With a majority of law firms reporting routine past-due accounts, unpaid invoices, and fee discounting, it’s clear the industry has plenty of opportunity to improve law firm billing. Below are five suggestions to help attorneys improve their chances of getting paid:
Walk Your Client Through First Bill
For a lot of your clients, this may be their very first interaction with the legal system, and your first time presenting them with an invoice can be overwhelming. Don’t let their assumptions guide their perception—sit down and explain each individual charge and the work that was completed. Be as transparent and forthcoming as possible, and be prepared to answer any questions the client may have. If you wish to take it a step further, you can even commit this process to your formal client service policy.
Don’t Wait to Send Your Bill
A client’s willingness to pay their bill directly correlates to their satisfaction with your contribution to the matter, so if you’ve recently delivered a favorable outcome, bill the client immediately. Jay Foonberg’s How To Start and Build a Law Practice maps out what he calls the ‘client curve of gratitude’. The curve shows that a client who is grateful for the outcome or value you have provided will pay immediately, particularly when provided with the means to do so (a strong argument in favor of accepting online payments) However, regardless of how great the outcome is, delaying or deferring sending the bill correlates to a steep decline in whether that bill is paid immediately (or at all.)
Clio’s own billing data supports this theory. Of the 115,000 invoices issued by Clio customers in the first quarter of 2015, 36.5% were paid the same day—either via trust account balances, upfront flat fee payments, or credit card payments. Bills not paid on the day they were issued took, on average, 22 days to close. When you’re a solo or small firm, in excess of 22 days in cashflow lockup (the time between when you start billing time for a client and when you finally close an invoice—83 days on average) can be an eternity. (If you’re looking for solutions to help address your cashflow, check out integration partner Fundbox.)
It’s All in the Details
When adding time entries, brevity and shorthand are fine for internal use but make sure you’re fleshing out the details on the client-facing invoice. Skip the abbreviations, transparency and clarity should be the ultimate goal. Tools like Clio’s Text Snippets or integration partner Viewabill offer great opportunities not only to communicate value to clients, but to build better attorney-client relationships with those you serve.
Make It Easy to Get Paid
No matter how transparent, timely, or well-communicated your bill is, if your client has to jump through multiple hoops (or worse: visit your office to hand-deliver a check) to pay it, you’re harming your chances of collecting. These days, consumers can purchase nearly anything online—paying for legal services should be no different (it’s estimated that 55% of all bills will be paid online by 2016.) Use a modern payment processor like PayPal or LawPay (the only end-to-end credit card processor designed specifically for the legal industry) to process payments online, or a solution like Square to accept payments onsite. You can read more about the differences between these payment processing options here.
Get Paid First
What’s better than having a client pay you upon receipt of their invoice? Receiving payment before you even bill. Accept advance fee deposits in your trust account to bill against, or make a switch to up-front flat fee billing to recoup your fees before you start a matter. However, ensure you’re familiar with trust accounting and regulatory obligations—that client funds are managed correctly according to state guidelines, that your client agreements are updated to advice of refund and cancellation policies, and that you’ve verified you’re utilizing PCI compliant solutions—to avoid sanctions and fines.
While there’s no way to absolutely guarantee timely payment, these five steps will help—for more on how you can optimize your billing practices and get paid, watch our free Better Billing for Lawyers webinar now.
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Categorized in: Accounting
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