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One of the biggest challenges faced by law firms is the slow payment of invoices, with uncollected money and low realization rates putting a serious damper on a firm’s profitability and cash flow. When you peel back for the reasons for this dilemma, you often find inefficient billing procedures at the center of the problem. Many law firms lack the uniform internal processes necessary for handling their billing efficiently and effectively.
It’s not uncommon for law firms to wait for 60-90 days once the invoice is sent to the clients. Poor billing practices, lead to poor payment habits by clients, leaving your firm with a serious cash-flow problem. But unfortunately, this doesn’t have to be your reality.
Here are five ways you can ensure your clients pay on time.
Provide concise and public communication on your billing policy
The first step law firms should take is to establish consistent rates. Whether this is hourly billing rates by attorney or flat fee billing rates by projects, present your rates in a format that anyone will be able to understand, Whichever route your firm chooses to take, the important part is to have an open and transparent conversation with your clients during your initial consultations about billing structures. You can then follow up by reiterating your rates in the letter of engagement you send to clients, making sure to include clear and consistent messaging throughout about your billing terms when payment is due, and details about whether interest will be applied to overdue invoices.
Fixed fee Arrangements –
As clients become increasingly savvy about law firm billing and the options made available to them by different legal service providers, they give law firms more pushback when it comes to making payments. Fixed fee payment arrangements can help these concerns while also reducing the risk of non-payment with upfront payments.
Offer Scheduled Payments –
Making the payment process as convenient as possible for your clients incentivizes them to pay the legal fees faster. With scheduled payment options, your clients can use a credit or debit card to preschedule automated payments towards their accounts. Recurring payment options are often liked by clients because they allow them to break large legal bills down into smaller payments without having to think about it each month.
Automate the Collection Process –
For many lawyers, the process of collecting overdue invoices is so unbearable that just refuse to take it on. But that only results in more unpaid invoices and costly write-offs. With an automated collection process, you can output an end to unpleasant phone calls and reinventing the wheel each time an invoice goes unpaid. With the right billing platform, firms can create customized messages and predetermine when they will be sent. It works by providing clients with a friendly, but firm, reminder while preserving the relationship for potential future matters.
Implement Technology –
The right legal billing system helps your law firm dependant efficient and profitable payment procedures. Implementing technology by standardizing the process and figuring out the best payment options for your law firm, is vital to streamline and efficiency. A detailed instruction lets the staff follow everything with ease and quickness. By standardizing the technology in the payment process improves productivity and profits.
In legal business and industry there could be various ways of getting paid by the clients, but despite the huge amount of different paying methods attorneys could, unfortunately, find out that some of the payments end up with some delays.
Billing clients is foundational to success at any law firm, but oftentimes lawyers struggle to receive payments on time, if at all. For an essential business function like getting paid, one would think it would be as simple as preparing an invoice and waiting for the payment to roll in. While yes, these two tasks encompass the general framework of legal billing, your firm is missing out on opportunities between these endpoints to maximize your payment efficiency. There are many steps your law firm can take to ensure you get paid on time, and it all starts long before you even interact with your client.