Accounts Receivables for Law Firms

Relying only on cash or checks might incur unwanted delays in client payments. What if they have a low account balance or have misplaced the check? In such cases, providing alternate payment methods will prompt clients to repay. The right collections technology reduces the manual workload for your firm by systematizing processes. This results in recovering more owed dollars and faster receivables turnover. Evaluating options that align with your budget and needs is key to see improvements.

Do law firms have accounts receivable?

There could be several reasons for the large number of Legal E-Billing accounts receivable. Here, we will discuss the many potential reasons for high ARM and solutions to reduce them. Strategically writing off uncollectables that meet firm criteria can provide tax benefits while cleaning up a firm’s accounts receivable.

Rocket Matter

You can also apply late fees automatically (if desired) to take one more task off your plate. However, keeping up with tracking can be a challenge without the right tools. Whether you’re using an app or manually jotting down time spent on tasks, you’re likely not tracking as much time as you could.

The Importance of Effective Accounts Receivable Management

A strong, well-written (and adhered to) credit policy is one of the best ways that you can protect your accounts receivable. Following these simple tips will ensure transparency and minimize the risk of misunderstandings between the client and the lawyer. Discover the top 5 best practices for successful accounting talent offshoring. Tools like Stampli allow creating a sequence of automated actions based on aging milestones. This includes email and letter templates to send at set intervals. Software logs all communications history and pending next steps so collectors know what is owed.

Managing client retainers requires maintaining detailed normal balance records of all transactions, including deposits, withdrawals, and interest earned. Firms must adhere to Generally Accepted Accounting Principles (GAAP) or International Financial Reporting Standards (IFRS) to ensure transparency and accuracy. Regular reconciliation of trust accounts is essential to verify that balances match records, as discrepancies can trigger audits or regulatory scrutiny. Do not accept the idea that ageing receivables are simply part of doing business. Firms that address and actively work to get results from their collection efforts will see a real payoff in the end.

Conquer AR Challenges with Rocket Matter

Offering online payment methods isn’t the only way to make your clients’ lives as easy as possible. Go one step further by providing Click-to-pay links or QR codes, meaning clients can pay instantaneously through Clio Payments. Generally speaking, once firms send out an invoice, they’ll usually wait until their payment due date expires before contacting a client. Payment due dates vary from firm to firm—while some have 30-day payment due dates, others might be more lenient and extend this to 60 days. First, a firm sends the client their invoice and waits until the payment deadline has passed. When the firm realizes the due date has passed, it reaches out to its clients to remind them about their invoices.

• To implement this method effectively, firms must maintain detailed project tracking systems documenting progress against milestones.
• 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.
• This allows you to focus on legal work rather than constantly chasing payments.
• Whether you choose to bill monthly or upon reaching specific project milestones, consistency is key.
• It’s about striking a balance—sending invoices on time, making it easy for clients to pay, and following up efficiently on outstanding balances.

Prepare for Disputes and Unpaid Bills

• Keeping them in the loop will build your law firm’s integrity and trust, thus improving the chances of timely client payments.
• You can read more about how to set up your credit control policies by clicking here.
• This also helps minimize the risk of clients setting the bill aside to pay it later since they have time.
• So, in the legal world, accounts receivable indicates the payment clients owe the lawyers or the law firm.
• With key strategies — like streamlining billing, automating payment tasks, and increasing communication — your firm can optimize the A/R process for the better.

For example, if you’ve billed $200,000 in the past year but only collected $160,000, then your collections rate is 80%.

Continuously Refine Processes

With so many ways to pay digitally, it can be hard to know which one is right for your clients. What one client is comfortable using might pose problems for another. That’s why legal payment solutions, like LawPay, provide firms with a variety of flexible options to accept payments, including eCheck, credit card, and other digital payment methods.

How To Level Up Your Law Firm’s Accounts Receivable Management

Having an law firm accounts receivable management easy way to store client details and payment information is an essential piece of increasing payment efficiency and streamlining your A/R management. When using manual processes or multiple pieces of disjointed software, this can be easier said than done. Convenient features like Quick Bill and Scheduled Payments help firms collect more payments while ensuring that money goes into either the correct trust or operating account automatically. Efficient billing and invoicing practices optimize cash flow and strengthen client relationships. A streamlined billing cycle minimizes delays and errors that could lead to payment disputes or strained interactions. Electronic invoicing systems facilitate prompt invoice generation and delivery, enhancing transparency and accessibility for clients.