A powerful online legal billing and payments solution prevents you from deciding between doing client work right now or making sure you get paid for work already completed. Implementing a solution that automates accounts receivable processes minimizes the possibility of human Accounting Periods and Methods error, such as inaccurate invoices, duplicate entries, and overpayment. It also allows you to keep invoicing and accounts receivable in-house rather than needing to fully outsource.
Utilize Scheduled Payments
This strategy involves setting up recurring, automatic payments, either via ACH transfer from a bank account or with a credit card. Providing online payment options removes those check-related obstacles. Ideally, you’d accept eCheck and credit card payments—so clients can choose to pay with cash or credit. Law firm billing software, like LawPay, can enforce a specific invoicing cadence, minimize billing mistakes, and send automatic payment reminders. Each of these actions build client confidence and improve your collection rate. Once this date has passed and the firm still hasn’t received what clients owe, they will then reach out to gently enquire/remind the client about their invoice.
Strategies for Law Firm Accounts Receivable Management
However, failing law firm accounts receivable management to track these expenses can lead to missed billable hours. If your team does not have a clear time tracking policy or a clear agreement with the client, you may also have issues properly billing for that time. Manually tracking hard and soft law firm expenses can become time-consuming.
Use easy, click-to-pay links and QR codes
- We’ll go over the cash and accrual accounting along with the pros and cons of both below.
- Plus, PracticePanther allows you to set up payment plans quickly, providing clients with flexible options for settlement and reducing the likelihood of accounts becoming overdue.
- One proven approach for reducing your law firm’s lockup period is to leverage cloud-based legal practice management software.
- Also, they should not just be concentrating on good-paying clients that need reminding; they should be placing a priority on collecting on older, difficult accounts.
- These inefficiencies eat up valuable time and harm law firm cash flow and profits.
When looking at dollar amounts, we learned that more than one-half of legal professionals collected $3,000 or more each month on average when offering online payments. Rocket Matter’s legal practice management software offers a comprehensive solution for streamlining law firm operations, from intake to payment. By automating time tracking, billing, and client communication, firms can enhance efficiency, boost revenue, and improve client satisfaction. This all-in-one platform empowers legal professionals to focus on providing exceptional legal services while ensuring the smooth operation of their practice.
In extreme cases, when you cannot come to a solution with clients, you may need to engage with a collection agency that can assist with recovering payment. There may be other cases where a client tries to dispute charges with you directly or by filing a chargeback on their card. A client may refuse to pay or dispute payments if they’re unhappy with the results of their case or if they don’t believe the charges align with what you agreed upon. Plus, with our Smart Time Finder, your firm can capture billable time you may have missed via a passive time-tracking feature.
Failing to Differentiate Revenue and Income
Eligibility for tax obligations and deductions varies based on the state(s) your firm operates in. If you haven’t completed this first step, check out our guide on starting a law firm for more in-depth guidance. Accounts receivable is about more than just the amount of money a firm collects. It also encompasses how quickly and consistently a firm gets paid—a metric known as lockup. Remember that your invoice has a critical objective, beyond getting you paid.
Embracing digital solutions for law firm accounts receivable management
- Plus, it can take a lot of time to transfer that information to invoices.
- Features like Rocket Matter Pay allow clients to make secure online payments with ease, ensuring quicker transactions and reducing the time spent on collections.
- The client should dispute directly with you since you still have some control over the process.
- They may claim that they are not satisfied with the services provided or are unhappy with the results.
- However, keeping up with tracking can be a challenge without the right tools.
- Most importantly, determine how many actual dollars they are collecting, especially from the older accounts that continue to age.
By tackling these challenges, firms can open the door to new levels of success. Oftentimes the cause is inefficient processes for billing, accepting payments, and managing accounts receivable. These inefficiencies eat up valuable time and harm law firm cash flow and profits. Realization rates and collection rates are two universal metrics across all law firms. Some of the main barriers include clients’ reluctance to pay bills and time or technological limitations that prevent lawyers from following-up on outstanding payments.
Step 5: Set a Realistic Budget
The convenience and speed of digital accounting solutions has provided legal professionals with an easy way to implement the latest best practices for accounts receivable management. Modernizing your practice’s A/R processes is essential to meeting today’s client expectations and increasing revenue. The reality is that law firms are businesses, and businesses need cash flow to survive and thrive. The efficiency of a law firm’s accounts receivable process is fundamental to profitability. Accounts receivable (AR) represents the total amount of money clients owe to the law firm for https://www.bookstime.com/ services provided but not yet paid. This includes all outstanding invoices that have been issued to clients, ranging from legal consultations to representation in court.
Consider offering scheduled payment plans for clients with a history of late payments. These plans allow clients to spread their legal fees over a set period, ensuring a more predictable and consistent cash flow for your firm. It’s a win-win situation—your clients benefit from manageable payments, and your firm enjoys a steadier financial stream. Imagine if a lack of communication lets the clients assume that you’ve withdrawn from the case or, worse, think you’ve failed them. So, maintain regular communication with the client, even if you have no new updates. Keeping them in the loop will build your law firm’s integrity and trust, thus improving the chances of timely client payments.
