.jpg)
Efficient collection of fees is a critical aspect of a law firm's financial success. However, collecting payments from clients can be a challenging task. Here are ten strategies that law firms can implement to boost their collections and improve their financial health:
1. Clear Fee Agreements
Start by establishing clear and detailed fee agreements with clients. Ensure that the terms and payment schedules are explicitly laid out and understood by both parties from the beginning. Communicating this internally to the finance team to ensure accurate invoicing is critical to avoiding reductions and rejections later in the matter lifecycle.
2. Regular Communication
Maintain open and consistent communication with clients throughout the engagement. This helps prevent misunderstandings and allows you to address any concerns promptly. If the only time when a firm is communicating with their clients is during invoicing/Collections, it is a missed opportunity to build a relationship with the client.
3. Billing Timeliness
Send out invoices promptly and regularly. Delays in billing can lead to delayed payments. Implement systems to ensure that time entries are recorded, and invoices are generated promptly. This invoice preparation and delivery can be a manual activity, which should be automated to ensure clients are receiving timely invoices.
4. Electronic Billing (eBilling)
eBilling is on the rise, and firms are increasingly struggling with catering to client’s requirements. Invest in eBilling systems that make it easy for clients to review and pay invoices online. This can expedite the payment process.
5. Billing Guidelines Compliance
Understand and adhere to your client's billing guidelines. Getting clarity on the client’s billing guidelines at the time of the matter opening is critical to avoiding delays. Failing to comply with their specific requirements can result in invoice rejection or reductions with delays in payment.
6. Fee Negotiation Strategy
The firm should develop a clear strategy for negotiating fees with clients. Clients frequently will request fee reductions and waive-off for various reasons. The firm should be prepared to discuss and compromise on fees when necessary but also know when to hold firm. Clear strategy defined upstream allows to ensure client satisfaction.
7. Collections Process
Establish a well-defined collections process and workflow within your firm. This should include a schedule for follow-up actions, such as reminder emails, phone calls, and escalation procedures for overdue accounts. The firm should invest in modern collections software that can provide insights into client patterns, and track anomalies to ensure no invoice falls through the cracks.
8. Early Payment Incentives
It is imperative that firms encourage good client behavior. The firm should consider offering incentives for clients who make early payments. Discounts or other benefits can motivate clients to settle their invoices more quickly rather than using the discount budget on long outstanding and overdue invoices with the intention of getting paid whatever can be collected.
9. Online Payment Options
Make it as easy as possible for clients to pay their bills. Accept various payment methods, including credit cards and online transfers, to accommodate different preferences. The credit card fees can stack up and, in those scenarios, having a strategy on which invoices or practice areas can accept credit cards should be clearly captured and understood. The firm should encourage other modes of online payments like ACH, Wire, etc. to allow quick processing as opposed to checks via the traditional mail approach.
10. Client Screening and Onboarding
The firm, before taking on new clients, should perform a thorough credit check or risk assessment to gauge their ability and willingness to pay. Avoid clients with a history of payment disputes or financial instability. The firm should invest in modern Intake platforms that allow firms to complete thorough KYC compliance before onboarding the client.
Implementing these strategies can help law firms streamline their collections processes, reduce overdue accounts, and maintain healthier financials. Remember that effective collections not only benefit the firm's bottom line but also contribute to better client relationships and the overall success of the practice.
In conclusion, a proactive approach to collections is essential for law firms to ensure timely payments, maintain cash flow, and sustain long-term financial stability. By combining clear communication, technology, and a strategic approach to billing and collections, law firms can significantly improve their collections efforts while preserving valuable client relationships.
