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Law Firm Finances: How To Take The Sting Out Of Collections

Dealing with collections is inevitable no matter what type of law firm you’re running.

iStock_000054864024_Medium-300x200Dealing with collections is inevitable no matter what type of law firm you’re running. If you want to get the most of your billing process and avoid losing money, you’ll need to implement the type of process that takes the sting out collections.

  1. Create a timeline. Your billing process should have a predefined process that determines when invoices and collections notices are sent to clients. For example, you might decide that all clients receive an invoice within 7 days after they’ve received legal services. Implementing this policy firm wide ensures that everyone bills clients uniformly.
  2. Bill quickly. Don’t wait too long before sending a bill to clients. The longer you wait to bill someone, the less likely it is that they will pay. This also goes for collections, if you know a client is 14 days late paying their bill, don’t wait for another 14 days before sending out a collection notice. As soon as they are a few days late you should immediately contact the client to see why they haven’t paid. Frequent communication with delinquent clients is key to getting paid.
  3. Automate. Billing can become cumbersome and overwhelming when done manually. If you want to eliminate errors and standardize the way you go about billing clients, you’ll need to choose an automated system. This system should fully integrate into your existing software so that when attorneys enter their hours, the billing system pulls that information (along with their billing rate) and generates an invoice. Automated billing not only takes the hassle out of collections, it can reduce the need to deal with billing delays since clients are automatically sent a bill right after they’ve received legal services.
  4. Optimize invoice format. How you format your invoice matters. Is the due date and amount easy to see and read? Are the details of legal services rendered clear and easy to understand? Making sure that your invoice format is optimized will reduce billing disputes and help clients understand why they’ve been charged a certain fee. If you have a special billing arrangement with certain client, it’s important to also make that clear somewhere on your invoice, even if you’re using a template.
  5. Create a delinquency policy. No matter how well you design your billing processes, it’s inevitable that some clients will fail to pay. You must decide what you’re going to do when that eventually happens. Are you willing to setup a payment arrangement? Will you stop giving services after a certain point of delinquency? Will you engage an outside collections company to recover payment from clients if they are severely delinquent? Whatever your policy, make sure that you implement it consistently and fairly with all you clients.
  6. Meet face-to-face. If you find that some clients aren’t paying, consider scheduling a face-to-face meeting to discuss the issue. When faced with a real person in their office, many delinquent clients are at least willing to negotiate a payment agreement. But be cautious: Put any agreements in writing and make sure to be clear about the penalties for breaking the agreement. If you can, setup autopay with the client so that their monthly payment is automatically deducted from their bank account.

If you want to take the sting out of collections, you’ll need to create billing processes that work.

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Smokeball - Lynn_ProfessionalLynn Luong is the Digital Marketing Manager for Smokeball, a case management software that increases productivity and efficiency for solo attorneys  and small law firms to become more profitable.  Lynn has over 8 years of experience in marketing with a focus on digital by developing successful strategies and managing many areas of marketing.

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