2 CRITICAL QUESTIONS TO ASK YOURSELF WHEN MANAGING LAW FIRM ACCOUNTS RECEIVABLE

2 CRITICAL QUESTIONS TO ASK YOURSELF WHEN MANAGING LAW FIRM ACCOUNTS RECEIVABLE

Firms lose thousands of dollars every year to the overhead costs of managing accounts receivable, for hours of work that they are never paid for, and on invoices they were never able to collect in full. Whether you’re a large firm with offices all over the world or a small practice of only one or two lawyers, you’ve experienced it. Collecting law firm receivables is tough for many reasons, but there are a number of things you can do to stop this profit loss from happening in your firm and start collecting invoices faster. First you need to understand why it’s happening and what options are available to help you fix it.

“WHAT’S CAUSING MY ACCOUNTS RECEIVABLE PROBLEMS?”

There are a few common things we’ve seen going on in law firms we’ve worked with that makes collecting receivables tough and it usually has something to do with the policies and the tools being used to manage accounts receivable.

POLICIES & PROCEDURES

Does your firm have a billing policy and defined collection processes and procedures? Many don’t and even those that do have them do not put them into practice or have not updated them since they were originally written. Without billing policies defined, you could be setting yourself up for incorrect billing or a lengthened collections process. Billing is only half the battle; if there is no defined workflow to walk through collections will be inconsistent in service to customers, missing critical steps in the process, and are likely not utilizing proven best practices for collecting law firm receivables. Developing documentation on billing and A/R allows you to:

  • Ensure continuity in the department in the event that key personnel leave the credit department.
  • Make sure all customers will be treated fairly.
  • Consistent credit decisions are being made.
  • Training tool for new sales associates and new additions to the credit and collections team.
  • Consistency in both procedure and execution between the credit department, sales, and management.
TOOLS

If your firm is like a majority of others, you’re using low-tech tools to manage accounts receivable. Some of these low-tech strategies include spreadsheets or accounting systems that produce aging reports that are then used to compose invoices and keep track of collections. Such practices do not offer opportunities for collaboration; nor do they provide collectors with the time-savings they need to accomplish the many activities involved in accounts receivable management. With the right tools in place to manage the accounts receivable process, collectors can eliminate manual data entry, automate time-consuming tasks, invoice faster and more frequently, and use their time to call customers about payment and settle invoice disputes.

“WHAT AM I GOING TO DO ABOUT IT?”
ADDRESS YOUR BILLING AND CREDIT & COLLECTIONS POLICIES

Take the time to look over your existing billing and credit policy documents to reflect how your business operates today. These documents should be looked over annually or as shifts in the firm arise. If you do not have a policy and procedure document in place, make it a priority to begin developing one.

What should your policy and procedure manual contain for it to be effective? Take a look at this white paper which lays it all out for you.

INVEST IN THE RIGHT TOOLS

Accounts receivable management software is a proven strategy for faster and more effective collections. Accounts receivable is one of your firm’s most important assets and your best source of working capital, don’t rely on low-tech and manual processes to manage it. You can build your policies and procedures right into the system making it easier for the staff to follow them and measure the results. According to PayStream Advisors, those who automate collections see benefits such as:

  • 10% to 20% reductions in daily sales outstanding (DSO)
  • 25% reductions in past due receivables
  • 15% to 25% reductions in bad debt reserves
  • Return On Investment (ROI) in as little as 2 months

HOW TO COMPLETELY OVERHAUL YOUR CREDIT AND COLLECTIONS PROCESS

Are you a law firm that needs to rethink their process and policies for collections?
Read our guide here.

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