By Ally Kennedy, Founder of Amiga, and Manuel Lozano
Many solo practitioners and small firms struggle with collecting on payment plans and/or outstanding accounts each month. I have struggled (and still struggle) with this myself, so I am bringing in my business manager to give some of his top tips on how to increase your law firm’s collections each month.
1. Be Clear About Financial Responsibilities When Reviewing Contract
A standard contract should include the payment date, payment amount, and consequences for not paying in a timely manner. It is important to read that portion out loud to clients to ensure their understanding. It helps to remind clients both written and orally that they have to be responsible about their monthly payments and financial obligations when signing the contract.
This is especially important when clients call to request to skip a month’s payment, pay late, and the like, because you can refer to the clauses in the contract that would apply.
2. Send Invoices Every Month
This is a must, and it is something that many lawyers struggle to do. Ideally an invoice would be sent 15 days before the due date to allow time for questions and clarifications. If you bill hourly, it could be best to break your invoices into two parts and mail invoices twice a month so your clients can better budget, especially for a bigger bill.
Cut down on the workload by using a program like MyCase to run the bills which can be easily printed and/or emailed.
Tip: use envelopes with windows so all you have to do is run the bill and stick it in the envelope, cutting down on a lot of time wasted on handwriting addresses or creating mailing labels.
3. Follow Up on Overdue Bills
Too many lawyers let late-paying or non-paying clients off the hook without saying a word about it. There are many reasons for this, such as they are too busy to keep track of their receivables, they feel bad for asking for money from clients, they don’t like the confrontation, or don’t want to offend someone or hurt his/her feelings. If you aren’t good at following up and asking for an invoice to be paid, make it someone else’s job. Don’t make it the job of an already busy legal assistant or paralegal, because for them it will be an afterthought. It needs to be a main part of someone’s job in your firm to make sure that invoices are collected.
4. Designate Set Pay Dates
It is easiest to keep track of when payments are due if you select one or two dates a month on which the invoices are due. The 1st and the 15th of each month are easy to remember for clients because those are common payment due dates. While it may be easiest to just do one streamlined date, it is nice to have half of the payments at the beginning of the month and the other half mid-month to help offset payroll costs.
We switch out the pay date by quarter, meaning that we have all new clients in Q1 pay on the 1st. Then all new clients in Q2 are set up to pay on the 15th.
5. Automate Payments through a Payment System
By setting clients up to be charged automatically each month, it drastically cuts down on collections. We have our clients sign a credit card authorization form and we use that to input the information into the system and set up an automatic debit on the indicated date. The month that we implemented automatic payments, the firm’s revenue doubled and has created a new normal for us in terms of average monthly income.
What are some ways that you have increased collections for your law firm?
About your Ally in Life, Business and Law:
Alexandra "Ally" Kennedy is a national award-winning attorney and the founder of AMIGA Lawyers and Alexandra Kennedy Immigration Law.. After becoming a mother, and in a matter of 3 months, Ally transformed her practice from earning in pesos to earning 6-figures and she is passionate about teaching attorneys how they can do the same. Ally empowers lawyers to be the CEOs of their law firms with her weekly blog, webinars, and conferences where she teaches step-by-step how to do the work they love while running a profitable legal business. Ally lives outside of Seattle with her partner and their 5 children.