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:
Your clients are consumers and they want to pay you 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 clients is an easy and effective place to start.
There is a direct correlation between offering online payment & client happiness
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 client’s 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 71% of consumers report higher satisfaction when given the option to pay online, and 36% were less likely to switch to a competitor if sent an electronic bill over paper. Giving clients an easy and positive payment experience is directly related to your firm’s pipeline of new business – law firms that offer online payment are more likely to have happy repeat clients and get more referrals.
You’ll get paid faster and make a huge improvement to your firm’s cash flow
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 and most prefer an online payment option. And if it’s easier for them to pay you, you’ll get paid faster. Headnote, a fast-growing company that is 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 and grow your business (it takes money to make money), plus it saves you or someone on your team a trip to the bank to physically deposit checks – that’s more hours you can spend billing, and more revenue in your pocket.
Use technology to automate non-billable AR work
While we’re on the subject of doing more with the time you’re currently spending on non-billable work, let’s examine the options to outsource as much of that time as possible using technology. Headnote not only allows your client to pay fast while providing a delightfully easy payment experience, it also automates the AR tracking process by keeping track of the status of all outstanding invoices on your behalf. You can also automate your follow up and collections process with Headnote by using the Automated Reminder feature. You decide the cadence and personalize the content, and your client is automatically emailed reminders until your invoice is paid in full. You get updated via email whenever there is a status change to an outstanding invoice. What you do with the time you save ist up to you. By taking this type of non-billable work off your firm’s plate you can spend your time marketing to more clients, performing more billable work, or doing whatever makes you happy.
But what about transaction fees associated with getting paid online?
Let’s be honest, the first thought most lawyers have when considering online payment is, “but what about the fees?!” It’s true, the fees associated with enabling online payment, particularly credit card transactions, aren’t insignificant. Most charge 3%-5% of the transaction amount. That’s between $30 and $50 for a $1000 transaction. While these sorts of fees aren’t trivial, they’re a relatively small price to pay to get paid remarkably faster than with offline methods like paper check. Most attorneys agree that the time value of money and what they could do to grow their firm with the money they’re waiting for in AR is worth the transaction fees.
But there is a way to pay less than traditional credit card processing fees for industry-compliant online payment. Headnote is blazing a trail in Financial Tech to help reduce transaction fees for law firms by creating a IOLTA and American Bar Association (“ABA”) compliant eCheck payment process. Although Headnote also offers the option to accept credit cards, their exclusive eCheck option allows you to provide a client-friendly online payment but at a fraction of the price of credit cards, only 1.9% for both trust and operating account transactions. You get all the direct and indirect benefits of online payment but at a much lower fee.
Can I pass the fees to my clients?
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 ABA recommends attorneys increase their billable rate by a few dollars to cover fees as a cost of doing business. Check the rules in your state to confirm whether you can pass fees onto your clients.
Aren’t there ethical implications to accepting 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 platform 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 or banking 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 or eCheck 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. Headnote’s flow of funds separates earned from unearned fees at all times even within the merchant account, so your client’s funds are completely protected at all times.
- Ethics and trust accounts: It’s important to ensure that credit card or eCheck fees aren’t taken from trust accounts and that there is no 3rd party access to these funds at any time. 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 and never co-mingled. Any transaction fees 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. Attorneys must use an online payment platform that is PCI compliant, like Headnote.
Online payments are a modern eventuality that nearly everyone prefers, so attorneys should prioritize offering this option to their clients. 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.