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Billing quick wins

Billing quick wins


How you bill your clients makes a big difference to cash flow. The way you bill has everything to do with how payment will be made. Are you giving your clients an easy excuse to not pay you?

 

1. State the payment terms


Firms traditionally offer credit easily. Whilst new clients are accepted through a risk analysis process the voice of the Credit Controller is not heard enough. These processes should identify potential risks through references to available searches and past history including the firm’s own records.

Before you offer credit make sure you agree and negotiate the terms of payment. You do not have to accept the 30 days from the end of the month the invoice was received. You are allowed to ask for a shorter term. What is important is that the client understands the terms and agrees to these terms before you start the matter. As a reminder, always ensure that the payment terms are listed on every bill. State the actual due date which is more effective than just the payment terms.

2. Include payment details


Clients do not need more excuse’s not to pay on time. Legal bills are confusing and seldom have straight forward payment instructions. The client may not understand what a trust or escrow account is!

Ensure they have all the information they need make payment. The bill should state the detail of the work completed, the clients purchase order number if they have provided one, the actual due date (for example, if the invoice is issued on September 1st and the payment terms are fourteen days, insert the due date as September 15th) and all the available payment options. We can customize these to the client and the type of work.

Just because you are a law firm does not exempt you from meeting business obligations. Supplying business numbers, registered address, tax status and business contact details in order to pay you and comply with the requirements. A bill or invoice number needs to be prominent and available and cannot be the Matter number or other non-unique internal identifier.

Regularly ask clients what information they need on the bill to facilitate payment. This is where a lot of the current Client reference projects have come from. Asking may show the clients expectations and the firms with a dis-connect. Clients often want a single simple account for all open matters. The law firm wants to supply extreme detail and multiple bills, one per “matter”.

3. Remind them of progress payments


For longer-term projects, consider issuing progress invoices or Requests for Payment. Depending upon your jurisdiction you may be allowed to ask for payment to be retained in the trust account in advance of the work being performed. For example, if you are providing a consulting matter over a six-month period, you may consider payment terms such as 30% upfront, 50% on provision of first draft of final report and 20% on completion of the work.

4. Don’t forget to ask for a retainer or deposit


Negotiate an upfront payment. These client finds may not be directly accessible for the payment of the bills but it is a lot easier than them being out of mind. These funds can be used for Disbursements which means you won’t have to supply this from your own funds.

5. Provide easy payment options


Although many of us don’t like to pay the bank charges that come with Credit cards and services such as  LawPay or alternatives for credit card processing, it is probably cheaper in the long run than spending time chasing payments and banking cash or checks. Just be very careful to ensure the credit card fees are not deducted from the client funds.

Payment arrangements can also be a useful tool and you can you third parties to assist. Litigation funders are one example, but at the other end offering a long running transactional matter a regular monthly amount provides benefits for both parties.

There are ethical issues to using Credit cards or arrangements which you should consider in your jurisdiction. Use your litigation partners experience to help her as they often face this dilemma in their cases.

If you make it easy for the customer to pay, such as via direct payment into a bank account via ACH or credit card payment, then it is likely that they will pay quicker. With bank statements available and full bank reconciliations available you should be able to download your bank records directly into your accounting system, which will also save you time and effectively money. We have some firms who have implemented full bank integration eliminating re-keying.

6. Send invoices early


The faster you bill the client, the earlier they will need to pay to adhere to the agreed payment terms.

Billing should not await, or be made to wait for the end of the financial period but with the completion of the matter. This requires a change in the mindset of Partners for Billing as a constant function rather than a cyclical one.

By doing this way the payment terms commence at the earliest possible date, and this will ensure that invoices are not missed or overlooked. Consider emailing your invoices directly to the person responsible for making the payment for fast payments as well as your matter contact. Yes this may offend some attorneys but it is normal business practice for the finance area to be aware of items that they have already committed expenditure to through their purchasing process. The money has already been allocated in the accounts so asking for it is not a surprise.

We focus very much on winning new matters, Alternative Fee Arrangements and discounts, it is equally important to receive the money. Spending time ensuring that your invoicing procedures are the best they can be will better your chances of being paid sooner and improve cash flow.

 

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