With shrinking profit margins across the industry, billing and collections have a big opportunity to help law firms hold back bad debts while improving cash flow.
These insights might help you navigate the new realities of the legal landscape.
1. Profits are under pressure
In 2018, law firms indicated an average collection rate of 85% and realization rates have fallen, from 94% to 87% in a decade. But when you look at other benchmarks, it’s clear that reducing accounts receivable hours and improving collections is an effort that needs to be embraced by everyone across the firm.
2. Client satisfaction may be the weak link in revenues
When a client is unhappy with the services received, they are less likely to pay their bills on time. This may result in a reduction of billing hours or less demand on payment of late bills.
The remedy here is communication, especially during client intake. Be transparent about hours and other costs—along with scenarios that could alter the outcome. This approach can reduce disappointment, the need to adjust billable hours and negotiate costs and, ultimately, result in better collection outcomes.
3. Your firm probably lacks a formal financial policy
Does your firm even have a financial policy? Only one in five credit departments has a formal financial policy, and less than 20% update it every two years.
With more clients scrutinizing their legal spending, a financial policy can give everyone a playbook to establish procedures. Include a timetable for the following:
- When to send notices for late bills
- When billing extensions/exceptions are permitted
- When accounts go to collections
Always provide a client copy and discuss it with them, so they know what to expect.
4. Payment methods could be blocking payment
Some 57% of Yet, only 38%of clients are doing this and another 40% would rather use electronic payments.
In fact, a lack of payment options could be holding back your firm’s growth, 40% of clients say they would never hire a lawyer that didn’t accept credit cards.
5. You’re in a time crunch
If only a fifth of your collection efforts are actually spent on communicating with clients, then your firm might still be using manual processes to collect payment. Organizations that had accounts receivable software to organize and retrieve this data spent 62% of their time communicating with their customers. With this level of found time, the impact on bad debts could be huge.
6. Pedal to the metal when it comes to billing speed
The 60-day threshold for accounts receivables is a critical one. After 60 days, they start dropping in value because of the chances of receiving payment decrease. Circumstances can change very quickly, along with a propensity to pay.
Ramping up billing speed can reduce these uncollectable bills— so your firm captures money while it can. Leave traditional billing methods behind and work to get bills out quicker by changing the threshold, such as a dollar amount or percentage of work completed.
Want to learn more? Download the entire eBook here.
ClientPay is an award-winning digital payment processing platform for professional services firms. With integrations with some of the legal industry’s top matter management platforms, ClientPay helps firms reduce write-offs and eliminate billing errors. ClientPay has been acknowledged as an industry leader, having been awarded the Software and Information Industry’s (SIIA) Best Financial Technology Solution at the 2018 CODIE Awards in San Francisco.
Learn more about ClientPay at https://www.clientpay.com