Law firm cash flow is not only a good thing, it's a necessity for a successful, financially-healthy law firm. When a crisis like COVID hits, cash flow can be what determines if your firm survives. In order to ensure the financial health of your firm, cash flow management practices need to be in place. The following tips can help you improve your firm's cash flow.
Audit your current cash flow Before you can improve cash flow, you need to understand the state of your current cash flow and create a cash flow forecast. The forecast or projection should be regularly updated.
Accept online payments like credit cards
If you are not currently accepting online payments, you should consider adding at least an option for clients to pay online. By offering an easier way to pay, you can increase on-time payments and decrease stress for clients. According to a 2019 Legal Trends report, "Law firms who accept credit cards get paid faster— 57% get paid within the same day they bill their clients, and 85% get paid within a week. Credit card payments are convenient for clients and they’re also easy to set up and track, which means your law firm can increase client satisfaction while spending less time on administrative tasks. Bill clients by using evergreen retainers to protect cash flow
Evergreen retainers are great for your law firm and clients as they improve collection rates and can help streamline accounting at your law practice. This gives your clients an opportunity to pay in smaller segments rather than large lump sums and replenish the amount once the retainer hits a predetermined minimum balance.
Optimize Overdue Accounts Receivable
Following up on unpaid invoices and chasing payments can be a frustrating task of any law firm or business. You can improve your methodology by first creating a client-centered approach and offer solutions that are accommodating to both your firm and your clients. You first need to make sure you have a clear and enforceable accounts receivable management process. If you have overdue invoices, follow up as soon as possible via email. After the email, you can follow up an additional time with a phone call. Legal billing software can also be a great integration and allows you to have automation in place that does the follow-up for you. Additionally, you can add an automated thank you message as soon as clients pay their invoices.
Offer Your Clients Payment Plans There is a great opportunity to develop a strong relationship and have a client-centered approach by offering your clients a payment plan. Your firm can create an internal protocol that of when to offer a payment plan, what plan to offer and more. You will also want to set up the software to manage the plan and accept and track the payments.