The management of invoices for law firms can be challenging. You need money for everything from paying your bills to buying new office equipment and paying your staff. You can meet your firm’s cash flow needs with a sound law firm billing procedure. Billing is the simple act of generating invoices on time and getting payments from clients. However, without a proper process in place, it can be a difficult nut to crack.
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In this blog, we are devoting all the time towards understanding the law firm billing process and how a dedicated accounting platform can help.
One of the numerous ways you communicate the value of your services to clients is through the invoice you send to them. If you want your clients to understand your invoices quickly, they should be clear and succinct. As a result, when people are aware of the charges, they’re more inclined to pay them.
We recommend using billing or practice management software that has built-in templates for creating consistent invoices.
Check to see that your invoice template contains the following elements:
- Describe the legal services you gave in as much detail as possible, using layman’s terms. It’s not enough to simply list “legal services” and the total number of hours spent. Give an overview of the services you offered.
- You can reach us at the following number: Include the name, address, and phone number of your customer. You should do the same for your business as well.
- Dates: Add the invoice date and the date you anticipate to be paid on the invoice.
- Several invoices: Additionally, this makes it easier to keep track of the invoices you send to clients and vendors. As an added benefit, it allows your clients to keep track of which invoices they’ve already paid for.
- Provide a list of your accepted payment options (cash, cheque, credit card, etc). As a result, your consumers will be more likely to pay on time if you accept a variety of payment methods.
- The total is as follows: Be sure to mention the exact cost of the service on your bill.
Organize your bills for simple storage and retrieval as necessary. We are ardent believers in the advantages of a paperless law office. You may use a basic client file folder system to arrange your bills online.
Believe in the fact that bills are a means to communicate with your client the worth of your services. As with any other customer correspondence, keep each invoice clear, structured, and concise.
Collections for Law Firms: How to Avoid Obstacles & Get Paid for Your Work
Even though good billing processes can help reduce collections, they won’t eliminate them. For both you and your customer to be happy with the collection process, it must be straightforward for both parties.
After a certain period passes without payment, invoices are usually sent to collections. Most organizations wait at least a month or two before they begin the collecting process, and others wait much longer than that.
Most of the time, you’re on your own as a solo practitioner or as the owner of a small law company when it comes to collections.
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The Importance of Honest Communication
Several of the attorneys we spoke with believe that if they’re honest about the expense of counsel, they’ll lose customers. This isn’t the case at all. Transparency in pricing might assist clients in deciding whether or not they can afford you.
Perhaps the attorney and client can then decide on a course of action based on what they think the client needs and can pay. Attorneys, on the other hand, typically inform their clients that it will cost X.xx per hour. When bills pile up, and clients are unable to pay, everyone becomes upset.
Our advice is to chat with your customer about what services they’ll need and how much they’ll cost before you begin. Examine possible snafus, glitches, and shocks that may occur in legal circumstances. As much transparency as possible is important so that the customer is well-prepared for their charge.
Structures & Processes
You need a strong structure and procedure for your collections, just like you do for everything else in your company. Your processes and procedures must be explained and followed.
When you’re developing your process, ask yourself the following questions.
- When do you consider a bill to be “old” or “ready to be collected” by your company?
- What will you do first? Will you contact the client or will you write them first? Which way will you use to communicate with us in the future?
- For whom is your team the collecting responsibilities entrusted? Is it going to be you or another person?
- When a client disputes an invoice, how will you handle the situation?
- When will you agree to settle your debt for less?
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Staying on Top of Your Accounts Receivable
It represents the money owed to you by your creditors, often known as your clients. It is important to monitor accounts receivables periodically. Accounts receivable reports are easily available if you utilize billing or bookkeeping software.
Put Your Billing & Collections Process Into Play
Keep an eye on these statistics, and make sure your billing and collection processes are in order. Now, you don’t have to wait until a bill is a month past due to send reminders.
You might, for example, send an email reminder three days after you raise the invoice. You can follow it by a brief phone call a week later to remind the recipient. In addition, some companies have begun sending SMS.
An example of a simple billing and collection procedure may be as follows:
- Bills to be sent and recorded
- After three days of non-payment, send a payment reminder via email.
- Remind the client to make payment after a week of non-payment
- After two to three weeks of non-payment, call the client again and write a letter.
- Move account to collections after a month of non-payment
However, you must stick to your strategy for every single account, regardless of what you decide. It’s the only way to stay on top of things. This is another instance where billing software may automate each step in your procedure.
How to Have the Collections Conversation
You’re not the only one who cringed at the prospect of phoning a client about a past-due account. Everyone dreads doing this. To keep afloat, it’s necessary.
