7 Ways Lawyers Can Improve Accounts Receivable Collections
Earning money and collecting money are two very different things. You can put in long hours for a client, obtain a successful result, and still be left with an unpaid invoice for your trouble.
Lawyers experience this all too often—on cases that no one intended to be pro bono.
In this article, we’ll cover what you can do to prevent this from happening. We’ll touch on why you should prioritize law firm accounts receivable and share seven accounts receivable collections best practices to help get invoices paid faster.
Why Should You Prioritize Collecting Law Firm Accounts Receivable
If you don’t prioritize collecting accounts receivable, you may end up working for free. Unpaid invoices will sit on your books until you turn them over to a debt collector or write them off entirely.
Fortunately, you can prevent these occurrences by re-engineering your process for collecting law firm receivables. While that might sound daunting, don’t be intimidated. You’ll simply need to adopt a few accounts receivable collections best practices, in return for an improved collection rate and stronger cash flow.
7 Best Practices for Accounts Receivable Collections
It is considered good practice to strive for a collection rate of 90% or higher. Use the strategies below to improve your accounts receivable process from start to finish and boost that rate. Over time, you’ll see more cash coming into your law firm.
1. Interview Carefully and Thoughtfully
Your accounts receivable process begins with the first client consultation.
Conducting a potential new client consultation effectively is an art form. There should be many objectives in this meeting—you need to assess the legal situation, measure up the prospective client, sell yourself as a reliable advisor, and describe how the relationship will progress.
When the consultation ends and the client decides to retain you, you must both be comfortable and confident in the integrity of the other party.
2. Communicate During the Case
According to the ABA Journal, one of the more common complaints against lawyers is a lack of client communication. Clients who feel ignored are less willing to pay your invoice and may feel inclined to vent their frustration in an online review.
Regular communication is one of the most important best practices for accounts receivable collections. Additionally, most state bar associations warn against a failure to communicate with clients.
3. Leverage Law Firm Billing Software
Law firm billing software, like LawPay, can enforce a specific invoicing cadence, minimize billing mistakes, and send automatic payment reminders. Each of these actions builds client confidence and improves your collection rate.
Legal billing software also minimizes time spent on non-billable tasks and ensures compliant handling of trust accounts.
4. Accept Online Payments
Physical check payments are cumbersome for you and your client. If you only accept checks, your client might delay payment because the account balance is low, the checkbook is in a drawer somewhere, or stamps are in short supply at home.
Providing online payment options removes those check-related obstacles. Ideally, you’d accept eCheck and credit card payments—so clients can pay with cash or credit.
5. Send Easy-to-Understand Invoices and Follow Up
Clients like to know what they are paying for. Be sure that you always provide clearly written, detailed invoices. You don’t have to outline your time to the minute, but you should separate larger tasks and include a summary of each.
Remember that your invoice has a critical objective beyond getting you paid. The invoice is an important touchpoint, where you give the client visibility into the work you’re doing. To that end, keep the language simple and avoid legal jargon. You want the invoice to answer questions, not raise them.
6. Be Timely With Your Billing
Clients routinely complain that they receive law firm bills 90 days or more after the work is done. By then, the client likely doesn’t remember what you did and therefore doesn’t remember the value you provided. In that scenario, your client probably doesn’t feel motivated to pay your bill.
Clients typically appreciate what you just did for them—not what you did months ago. A timelier invoice is more likely to reach them when their motivation to pay you is at its peak.
7. Utilize Scheduled Payments
Scheduled payments can be an effective solution for clients who are habitually late payers. This strategy involves setting up recurring, automatic payments, either via ACH transfer from a bank account or with a credit card.
The best time to pitch clients on scheduling payments is during intake. You can have them sign payment authorization forms and set up the payment plan from the get-go. The payments will process automatically, without hands-on intervention from you or the client.
Start Collecting Your Law Firm Receivables With Ease
You set the tone for collecting accounts receivable at your first meeting with a client. From there, you reinforce your payment expectations, either directly or indirectly, by communicating clearly and consistently with your client.
The use of reputable legal billing software that supports online payments and scheduled payments can streamline this process for you and your clients. With LawPay, you can accept bank transfers via ACH plus credit card payments online or in person. Additionally, you can also set up automatic, recurring payments for clients who prefer a set monthly fee.
LawPay integrates with dozens of legal software products to create a comprehensive end-to-end platform where you can manage all of your legal billing. Integrate timekeeping and case management software with LawPay to produce detailed and accurate invoices—as well as payment reminders and account statements.
Want to learn more about how LawPay can help you manage your law firm’s A/R and drive more cash into your law firm? Visit lawpay.com/nysba and sign up by May 31st to get 6 months with no monthly fee.