Next to Nothing: How to Tamp Down Your Accounts Receivable

The reason your accounts receivable are high, is the same reason every other process in your law firm is relatively untamed: because you don’t apply systems to managing your business. 

 

Everything in your law firm should be systematized. 

 

But, let’s walk before we run, and get a basic system in place for managing your accounts receivable.  Collect on those stale invoices first, work on everything else after.



If your accounts receivable are so high, it makes you sick, or if you won’t even look at them, because you’re afraid to see the numbers, that probably means you aren’t billing with any kind of frequency.  So, the very first thing you can do to improve your position is to not add to the pile.  By making sure you get billing out like clockwork at the end of each month, it’s more likely that more of your clients will pay you.  That’s simple math.  And, think about it: If you were a law firm client, and getting bloated bills covering 90- or 120-day windows . . . How likely would you be to pay promptly? 

 

If you really want to ramp up your payment processing, add epayment solutions, through which you can automate payment of recurring bills. 

 

And, realize that the billing process is the output end of the funnel.  Before that, you have to get your time input correctly (use a single-entry system, and do it contemporaneously), then added to bills effectively (include a description for time entries that will resonate with clients, and don’t put off finalizing pre-bills) – and, you can also lose revenue as you push those items.  So, that system you’re creating for billing also includes aspects of time capture and finalizing invoices. 

 

Let’s neither forget the existing haystack of unpaid invoices. Most lawyers will look at it, and sigh.  But, you’re going to build a collection process.  Define someone within the firm who will be responsible for collections.  Build a consistent followup methodology.  Add and apply penalties and remedies to your fee agreement.  Decide when or if unpaid bills get handed over to collection companies. 

 

This may all sound daunting; but, building a system like this, while challenging at first, will allow you to reap massive benefits on a go-forward basis. 

. . . 

Need help getting your financial house in order for a new fiscal year?  We can help. 

Through a unique partnership between the bar association and Jared Correia's Red Cave Law Firm Consulting, National Creditors' Bar Association members now have access to experienced law practice management consultants at a special discount rate. To get started, visit Red Cave's NCBA landing page, and start running your law practice like a business.

Comments

Post a Comment

Popular posts from this blog

Top Shelf: How to Maximize Lawyer Staff in a Modern Law Firm

Image
Broadly speaking, lawyers take on too much.  You know: at work, emotionally.  They’re probably also trying to carry too many grocery bags into the house at one time.  You know how it is.     This, of course, leads to a whole host of problems, including that attorneys have higher incidences of alcohol and drug dependence, as well as depression, than does the general population .  Maybe you already knew that.  But, the fact is that this also has a direct effect on how much a lawyer can make. Hear me out: Because lawyers try to do everything, and to do everything perfectly, they’re also more prone than the general population to take on more work than they need to.  For example, they’re unwilling to delegate, including to paralegal and administrative staff, but also to other attorneys.  That means that lawyers end up being chief cook and bottlewasher, rather than focusing on the high-end work (strategy , client engagement), that they get paid th...
Read more

Transfer Portal: Sharing Files Securely is a Piece of Cake Now

Image
If you’re still sharing files with clients, referral sources and other attorneys, via email attachment – or, heaven forfend: fax! – you need to step up your game .  Email is an inherently unsecure technology; so, if you’re sending confidential information via email, you need to secure that information, by encrypting it – at the document level, or at the system level .  But, that takes additional time and effort, and cost s more.   Instead, why not share confidential information through a secure , encrypted platform, th rough which the person who is to receive the information logs into, thereby bypassing the email problem, where that information passes through several servers (some of which may be unencrypted), before reach ing its final destination .  With a client portal, your document stays where it is (safely encrypted), and your recipient comes in to get it.     Now, you can share files and documents via document storage programs in this fashi...
Read more

Hiring Percentage: What is the Law Firm Hit Rate for Bringing on Staff?

Image
Some lawyer s get burned hiring staff, whether it’s legal assistant s , paralegals or other attorneys .  But, just because you miss out once, in trying to hire somebody, doesn’t mean you should give up forever .  There are distinct advantages to bring ing on employees, including increased control over work product + improved revenue generation models.   In my experience, I’ve found that law firms connect on a successful hire (across all employee categories) about 40% of the time .  That may seem like a low number , but it represents about a 50% hit rate, meaning that every other hire should yield a viable staffperson , who’ll stay on between 3-5 years – which is not too bad, in the modern economy.     Putting that into baseball terms, which folks often do when trying to rationalize failure : your hiring batting average as a law firm, is about equivalent to Ted Williams’ 1941 season , when he was the last baseball player to hit .400 over a full seas...
Read more