Solutions to Top Financial Challenges for Legal Firms

law firm revenue managementBilling and collections are important, if deeply unliked, parts of business in every field, including the
legal industry. Law firms face the same cash flow management issues as other businesses when it comes to unpaid or past due bills. Unfortunately, small to medium-sized firms are not always able to devote the manpower to make a real change in their overall numbers.

According to a recent LexisNexis survey of more than 300 law firms in the U.S., roughly 73 percent of firms struggle with past due accounts. In that same survey, almost half the survey participants, 45.6 percent, indicated that after 90 days, those past due accounts are “unlikely” or “very unlikely” to ever be paid.

Considering the general cost of retaining legal counsel, the financial challenges a small law firm will experience due to unpaid accounts can be significant, especially as they add up. Taking into account the survey above, where surveyed law firms reported that between 10 and 39 percent of their overall customer bases had outstanding or unpaid bills, the occurrence is far too common. That’s thousands of dollars in some cases that are going uncollected.

Now, of course, two questions remain: how is this happening and how do you stop it?

The causes will vary for each situation, of course, but one source could be from a lack of focus on collections and billing in your firm. With so much going on in a law firm, all the research and the time devoted to obtaining and retaining clients, sometimes the details of collecting on unpaid or past due bills can be lost.

Fortunately, there are ways to make the collections and billing process easier, as well as a few tools and solutions available that can help you bring accounts current quickly and efficiently. While there’s definitely no cure-all for bad debt and past due accounts—you’ll always have a few—minimizing the total number of past due accounts at your firm can help remove financial challenges and improve cash flow.

  • Card on File – As with any business today, the legal industry thrives on consumer satisfaction. Since consumers expect businesses to accept debit and credit cards, most legal offices would understandably have the capability to process payment cards. What they might not have is a card on file option, to make it even easier for clients to pay retainers or other standing legal fees—and the easier you can make it, the happier most clients will be. Storing client information will also save on time and paired with online or phone payment options, can ensure easy and efficient payment access for your clients.
  • Recurring Billing – An even more promising option for efficient cash flow management is recurring billing. Particularly for clients who either have payment plans or have enlisted your firm for repeated or long term service, recurring billing will ensure that regular, hassle-free payments are made on-time each month. This option is easier for clients and more reliable for helping reduce your firm’s financial challenges.
  • Multiple Account Options – One important consideration for the legal industry is the versatility of payment methods to meet legal standards. In cases like Texas’s laws regarding Interest on Lawyer Trust Accounts (IOLTA) and other legal requirements pertaining to separate accounts for holding funds, systems like NTC’s Converge can be especially helpful for cash flow management that meets legal standards. The Converge system allows law firms to accept payments and direct those funds towards different accounts, instead of standard payment card programs, which only direct money into one primary account. The ability to direct cash flow into the appropriate accounts will help law firms meet legal industry requirements and client needs efficiently and beyond reproach.

Every industry has its challenges, and the legal industry in particular is held to a high standard due to the sensitive nature of the work many lawyers perform. Your clients need to be able to trust you and your team to do an effective job, and much of your time will be devoted to nurturing that trust and providing the best legal services possible.

Don’t let a lack of focus on billing and collections be your downfall. With the right technology, cash flow management within your practice can become easier and far more efficient, improving your bottom line in a way that will benefit not only you and your team, but also your practice’s overall financial success.

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Ashley.jpgAbout the Author – Ashley Choate is a native of Jacksonville, FL where she lives with her son, dog, and three cats. She graduated Magna Cum Laude from Jacksonville University with a BA in English and holds an MAED in Adult Education and Training. She lives for reading and writing, learning and teaching, and figuring out the day-to-day traumas and joys of mommyhood.

Top Photo Courtesy of Ken Teegardin @ Flickr CC.