iThis is the second post in my three-post series this week on the three ways to fire up your law firm’s profit potential. Click on this link to read the first post in the series.
Improve Your Billing
There are several ways law firms can improve their billing system and lower their accounts receivable (A/R):
No. 1 – Make sure you have a written procedure in place for when a client is to be charged, payment options, how to verify that client accounts are up to date, how to notify attorneys and paralegals to stop work on a client who is overdue, how to handle overdue accounts as well as how and when to send them to collections.
No. 2 – If you’re in the type of practice that has to deal with overdue client payments, then be sure to review an aged A/R report every month and have a system in place to notify people to stop working on a case when a client hasn’t paid. Create a series of letters and emails to send to clients who are overdue.
No. 3 – Include “No Charge” line items on your bills. Just about every lawyer does stuff for his or her clients that aren’t billed. Keep a list of those freebies as you go through your month and then include them as line items on your bill with the notation, “No Charge.” Instantly adds value!
No. 4 – Eliminate surprises. No one likes a billing surprise, so if you are constantly getting pushback on charges clients did not expect, then you need to do a better job of managing their expectations. Give them fair warning on big ticket line items. If the bill is going to be particularly high, call them to explain.
No. 5 – Cut out nickel and dime charges. Roll up all your miscellaneous charges for postage, copies and other small stuff into your hourly rate. Clients hate to see that stuff on a bill.
No. 6 – Don’t charge for phone calls. I’ve never met a single client who likes to be charged for a phone call so be sure to follow up the call with an email that details the conversation, any action steps that will be taken, deadlines to remember, and any major points.
No. 7 – Consider charging more frequently. Ask your clients how often they want to be billed. Most will probably say monthly, the way most of you do it now, but there could be some who want you to bill more or less often. If it’s more often, that’s good for your cash flow.
Many attorneys don’t know the questions to ask or who to trust when it comes to law firm financing. And many traditional lenders and banks will not even consider you if your firm is a personal injury, workers compensation, SSD or another contingency-based practice area.