Making the Call
Start by reviewing the client’s financial records to determine the amount owing, any late fees or penalties, the date of last payment, and any other pertinent information. Call your customer and inquire whether it’s a terrible time to chat at this point. Then request a new time.
It’s best to start by expressing your thanks for their business. It’s a good idea to ask them whether they’re happy with your work. Then, explain the past due amount and ask the client to work with you to find a solution to the problem along with you. The opportunity to make a partial payment and set up an installment plan for the remaining debt is a great option. Your best bet would be to tell them that you can’t continue representing them until they settle their amount or begin a payment plan.
How to Improve Collections at Your Law Firm
As a business’s lifeblood, collections are essential to its survival and growth. Many in the legal business confront considerable hurdles when it comes to receiving payments.
As per the latest report, attorneys receive payments for 86 percent of the time they bill customers. Most attorneys can’t afford to wait to get paid long after they expect to—if they get paid at all! Attorneys who are fresh out of law school or who have left a previous practice to start on their own for the first time will find this to be particularly true. It is possible for lawyers to receive payment on time by improving their collection methods. Making minor modifications in timekeeping and invoicing might enhance the probability that your clients will pay you sooner rather than later.
1. Improve your timekeeping and recordkeeping
The process of improving your law firm’s collections begins long before you send a customer an invoice. Implementing rigorous timekeeping and recordkeeping habits in your firm is one of the best strategies to enhance cash flow. What good is tracking time billed if there is no way to be paid for it? Take advantage of these time-saving strategies.
A. Take notes on what you’re doing
Taking comprehensive notes is one method to ensure you don’t forget any of the essential work you perform for your clients. Whenever possible, document all work completed, as well as the context in which it was performed.
Most attorneys find themselves rushing from one task to the next, only to enter their time after the fact, which is not ideal. Preparation is the key to success.
You’ll be able to recall as much as possible about what you accomplished, even if you don’t have access to a timekeeping tool until later, thanks to your notes.
B. Review outgoing calls and emails
If the world were a perfect place, this method would function perfectly. However, we all know how the actual workday goes—as soon as you’ve finished writing an email to a customer, someone arrives in your doorway and pulls you into another activity.
As a result, it isn’t easy to find time to document your activities and keep track of what you’ve accomplished. After each day, review your outgoing call list, voicemails, and outgoing email to see what you may have neglected to record.
Your timekeeping tool may remind you of anything you failed to record since you saw a client’s name or matter number on an email that you sent but didn’t record in your timekeeping tool.
C. Track time as you go
However, contemporary legal software solutions can perform a lot of the hard work for you, saving you time and money. So, for example, practice management systems like Legodesk Manage offer capabilities to help you produce clear and consistent invoices (more on that below), and also a timekeeper that enables you to start tracking time with just one click, so you can quickly document work as you go. This way, there is less chance for lawyers to lose billable hours.
2. Make your bills comprehensive, understandable, and fair
Keeping meticulous records of your time is a struggle. We agree. However, it is crucial to raise the invoice as you can only bill for accounted hours. It’s also important to communicate explicitly when you bill a customer so that there’s no mistrust or uncertainty.
A. Use plain language
One of the easiest ways to achieve this is simply describing your work in clear terms on invoices. Confusing acronyms or legal language is likely to annoy your clients and might lead to a rift between you and your client. Unaware of what you’re costing, a customer is far less inclined to pay for it.
B. Avoid extraneous charges
Keep in mind that while your bills should be thorough, you shouldn’t go crazy with them. Common office consumables such as printer toner and stapler should be paid for out of your own money, not the clients. A client’s mistrust can be increased by charging for these goods, leading to a payment delay or nonpayment.
C. Highlight freebies
Think about providing tiny things that you consider free on your bill to create goodwill. Consider listing a five-minute phone conversation as a free service if it didn’t take much time out of your day. You can make a big difference with your kindness.
3. Prioritize consistency
Just think about how you handle your bills. It’s easier to budget and pay bills on time when they arrive at a predetermined time. Keeping up with bills becomes more difficult when they are unpredictable and inconsistent.
When sending out invoices, you should provide a predictable and consistent experience for your customers and clients. Assist your clients by issuing monthly invoices at the same time. Instead of sending monthly invoices, clients are likely to be taken off guard if you send them out at different times each month. Two more collections of best practices linked to time are shown below.
A. Send bills early in the month
Consider billing clients at the beginning of the month if feasible. The end of the month is when most people get paid. Sending your invoice early in the month, immediately after they’ve been paid, improves the probability that they’ll have money in their bank account to pay you. As a result, your clients’ budgeting for the remainder of the month becomes considerably easier.
