Are you happy with your firm’s cash flow?
Your billing and collections practices can have a major impact on your law firm’s cash flow. Here are five ways to improve them to make cash flow more consistent. (Watch the video, or read more below):
- Have Frank Conversations with Clients About Billing – No one likes to talk about money, but it may be the most important part of your initial consultation. Explain your billing and retainer policies, your fees, and how they are calculated. Provide a budget or estimate of total fees. If the client is unable or unwilling to pay, it’s better to find out now than to do the work and not get paid.
- Get Paid Up Front – Don’t wait until the work is done to chase clients for money. Paying up front demonstrates the client’s commitment to their case. Use evergreen retainers to replenish funds and refund the client any remaining funds when the matter is complete.
- Send Clear, Consistent Bills – I tell my clients, “If you can’t be bothered to send your bill on time, why should the client pay on time?” Communicate at least monthly with the client, even if no work was performed that month or they have paid the entire fee up front so they know the status of their matter and can see what work is being done. Send itemized invoices in language clients can understand – don’t use legal jargon.
- Follow Up on Unpaid Bills – If a client gets behind on their payments, address it right away. Set up a collections process that begins with written reminders, and follow up with telephone calls. If you can’t work out a mutually convenient payment plan, and if it’s allowed in your jurisdiction, stop work until the client becomes current.
- Conduct a Regular Financial Review – Is there work that hasn’t been billed? Are some matters languishing with no activity? Are your retainer balances sufficient? Look for patterns – are some clients consistently not paying, paying late, or contesting their bills? Make changes in your billing practices or intake procedures as necessary.
If your cash flow isn’t what you want it to be, or you need help with your billing and collections procedures, email me at Allison@LegalEaseConsulting.com.