Best Practices for Improving Law Firm’s Accounts Receivable Process

Given these challenges, effective accounts receivable management is crucial for law firms. By streamlining the invoicing process, offering convenient payment options, and implementing timely follow-ups on overdue accounts, firms can reduce their AR balance and improve liquidity. Sending reminders to one client about pending payments may not seem inconvenient, but think about manually tracking tens or hundreds of them and giving a slight nudge about owing balances. That’s why you need a well-organized law firm accounts receivable process. Do not worry if you’re only getting started; here are a few strategies to help you improve the accounts receivable process at your law firm.

Final thoughts on improving the accounts receivable process for law firms

For example, you can’t use money from trust fund accounts to pay off utility bills if you haven’t earned that money. Trust funds belong to the client unless they are earned or needed for client-related fees. Anything leftover after services are complete will go back to the client. However, cash accounting may not accurately reflect your finances since it does not account for accounts receivable or payable. For example, you may appear to have more cash than you have if outstanding payments are owed to vendors.

Maintain Consistent Communication

Some law firms consistently maintain a high A/R, whether due to strict payment terms, unresponsive clients, or a myriad of other potential reasons. But ultimately, regardless of how high a firm’s A/R is, the money remains only potential revenue until the bills are actually paid. Offering more balance sheet options can help improve collection rates and positively impact your law firm’s cash flow. For example, our 2024 Legal Industry report uncovered that our customers collected 33% more from clients who paid online.

Leverage Law Firm Billing Software

You law firm accounts receivable management could also send a written notice that you’ll turn the account over to collections when it reaches 90 days past due. That is why regular communication is one of the most important best practices for accounts receivable collections. Believe it or not, your accounts receivable process begins with the first client consultation.

Billing & Payments

This means that, at any given time, law firms have around three months’ worth of annual revenue that’s either not been billed out or not been collected. Implementing these collection practices can dramatically improve your payments experience with new clients, but what about the old ones? Overhauling your client consultation process or improving the clarity of your invoices won’t affect the aged accounts already on your books. With the Automated Bill Reminder feature, your solicitors can spend more time on billable work instead of chasing up payment. Breaking payments into smaller, more manageable instalments benefits both firms and their clients.

• More than 73,000 law firms trust MyCase and LawPay to track time, generate ready-to-send invoices, send automated reminders, accept payments, and crunch analytics.
• Go one step further by providing secure payment links or QR codes, meaning clients can pay instantaneously through Clio Payments.
• Now that you’ve made a great first impression, it’s important to maintain that level of service by keeping clients up-to-date on their case, billing, and account status.
• A law firm’s accounts receivable (A/R) represents all outstanding client payments for work that has been completed and invoiced.

As your law firm expands and you’re busy https://www.bookstime.com/ running a practice, you do not want to mourn over the pending payments from clients. These effective law firm accounts receivable strategies can transform your financial landscape. From sending invoices electronically to setting up multiple payment options, we’ve seen various ways to improve your law firm’s accounts receivable process. Now, payment due dates can vary from firm to firm; if one sets 30 days, others are more lenient, extending the due date to 60 days. However, once this period lapses and the clients haven’t yet paid your fees, you gently remind them about the pending payment by sending a message or calling them up.

Send Easy-to-Understand Invoices and Follow Up

Law firm accounts receivable management is your ultimate solution to prevent such hiccups! It’s about striking a balance—sending invoices on time, making it easy for clients to pay, and following up efficiently on outstanding balances. So, prepare to get paid for your services and grow your law firm with accounts receivable. One of the biggest advantages of leveraging tech, like a legal billing and payment solution, is how they can digitally automate your end-to-end billing processes. Automating A/R management has a number of distinct benefits for law firms.

Step 10: Set a Schedule for Financial Reporting and Reconciliation

First and foremost, your attorneys will waste significantly less time on calculating and sending invoices, following up with clients, and chasing payments. We specialize in legal practice management software, including accounts receivable tools. More than 73,000 law firms trust MyCase and LawPay to track time, generate ready-to-send invoices, send automated reminders, accept payments, and crunch analytics. Law firm accounts receivable (AR) refers to the money clients owe your firm for legal services you’ve already provided. It’s essentially the outstanding balance of invoices issued for completed legal work.