B. Send bills quickly
When it comes to billing, it is vital to send out invoices as fast as possible. Whenever Jay Foonberg talks about the Client Curve of Gratitude, he explains that clients are more inclined to pay you once you have achieved their goals. The client satisfaction factor is crucial. And, truthfully, it is not professional if you send invoice two months after the job is over.
You should send that client’s bill as soon as feasible. Clients may be shocked by the bill’s amount if you wait up to 30 days before sending it since they’ve likely forgotten any price discussions you had early in your relationship.
It is possible that after 60 days, the client will be angry and frustrated at the expense of the bill. Clients forget the value of your service after 90 days, and they may even believe that they didn’t need an attorney in the first place.
4. Make it easy for clients to pay by accepting credit cards
The reality is, even if you implement every law firm collection best practice we’ve discussed in this blog article, you still risk late payment, underpayment, or no payment at all if you don’t make it easy for customers to pay you.
When you provide your clients the choice to pay you online with a credit card, you’re offering them a seamless payment experience. Things have changed when it comes to how consumers pay for products and services. All of your clients want a consistent payment experience, regardless of whether they’re purchasing something from Amazon.com or paying for your professional services.
Customers are more inclined to employ an attorney who accepts electronic payments, according to a new survey. Forty percent of respondents said they would never work with an attorney that didn’t accept credit or debit cards.
Law Firm Billing: Ultimate Guide and Best Practices
Your legal firm’s success depends on how well you bill your clients. The fact is that for many legal firms, invoicing customers and tracking down money is still a time-consuming and monotonous aspect of the work that they dread.
As per a legal trend report, attorneys only bill 2.5 hours per day on average. The rest of the time they draft invoices, follow up on payments and maintain trust ledgers.
The law firm billing process
In many cases, the billing process looks something like this:
- It all starts with a new client or new case.
- Throughout the case, law firms must track billable time and disbursement fees/expense.
- They also need to track bills and costs for each client at the end of each month (or after the case, if it’s a shorter case).
- Attorneys add remarks, modify expenses as appropriate, and sign off on the bill after reviewing.
- Then the final version of the bill.invoice is share with the client.
- The company accepts a variety of payment options from clients.
- In the event of late payments, the accounting staff will issue follow-up reminders.
Even while it appears easy, there is still plenty of potential for bottlenecks and wasteful expenditures to creep into the process. Taking too long to approve bills or adding too many modifications might create a delay in bills being sent out, for instance.
Your law firm’s billing policy
A clear, consistent law firm billing strategy is crucial for saving your business time and money. Attorneys and staff may use it as a reference, and it keeps everyone in sync.
The first thing you should examine when drafting a policy for the first time is:
- How does your company bill clients?
- Are there any areas where you observe the most mistakes?
- In which phases of the process are the biggest bottlenecks occurring and why are they occurring?
With that in mind, follow these steps to write an effective billing policy:
1. Provide a template and guidelines
Invoices that you send to clients should be timely and follow the proper format. Uniformity can help you establish trust. Plus, they are easier to track with billing software, invoice generation is automatic.
2. Write out the flow of your law firm’s billing process
Which of the attorneys involved in a lawsuit should evaluate a billing statement? Then, what order? Invoices are mailed or sent through email? When you send a bill, who needs to be notified about it? Your whole procedure should be documented from beginning to end to avoid misunderstanding.
3. Set requirements for invoice review
For electronic evaluations, it’s helpful to advise lawyers to utilize a specific system like your legal practice management software. If you want to speed up the process even more, you may utilize automation software to do it for you.
4. Integrate the finance team with your billing process
Your accountant or financial staff should know when bills are received, what has to be collected, and what is written off.
5. Include a standard process for disputes and collections
Be sure to take care of any outstanding debts as soon as possible. Having a clear collection procedure is important because the longer you wait, the less likely your clients will pay. Determine who is responsible for collecting delinquent invoices and share notes or emails if there is a delay. If a client challenges a bill, be aware of who will examine the claim and give frameworks for resolving the issue.
6. Have a public billing policy for clients
As a result of this, your clients should have a clear understanding of your charging policies.
- How often will they be billed for the service
- What form of payment is expected?
- When do they have to pay?
- As a result of late payments
These rules must be part of the policy and share with all the new clients.
Finally, well, it is time for lawyers and law firms to move beyond the tedious processes around billing and invoice management. There are a lot of law firm management platforms that can help you with that.
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