When it comes to your legal billing system, having the appropriate measures in place to ensure that you’re paid by your clients each month is step one in running a more successful and profitable firm. Though billing is easier than ever, with many legal billing software options that integrate with your accounting system, many attorneys still find the billing process to be tedious and cumbersome.
Over the years, I’ve developed a few of my own key systems that work well with most law firm accounting software and make it easy for attorneys to ensure that they’re paid in a timely manner. Today, I’m sharing what I’ve found to be the best law firm billing procedures for ensuring accounting and ABA compliance and boosting cash flow.
Law Firm Invoicing Must Be Consistent
If you don’t send invoices, you won’t get paid. Simple as that! For most attorneys, handling invoicing is the last thing on their minds. Between serving clients and managing the firm, most lawyers have very little time to worry about invoicing. My best advice is to admit when law firm invoicing is overwhelming you and seek solutions that work with your schedule and obligations. One way of doing this is trying attorney billing software that automatically sends invoices to your clients. This method works best for firms who operate on monthly retainers or who have installment agreements with clients. If most of your work is done case-by-case, consider outsourcing your billing process to a qualified bookkeeper who specializes in legal accounting in order to avoid any missed invoices.
Understand the Consequences of Missed Invoices
Did you know that when you send late invoices that clients are allowed to be late paying you? Not only does sending late invoices send the message that you don’t care about collecting money, it has the ability to result in huge missed opportunity costs. Implement a system for sending invoices, as described above, and be sure to include follow up reminders as part of your process as well. Your clients need to know that you have a vested interest in collecting money in order to be motivated to pay. Most people will pay when reminded that an invoice is due rather than risk being sent to collections. Plus, many law firm billing software options will allow you to include automated reminders when you create the invoice.
Consider Attaching a Late Fee to An Invoice
Just because you have a late payment policy doesn’t mean you have to enforce it. Many attorneys avoid late payment penalties because they seem harsh, but the truth is that even just the threat of a late fee can boost the speed in which you are paid and avoid invoices from becoming past due. Lawyers billing with late fees can expect to struggle less with past due payments and to achieve healthier cash flow overall.
The Best Strategy for Billing: Collect Payment or Payment Info Up Front
I recommend that my clients do not perform work unless they have money sitting in the IOLTA account. However, I understand that not all attorneys feel comfortable with this or are limited due to other circumstances. In this case, I highly encourage firms to collect credit card and bank information up front along with an auto-draft authorization form. This will eliminate the possibility of a client not paying you and ensure that you get paid promptly when the work is completed. Just be sure to outline to your client the terms in which you will bill their automatic payment.
