There are plenty of intricacies in running a law firm, and often they encounter poor cash flow due to late payments, inefficient billing methods, and more. If left unaddressed, your firm’s profitability will plummet and face a cash flow shortage.
So how can you avoid payment troubles and expedite the payment process? In this article, we’ll share a few industry-leading tips to handle your billing swiftly and efficiently.
1. Set up online payments
As more and more people embrace the convenience of online payments, paper checks are slowly becoming irrelevant in the legal industry. As a law firm, you want to conform to the needs and expectations of your clients to deliver a superior experience and encourage positive cash flow. To achieve this, you want to accept eChecks (electronic checks), which is the digital alternative to paper checks.
eChecks take only one to three days to process payments compared to paper checks which can take around five days. They use the ACH network to process transactions, allowing clients to pay straight from their bank account and eliminating the need to write a check. Not only do you benefit from faster payments, but you also enjoy lower costs compared to credit cards.
If your firm works with large bills regularly, accepting eChecks can lead to significant cost savings, as they charge a flat fee instead of percentage-based transaction fees. Look for a reliable payment processor that includes eCheck support to accept this type of payment method.
2. Create invoices faster with legal billing software
Gone are the days when paper invoices ruled law firms, as legal billing software has taken invoice creation to a new level. As technology in the legal sector progresses, it’s much easier to generate invoices thanks to advanced software.
Legal billing software helps expedite payment collection by automating invoice creation and sending them immediately to clients. You can set a schedule to send reminders to clients when their payments are due, and a follow-up message will be sent automatically to remind them of their billing.
The software also helps simplify the invoice process by filling out necessary billing information in a few clicks (LEDES codes), thus helping your firm save time and money.
3. Provide flexible payment solutions
Clients appreciate the added flexibility when it comes to legal payments as it enables them to break down their bills into manageable pieces. The reality is not every client is capable of paying legal payments upfront, and law firms can adapt to this by offering installment payment plans.
While it may seem counterintuitive, offering installments can make full remittance more likely for your clients, giving you a steady stream of cash flow. It’s up to you how you want to customize your payment plan to suit your client’s needs.
4. Delegate financial responsibilities
As an attorney, you only have so much time available to work on legal cases and manage the firm. If you want to streamline your payment collection, you need to delegate financial responsibilities so you can focus more on the important tasks.
Preparing invoices, sending reminders, and similar administrative tasks contribute to non-billable hours, which could have been time spent on other productive means. To ensure consistent payment collection, distribute the financial workloads across your team. Doing so helps minimize costly errors and allows your team to focus on the details that matter most.
5. Apply interest fees to delayed payments
This next step requires careful planning and consideration to execute properly. If you notice most of your clients don’t pay on time, implementing an interest fee may help improve your firm’s cash flow. It’s not always the ideal solution, but it can work depending on your firm’s financial standing.
Late payment penalties keep the client’s bills on top of their mind, encouraging them to make timely payments in the future. But before you enforce this rule, it’s a good idea to research the legalities of charging late fees and interests within your area. Once you receive a green signal, you can go ahead and implement it immediately.
6. Eliminate the friction in the payment process
When clients struggle to pay their bills on time, there’s a good chance they’re experiencing friction with your payment process. To identify the problem, you can ask for feedback or recommendations on how you can improve your payment schemes.
Start by running a survey and tap into your email list. You’ll find that many clients struggle to make payments because the process is complicated or inconvenient from their side. Once you identify the problem, take proactive steps and provide a solution that works best for you and your clients.
For example, if most of your clients prefer to pay using credit cards, now is the perfect time for you to accept them as payment methods. You can easily track incoming cash, and the small convenience fee can turn out positive in the long run if more clients can make their payments on time.
7. Follow up with your clients
The last thing you want as an attorney is to leave invoices open, as they’re less likely to be paid by clients once it slips out of their minds. It’s a good idea to review your accounts receivable ever so often so that you can follow up with unpaid invoices regularly.
Some lawyers feel uncomfortable about asking clients for payments, but these conversations need to take place to maintain a healthy cash flow for your firm. You can present multiple payment plans to allow for greater flexibility and increase the likelihood your clients settle their bills.
While maintaining client relationships is crucial to any law firm, you don’t want to sacrifice cash flow that can hurt your business in the long run. Create a systematic approach to how you can follow up with your clients, and you’ll see improved results over time.
8. Stick with what works
Part of streamlining your payment process is experimenting with different payment methods until you find the right one that works best for your clients. It may take a while to come to a solid conclusion, but the patience will be worth it as you’ll be able to systemize your collections.
Create detailed instructions on how your team can approach unpaid bills, and implement them throughout the whole firm to get consistent results. Newer forms of payment like Apple Pay and PayPal have surfaced as the favorite for many clients, and some even use cryptocurrency to settle their bills.
Figure out what works best for your firm, and stick with it for the long haul.
`Law firms don’t have the luxury of bountiful reserves like other businesses do, so it’s important to maintain a healthy cash flow as much as possible. Getting paid faster means more flexibility with your financial budget and more predictability, so keep these tips in mind when streamlining your payment processes.
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