When it comes to working in a law firm, effectively management of the Accounts Receivable (A/R) process is crucial. But let’s be honest: you didn’t go through law school and pass the bar exam to worry about your firm’s finances (or act like a bank to your late-paying clients). You want to focus on practicing law.
So, what’s the solution? A solid A/R process that lets you stay focused on the important work.
To meet your clients’ expectations, having an efficient A/R system isn’t just an option; it’s a necessity. This is where new strategies, innovation, and technology come into play – helping your firm stay ahead of the game and keeping your focus on the law, not finances. By streamlining A/R, your law firm can maintain healthy cash flow and ensure financial stability, keeping you focused on what truly matters.
Setting the Foundations: Accounts Receivable Management for Law Firms
Accounts Receivable are the outstanding payments your firm still expects to receive for your services. Collecting promptly on A/R is critical for your working capital – which keeps your lawyers and staff paid and your firm operational.
However, it can be a real challenge to keep it all in good shape. Your firm may face delayed payments due to client disputes, scope creep, or clients’ financial constraints. You’ve likely dealt with the headache of managing billing across multiple clients and services.
Perfecting this balancing act starts with understanding the role of A/R in your firm:
- Step 1: A lawyer provides a service to a client.
- Step 2: The client is invoiced for the service.
- Step 3: Your firm processes monthly aging reports.
- Step 4: Your firm sends recurring billing statements and collects payments.
- Step 4: If absolutely needed, you may need to write off outstanding A/R as a bad debt expense.
Keeping A/R within a reasonable quota shows the “health” of your firm’s finances, reflecting its ability to cover expenses without needing additional credit or cash flows.
Key Strategies for Improving A/R Efficiency
Rather than simply regarding A/R as a financial issue, it’s important to understand the stories behind your overdue accounts. This requires regular check-ins with clients, taking a direct, straightforward, yet friendly, approach to payment collections.
As soon as you anticipate a payment delay, take the proactive approach: politely remind your clients before the due date. You’ll want to take a more head-on approach after a missed payment. This will help you save professional relationships and maintain high-value clients, while opening up conversation for negotiating payment plans, if absolutely necessary.
If your law firm’s aging receivables are not in the best shape right now, there’s still hope. With key strategies — like streamlining billing, automating payment tasks, and increasing communication — your firm can optimize the A/R process for the better.
- Consistent Communication: Regularly communicate with your clients to ensure they understand payment terms. Be prepared to quickly address any questions or concerns.
- Digital Invoicing: Switch from paper to digital invoicing to reduce paper waste, increase payment speed, and improve tracking.
- Online Payments Technology: Use a centralized, online payment system to make it easier for your clients to pay their bills (and, for your law firm to manage Accounts Receivable.)
- Recurring Reminders: Set up automated reminders for overdue payments to reduce time spent following up.
- Staff Training: Provide ongoing training to keep your team up-to-date on best A/R practices and any new industry developments.
- Detailed Billing Policies: These billing policies should be clearly listed in your engagement letters and outlined in any client agreements.
Leveraging Technology for A/R Management
The good news is you can take much of the A/R stress away with an effective online payment service provider. Beyond A/R management, you can expect improvements in automation, efficiency, security, and accuracy when you use digital payment options and invoicing methods.
Using this technology will help you streamline tasks, reduce manual errors, and free up staff to focus on managing cases and clients. With an online payment service provider, it’s easy to monitor and manage A/R in real-time, without the paper trail. These payment systems often include integrated platforms to communicate directly with clients and streamline into your firm’s workflow. Together, this offers you both visibility and analytics to be able to make data-driven decisions.
Most importantly, when your law firm invests in Accounts Receivable management and uses an online payment service provider, you’ll reduce manual labor costs and time, minimize bad debt, and improve overall financial performance.
Before making a decision, consider a few key points:
- How does the integration strategy work for law firms?
- How simple is it to use and navigate the online platform?
- Does the provider meet your law firm’s security needs?
- What payment types do they offer?
- Are there any hidden fees?
An online payment service provider will automatically generate invoices, send reminders for due payments, and provide detailed financial reports. A/R management technology is especially helpful in handling high volumes of billing and ensuring practices remain consistent across your firm.
Building Strong Client Relationships through Transparent Billing
The cornerstone of strong client relationships is trust. You can foster trust by establishing transparent, fair, and consistent billing practices, and when your firm proactively manages A/R, you’ll increase efficiency and overall morale — a win-win for you and your clients. Why not connect with an industry leader to take your A/R to the next level?
For almost 20 years, QuickFee has offered law firms a full suite of solutions to manage Accounts Receivable and online payments more effectively. We understand how important it is to manage time and finances. That’s why our platform makes it easy for your law firm to accept ACH payments, eChecks, credit cards, and financing plans, all through our secure payment portal. We focus on payments so you can focus on your firm’s needs.
Ready to learn more? Click here to schedule a demo to learn more about QuickFee. We help legal professionals like you manage receivables to get paid for your work faster.
