I prepare my invoices (which I do twice per month, through Clio), I automatically charge each client's card for the amount of their invoice. Of course I also send them the detailed invoice, so they have a chance to review it and contest any charges — but in the many months I've been using this system, I have never had a client question a charge. It's a system that "just works," both for me and for the clients.

You may be wondering what happens if the card is declined. This is far less common than you might think. It's happened to me twice. The first time was when a divorce client changed the address on her card, which caused the card to be declined even though the number was valid. I informed her of the decline, got the new information, and it was smooth sailing after that. The second time was when a prenuptial agreement client maxed out her card on wedding-related purchases during Massachusetts' sales tax holiday. She told me to try again in a couple of days, which I did, and the charge went through just fine. Both of these issues were resolved in just a few minutes, via email, in less time that it would have taken me to deposit a retainer check.

Will clients agree to this? Absolutely! Most of my clients would have paid by credit card anyway, so this arrangement just streamlines the process. I've only ever had one client say they didn't want to use credit card preauthorization, and it was only for privacy reasons; they didn't want the bank to know they were visiting a divorce mediator. The vast majority of clients seem perfectly happy with the arrangement, and I know I sure am — it makes billing a breeze, and it lets me focus my mediation sessions entirely on the substantive issues.

Give it a try yourself, and you may find yourself never again wanting to take payments any other way!