It’s that time of year again. The annual scramble to settle unpaid client invoices before fiscal year-end is upon us. Odds are, your accounts receivable department is doing what they can to avoid writing off uncollected balances before the books are closed.
Today, law firms face more year-end write-offs than ever. Last year, firms collected an average of 83.5 cents for every dollar of standard time logged by their lawyers, according to Thomson Reuters Peer Monitor. This amount was just 92 cents per dollar in 2007.
By maintaining a significant amount of outstanding receivables, you effectively extend credit to your clients. The unfortunate reality is that invoices that go unpaid for 180 days are far less likely to be paid in full. This can be a crucial hit to a law firm’s financial performance.
So, what can a firm do to minimize fourth quarter write-offs and accelerate cash flow?
Allow clients to pay with a credit or debit card. Credit card transactions allow clients to conveniently pay on time, with funds typically deposited within 48 hours. This is a significant improvement from the weeks that often transpire before some clients drop their checks in the mail.
By accepting card payments, you can shift your receivables to the card-issuing banks (which are in the business of issuing credit and collecting debt) and your firm can stay focused on the practice of law.
❏ Online payments. An online payment portal enables your clients to run their own credit cards 24/7. This provides an appreciated convenience to your clients, but it also reduces the amount of time your accounting staff spends processing payments.
❏ By using an electronic invoicing system, firms can speed cash flow by an average of 11 days.
❏ Let clients know your payment expectations upfront. Be certain to include the term “Major Credit Cards Accepted” on your website and all invoices.
❏ Review your statements. Does your firm get the lowest possible payment processing rates? Credit card interchange rates vary widely depending on service providers and payment processing procedures. LawPay, an Elite Product Partner for integrated payment processing, offers a Free Statement Analysis to ensure you receive the most competitive rates. This simple step could set your firm on a path to save hundreds or thousands of dollars per month on payment processing. Reach out to us at email@example.com if you have any questions.