At a Loss: All A/R is Not Created Equal

Managing accounts receivable is all about timing; and so, you can’t view it simply as a lump sum that you are owed.  Ideally, you’re running and reviewing aged accounts receivable reports – which most bookkeepers will do as a matter of course @ 30-day, 60-day and 90-day+ intervals.  That will give you a sense about a lot of things, related to the financial management of your business, including how your cashflow projects, on a go-forward basis. 



But, most importantly, you’ll get a sense of how those dollars escalate in your law practice.  That escalation, of course, needs to be matched by your collection process.  When clients don’t pay you, as they should: you can’t just watch the dollars stack up.  You need to meet that escalating mountain of cash, with a more aggressive collection program.  And, that collection process should be established in your engagement agreement. 

 

There are template clauses accessible online.  But, the general idea is that you want to be able to ramp up your collection process, as the non-payment period extends.  Start by adding interest.  Ramp up followup.  Negotiate, if you need to. 

 

For most law firms, the collection rate is sub 100%.  But, before you write off collecting what you can’t grab on the first pass, pull levers to try to increase that percentage by increments, moving forward. 

 

. . . 

 

Oftentimes, for law firms, invoicing is a process, not a single action – so, lean into it, to reduce your accounts receivable, over time. 

Through a unique partnership between the bar association and Jared Correia's Red Cave Law Firm Consulting, National Creditors' Bar Association members 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.

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