Improving Accounts Receivables Collection for Atlanta Law Firms

Improving Accounts Receivables Collection for Atlanta Law Firms

Many law firms of all sizes and specialties experience cash flow issues from time to time. One of the most common causes of these issues is poor accounts receivable collection. Certain clients may continually pay their amounts due very late or even not at all. Despite the frequency of this issue, though, it doesn’t have to be like this. Here are a variety of quick and simple methods and process changes that can improve and quicken collections across your entire client base.

Bill quickly and consistently. The later an invoice is sent, the more likely a client is to dispute its validity or to simply similarly delay in remitting payment. For this reason, invoices should be sent out immediately after work has been completed at the latest. For larger, lengthier projects, you may want to consider interim billing at various points as the project progresses, perhaps in conjunctions with the project’s major deliverables or other steps (e.g., court appearances). Whenever an invoice is sent, though, it should be followed up on regularly each month. Whether the client in an individual or a business, your bill is just one of many that they must pay, and as a result they may honestly forget about the amount due or hope that it simply goes away. Politely but firmly reminding clients of your bill each month until it is paid will help prevent this from happening and improve the timeliness of payments.

Make your invoices detailed. If an invoice simply requests payment for “legal services rendered”, a client may not recall the nature of the services or may not connect the value of those services to the amount of the invoice. If an invoice includes information about the exact nature of the services (e.g., communication with prosecutor, preparation of will), the name of the employee who performed the work, and the rate charged for the work, the client is less likely to ignore the invoice, and in turn is more likely to pay it promptly. Moreover, if an invoice include the client’s unpaid balance from prior invoices, as applicable, the client will be more likely to pay the full balance due, rather than simply paying one invoice’s balance.

Involve attorneys in the collections process. Many attorneys avoid asking clients to pay their balances due, opting to instead leave that task to paralegals, secretaries, and similar support staff. Attorneys shy away from collections efforts because of fears of worsening client relationships and because it’s not billable. However, the closer relationships that attorneys have with clients can be very helpful in accelerating the collections process and even making it less confrontational. While support staff may generally or even only contact clients in order to request payment, attorneys engage with clients in a wide variety of ways that are directly related to the services provided. As a result, collections requests from attorneys are less likely to be disregarded and more likely to be responded to quickly. In order to motivate attorneys to participate in the collections process, given its non-billable nature, consider making bonuses contingent upon realized revenue, rather than billed hours or revenue.

Be clear about your payment policies from the very beginning. A firm’s payment policies should be clearly stated in every client engagement letter, and these policies should be strictly followed. This clarity can help keep many of the clients that will be toughest to collect from becoming clients at all. Moreover, being able to reference written and agreed-to policies during the collections process makes the requests for payment more compelling.

Use software to assist in tracking amounts due and requesting payment. There is a wide variety of general accounting software and industry-specific firm management software that can be very useful in keeping track of amounts due and requesting payment of these amounts. While the exact features of specific software vary, many of them offer items like easy-to-read reports of all outstanding receivables sorted by client and by date and the ability to email invoices to the client directly from the software. This software reduces the administrative burden of every step of the collections process.

These are just a few general techniques to consider. If you have specific questions about your law firm’s collections process and how to improve it, you should contact Atlanta business advisers such as us here at Fusion CPA.