Accounts receivable consists of the money needed to be collected by the law firms from the clients for offering the services. It is one of the most important financial processes for the income of every business. If law firms’ accounting is not done efficiently or ignored in several manners, it creates a path for loss for the law firms.
Accounts receivable Outsourcing maintains the company’s flow of income to handle several types of expenditures in liabilities, including employee payments, insurance costs, office supplies, taxes, and others.
Top 5 accounts receivables mistakes done by law firms
- Feeling scared of ruining relationships with the client
Several law firms’ owners think that if they keep recalling the clients for timely payments, they might lose them. They don’t wish to make clients uncomfortable by asking for advance payments and think that they should offer ample time to their clients to release the payment.
- Limited payment options
One of the most common mistakes made by law firms is that they offer limited choices of payment to their clients. Relying on making payments from cheques and the traditional method of collecting cash leads to the payment delay.
- Depending on standard data reports
Law firms only take the overview from the data reports of accounts receivables. They avoid digging deep into the parameters, which tells them about the real errors in the payment, debt time and also assists them in identifying whether proper steps are taken to collect the payments or not.
- Relying only on paper usage
Several law firms rely only on papers for managing accounts receivable; be it sending payment reminders to the clients or maintaining billing statements, law firms prefer depending on papers. This process delays the timely delivery of invoices and is also focused on the misplacement of statements.
- Ignoring previous account receivables
The main motive of law firms is to offer their current clients unmatchable experience and acquire new clients at the same time. However, while doing this, most law firms ignore the previous account receivables and put less time and effort into sending payment reminders to clients.
Best practices for law firms to handle accounts receivables
- Speed up the process of billing
Sending bills more frequently is one of the best ways to reduce your account receivable days. If you are sending invoices twice-monthly, then offer transactions to a higher cadence. Enhance your collaboration with your paralegals and partners. Working on these departments to create deadlines and procedures will assist you in on time and prompt billing. Post keep tracking your progress with monthly reports.
- Practice good record keeping with late payment accounts
Enhance billing software’s limit and keep contacting clients over past due bills and track when your company has sent the last reminder, and track the client’s response.
- Allow credit card payments
According to a Federal Reserve payments study, between 2015-16, the credit payment has enhanced by 10.2% with a 7.4% increase in debit card payments. Meanwhile, cheque payments have been reduced by 3% in the same period.
Clients prefer credit cards over other payment options because it offers them high control over the payment and helps them acquire reward points for mechanizing and travel purposes.
The most crucial reason why law firms should prefer credit card payments is that they get paid faster. Credit card payments enhance the cash flow and enable companies to have working capital in a day or two business days.
- Allow clients to receive email invoices
Law firms can send invoices to their clients with a single tap of the keyboard. For being more effective law firms can take assistance from account receivable outsourcing companies in attaching click to pay link in their invoices to mail email invoicing. It will enable them to have a smooth and safe payment by just clicking on a link.
- Create collection procedures and policies
If you don’t have a collection policy for your clients or it’s outdated, always prefer to have the latest financial policy. A financial approach is one of the best opportunities for law firms to define their collection procedure and enables clients to know what exactly you expect from them. It also tells them that your company is highly focused to get paid on time. Things that should be included in your privacy policy include:
- Billing appeals
- Payment methods accepted
- Past due notifications
- Discounts on early payments
- How clients can commence a payment plan
- When account will turnover to collection partners
- Due dates post invoicing
- Flexibilities offered
Final words
Account receivables play a crucial role in contributing to the financial situation of the law firm. Law firms should understand this and implement a strategy that can help to streamline the accounts receivable process. They should replace traditional invoicing and initiate collecting cash with electronic invoices and online payment gateways to deal with clients more effectively.
Technical expertise and falling short with cash should be dealt with carefully. Law firms should prefer taking assistance from firms offering account receivable Outsourcing to effectively handle their accounts receivable and get all the pending payments cleared soon.
Law firms looking for accounts receivable Outsourcing can get in touch with FinAcc Global.
