Ask yourself this: How often do you pay for goods and services using a credit card versus writing out a check, stuffing it in an envelope, licking a stamp, and dropping it in the mail? It’s likely safe to assume that, like most other consumers, the bulk of your transactions are digital.
Your clients are consumers, too, yet only 15% of solos and 12% of small firms are currently offering online payment options for clients to pay their fees. If you aren’t offering clients the option to pay legal fees online, it might be time to start. Many small businesses avoid credit card transactions because of the fees. But there are some compelling arguments in favor of offering online payments. Consider the following points:
Clients prefer paying online
According to the World Payments Report 2017, global non-cash transaction volume has increased an unprecedented 11.2% from 2014 to 2015. In mature markets like the U.S., digital payments make up 70% of total payment volumes. The vast majority of consumers are transacting online for convenience sake – it’s faster and easier for them. If a solo attorney or small firm wants to be modern, efficient and business-focused, offering online payment as an option to their cleints is an easy and effective place to start.
Paying online is also what your clients (aka consumers) have come to expect. As attorneys know, getting a client can be tough, but keeping them happy and satisfied can be even more difficult. Anything you can do to make your clients life easier and give them the best possible experience (from the work you perform on their behalf to the way you send them invoices) will reflect positively on you and your firm. Offering online payment is no exception. In fact, a recent study showed that clients are 25% more likely to stick with their attorney over a competitor firm if they are given the option to pay online.
You’ll get paid faster and save time
Recall the earlier mentioned scenario of clicking a few buttons to make a payment in minutes in contrast to the check writing? Your clients want to save time just as much as you do. Many people don’t keep stamps on hand anymore and most favor online payment options. And if it’s easier for them to pay you, you’ll get paid faster. Headnote, a fast-growing company that calls itself the new standard in legal payments, has measured that when invoices are sent and paid online over their platform 84% are paid in under a week, thus dramatically improving payment time from the industry average of 60 days or more. Having money in the bank instead of waiting for a check to arrive in the mail certainly makes it easier to manage finances, plus it saves you from having to go to the bank to physically deposit checks.
Similarly, companies like Headnote create real-time transparency into the state of your firm’s AR department, automating certain administrative functions you previously had to do yourself, such as: keeping track of the status outstanding invoices and updating spreadsheets once payment arrives, awkwardly contacting clients with past-due invoices to request payment, or emailing your client a receipt (and you an update) once your bill has been paid. By taking this type of non-billable work off your firm’s plate, you have more time to get more clients, focus on legal work, or doing whatever makes you happy (and it probably isn’t check chasing).
You may be able to pass off fees to your clients
The fees associated with enabling credit card transactions aren’t insignificant. Most charge 3% of the transaction amount. That’s $30 for a $1000 transaction, which most attorneys agree isn’t trivial, but is a relatively small price to pay to reduce the payment time from 60 days to under a week. Companies like Headnote are also blazing a trail in Financial Tech to help reduce these fees. For instance, by giving you the option of requesting online eCheck payments from you clients instead of credit cards, Headnote can lower your fees to only 1.5% per transaction. The business development, client retention, and administration efficiency factors alone are enough to make those fees worthwhile (and are simply the cost of running an efficient business in today’s world).
Some states have recently updated their rules to allow attorneys to pass off transaction and administrative fees for processing online payments to their clients under certain circumstances. For instance, some states allow attorneys to pass fees to clients if they are within reason and clients are given advance notice and consent; other states allow firms to charge clients a universal flat fee that can go towards offsetting transaction fees. In general, the American Bar Association recommends attorneys increase their billable rate by a few dollars to cover fees as a cost of doing business. Check the state-by-state requirements listed by the American Bar Association to see how the rules in your state affect whether you can pass fees onto your clients.
What attorneys need to know about online payments:
Receiving payment online isn’t inherently risky for attorneys, but all of the same legal and ethical requirements around handling client money still apply. Using a legal payments software solution like Headnote, made specifically for attorneys and the legal industry, is the best way of keeping your transactions centralized and above board. We’ve included some info below, but be sure to conduct your own due diligence before jumping in.
- Payment gateway: This is where the client enters their credit card information. A payment gateway can be a physical card reader or a form on a webpage. The information entered in the gateway is then transferred to an intermediary account (merchant account). All of this takes place behind the scenes, so from your client’s perspective (and yours) they simply click a button and payment is initiated seamlessly.
- Merchant accounts: Most credit card processors will briefly hold a client’s money in a merchant account established with a FDIC insured bank while verifying the details of the transaction, then transfer the money to your firm’s operating account. This is completely standard practice in all banking and online purchase relationships whether paying via credit card or eCheck.
- Ethics and trust accounts: It’s important to ensure that credit card fees aren’t taken from trust accounts and that there is no 3rd party access to these funds at any time. With very few exceptions, most online payment platforms prohibit attorney’s trust accounts. However, using a processor like Headnote made specifically for the legal industry will help you make sure that funds, including trust funds, are protected throughout the transmission process. We treats trust and operating account funds differently during transmission before depositing them to your firm’s trust account, ensuring no co-mingling. Any fees associated with the transaction are taken from the firm’s operating account so the entire amount of the trust deposit is protected every step of the way.
- PCI compliance: Any organization that facilitates the online transmission of funds and payments must adhere to the Payment Card Industry Data Security Standard (PCI DSS). The standard is intended to protect consumer data. Accepting online payments requires the transmitter to collect, process, and transfer data, so it’s important to make sure you are using a platform for online payment that is adhering to the rules surrounding PCI compliance.
Online payments are a modern eventuality that nearly everyone prefers, so attorneys should prioritize offering this option to their clients. The benefits of accepting online payments outweigh any associated fees, especially considering the value of the time you’ll be saving by streamlining this non-billable AR work. When considering payment partners, it’s extremely important to use an online payment platform built specifically for the legal industry and its specific needs. In summary, software like Headnote can help you streamline and automate your AR processes, save you time, get you paid faster, and give your clients a professional and convenient impression. Your clients will thank you by paying you faster and wanting to work with you over and over again. Most importantly, Headnote will help make sure you are totally compliant in how you accept online payments, so you can focus on what really matters: growing your practice and doing great legal work. Have questions about compliance or taking payments online? Reach out to us at help@headnote.com with questions or comment below!
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