Law firms don’t have the best track record when it comes to accounts receivables. On average, law firms are waiting 76 days to collect on their invoices. A typical small law office can see their total uncollected accounts receivables equaling 40 percent of their billed charges. That’s money that the law firm has earned, but was never paid for.
Accounts receivable may not be you’re first priority in a law firm, but it should be. Without those, payroll suffers and so do your own unpaid invoices. Here are some easy tips to help your law firm collect more and faster.
Law firms have vastly different billing policies than most other industries. Typically, lawyers record hours worked and then send clients a monthly invoice for services. Compare this billing policy to your doctor, dentist or accountant. As soon as a client leaves the office, an invoice is sent out to collect on those services. Law firms could instantly see a reduction in collection days if they were to mirror some of these billing procedures.
Clear up your invoices
Law is not an easy subject to understand, and that is why we have lawyers to help us along the way. When billing your clients, though, you need to make it clear what they are being billed for to decrease invoice disputes. Make it clear in each line what the hours were spent doing.
For example, include the name, tile and hourly rate of specific people who performed services for a client.
Invest in accounts receivable software
Most law firms are using low tech, manual tools to manage their accounts receivable, this includes using spreadsheets. Using an automated accounts receivable software makes collecting on unpaid invoices much easier. Instead of spending time at the end of the month to make collection calls, especially at smaller law firms, you can be spending time helping more clients. Automated accounts receivable software can be set on auto-pilot and help you get paid nine to 12 days faster.
Build Client Relationships
Especially at a smaller law firm, building a personal relationship with the client can help you to get paid faster. As the saying goes “you catch more flies with honey than vinegar”. Sending friendly reminders about unpaid invoices could go a long way in collecting.
Furthermore, keeping tabs on which clients have a record for not paying their bills is helpful. An automated accounts receivable software can help you do this. Using an easy search tool for looking up clients, you can see who has a track record for not paying or taking a long time to pay. You can even flag certain clients to remind yourself who may give you the most trouble.
Collecting on unpaid invoices in a law firm does not have to be hard, and does not have to have such a detrimental effect as it does now. Following these easy tips and adding in an accounts receivable software can make a world of difference.