Collections are the lifeblood of a business’ success. However, many in the legal industry face significant roadblocks to getting paid and maintaining a predictable, steady cash flow.
According to Clio’s 2017 Legal Trends Report, 59% of lawyers regularly deal with late payments. Worse, on average, lawyers are only getting paid for 86% of the hours they bill to clients. With very real business-related expenses like employee salaries, rent, and office utility payments, most attorneys can’t afford to wait to get paid long after they expect to—if they get paid at all! This is especially true for attorneys who are fresh out of law school or who have left a previous practice to go out on their own for the first time.
The good news is that with better billing practices at your law firm, getting paid (and getting paid on time) is achievable. Rather than hoping your clients pay on time, you can make simple adjustments to your timekeeping and billing habits to significantly increase the likelihood that your clients pay you.
1. Improve your timekeeping and recordkeeping
Improving billing and collections in your firm starts long before you ever send an invoice to your client. One of the most important ways to improve cash flow is to implement diligent timekeeping and recordkeeping habits in your practice. After all, how can you collect on time billed if you haven’t tracked it in the first place? Here are a few tactics for recording more of your time.
Take notes on what you’re doing
One way to ensure you aren’t forgetting any of the valuable work you’re doing for your clients is to take detailed notes. Document any and all work performed—as well as the context surrounding that work—as soon as you are able.
Most attorneys find themselves moving quickly from one activity to the next and inputting their time after the fact. Set yourself up for success by leaving yourself notes and recording details for any given task.
Even if you aren’t able to enter your work into a timekeeping tool until later, your notes will help you remember as much as you can about what exactly you did so that you can thoroughly and accurately record this data.
Review outgoing calls and emails
While this system would work in a perfect world, we all know how the workday really goes—as soon as you’re finishing up a long email to a client, someone appears in your doorway to pull you right into another task. It’s hard to find time in the day to record your tasks and make notes about what you’ve done.
A great way to check for anything you may have forgotten to record is to evaluate your outbound call list, voicemails, and outgoing email at the end of each day. Even if you didn’t send a specific email that you want to record into your timekeeping tool, you might see a client name or matter number in an email that sparks your memory about something you forgot to take into account.
Track time as you go
While these techniques are effective for some attorneys, modern legal software solutions can also do a lot of the heavy lifting for you. For example, practice management solutions like Clio include functionalities to help you create clear and consistent bills (more on that below), as well as a timekeeper that lets you start tracking time with one click, so you can easily document work as you go. This makes it easy for you to ensure you’re not losing billable time and gives you a unified place to record notes on the work you do, so you can relay it to your client.
2. Make your bills comprehensive, understandable, and fair
When it comes to getting paid in full and on time, recording your time diligently is only half the battle. Billing best practices also involve clear communication: You need to make sure that when you actually bill a client, you’re clearly articulating the value of what you did and that you’re not creating any distrust or confusion.
Use plain language
One of the best ways to do this is to only use plain language on bills when describing your work. Confusing abbreviations or legal jargon will likely frustrate your clients and could even breed contention. If a client doesn’t know what you’re charging them for, they are much less likely to be willing to pay for it.
Avoid extraneous charges
While your bills should be comprehensive, make sure you don’t go overboard. For example, costs for common office supplies like printer toner or a stapler should come out of your pocket and shouldn’t be passed on to the client. Charging for these items can create significant distrust between you and a client, so this is another billing practice that may cause a delay in payment—or a nonpayment altogether.
In fact, to foster goodwill with your bills, consider including small things on your bill that you count as free. If a phone call only lasted five minutes and didn’t take much out of your day, list it as a free service. Your goodwill will go a long way.
3. Prioritize consistency
Think for a minute about the way you handle bills in your personal life. When these bills come at a predictable time, you’re able to budget accordingly and pay them on time. When bills are unpredictable and inconsistent, it makes it harder to stay on top of things.
When sending out bills, you should give clients a predictable, consistent experience. Afford clients every convenience by billing regularly and at the same time every month. If you send bills out at different times every month—or if you wait months from the date of legal services to send your first bill rather than billing monthly—clients are likely to be caught off guard. They may be frustrated, and may not even have the money on hand to pay your bill.
Here are a couple of other billing best practices related to timing:
Send bills early in the month
If possible, bill clients right at the beginning of the month. Many people get paid at the end of the month, so sending a bill for your legal services early in the month—right after they’ve been paid—increases the likelihood that they’ll have money in their account to pay you. From your clients’ point of view, it makes it much easier to budget their expenses for the rest of the month.
Send bills quickly
Your clients’ memory of your incredible service is likely to diminish with time, so it’s important to send bills out quickly. Attorney Jay Foonberg regularly references what he calls the Client Curve of Gratitude—clients are most likely to pay you upon the final achievement of their goals.
For example, the day a case settles, the client is happy and sees the value in the work you performed. You should get your bill out to that client as close to this day as possible.
If you wait as long as 30 days to send your bill, the client might be surprised at the cost of the bill, as they’ve likely forgotten any pricing conversations you had early on in your relationship. After 60 days, the client is likely to react with anger and frustration at the cost of the bill. After 90 days, the client has completely forgotten the value of your service and will likely think that they didn’t need a lawyer in the first place.
4. Make it easy for clients to pay by accepting credit cards
Even if you follow every law-firm-billing best practice we’ve highlighted in this blog post, there’s still a single, unavoidable truth to face—if you aren’t making it simple for clients to pay you, you risk late payment, underpayment, or no payment at all.
Offering your client the option to pay you online with a credit card is also a way to deliver top-notch client service by giving them the frictionless payment experience they’ve grown to expect and prefer. Additionally, you’ll open the door to clientele who might not have the cash required to obtain legal services. By offering simple, secure credit card payment options, you broaden the scope of who you can serve in your practice.
The way people are paying for goods and services is changing. Your clients expect a consistent payment experience across all walks of life, whether they’re ordering something from Amazon.com or paying for professional services like yours. According to the 2017 Legal Trends Report, 28% of consumers surveyed said the ability to accept credit card payments would be a key factor when choosing a lawyer to hire.
If you’re only giving clients the option to pay with cash or check, you’re putting a serious roadblock in the way of getting paid and potentially creating a negative interaction with your client. When your client has the option to pay your bill with a credit card from wherever they are, you significantly increase the chances of that person paying your bill on time. In fact, Clio’s 2017 Legal Trends Report also found that lawyers who offered secure online payments were paid 39% faster on average than those who only offered their clients traditional payment options.
In summary, to create a positive billing experience for your clients—and to be paid on time—follow these billing best practices:
- Be clear. Take notes on what legal work you’ve done and why, and communicate that to your clients on every bill.
- Track time wisely. Don’t miss out on billable hours: Using a timekeeper is the best way to make sure no billables go untracked.
- Be consistent. Send bills early, and at the same time each month.
- Accept credit cards. Make it easy for clients to pay, and get your firm paid faster.
Remember—your bills are a vital communication tool between you and your client. By taking advantage of these law firm billing tips, you can make the most of this opportunity to create a pleasant experience for your clients and reinforce the value of the work that you’re doing.
This post is part of the 2018 Clio Cloud Conference Summer Series. See LawPay at the Clio Cloud Conference, taking place October 4–5 in New Orleans.
Accept credit cards with Clio Payments, powered by LawPay, and you could be getting paid 11 days faster. Learn more.
Amy Mann is a writer and the MarCom Manager for LawPay. She lives with her two dogs in Austin, Texas, and tries to see every movie in theaters.