When you think about your firm’s accounts receivables, what comes to mind?
Pain? Headache? Lost money? Wasted time?
Accounts receivable exists in every business. In a law firm, this can be a sore subject as late payments and rising AR causes anxiety and potential cash flow issues.
At Headnote, we’ve put significant effort into cleaning up this issue. We have tools and strategies to help you simplify AR and collect the cash you deserve.
However, the greatest tools in the world won’t help unless your law firm takes a new approach to accounts receivable. What if AR wasn’t something to dread, but seen as an opportunity?
For many firms, accounts receivable is a necessary evil that’s part of the gig. It’s a cause for disillusionment as you grow frustrated with clients and bank on a write-off at the end of the year.
For a law firm to get to the idealistic point where money is billed and collected quickly, easily with minimal headache and follow up, we have to start with the mental approach to AR. That starts with making AR reduction a priority.
Why Law Firms Need to Prioritize AR
Your AR issue is a time management issue
Often when you think about AR, you are thinking about money. Rightfully so, this is a matter of collecting what is owed to you. But for many law firms, their approach is reactive. If you are thinking, “AR is a challenge for everyone, and you just have to spend time on follow-up to collect,” you are falling into a trap that’s going to drain a lot of your time.
With an efficient AR process, your staff’s time commitment should be at a minimum because expectations are laid out and clients make their payments quickly.
When AR starts to pile up, so does the work for your team. Now you are trying to chase down payments, keep track of what’s owed and by who and it becomes a giant draining administrative task for both billable and non-billable staff.
This staff time is worth even more money on top of the money you’re trying to collect.
Your AR is a growth issue
A core lesson for a business is the importance of cash. It’s important to remember there is a difference between cash and revenue. Revenue is money you’ve earned, but until you collect it – you can’t do anything with it.
This is significant because cash gives you flexibility in decision-making. One example is with hiring. Growing a business is expensive. As you grow, your needs for staff increase. Maybe you want to hire an associate or some administrative support.
Just because you have a growing client-base, doesn’t mean you can necessarily afford the increasing payroll. Having a reliable system for predicting how much cash is in your bank account is the only way you can grow with confidence. That means converting bills into cash and never looking back.
Your AR is a client experience issue
When thinking about AR, it’s easy to get in an adversarial mentality with your clients. They owe you money and you may be thinking to yourself, “They are being irresponsible and need to take care of this.”
This is probably true. However, a helpful exercise is to flip this on its head and think about what would be the best case scenario for clients. Think of it as if you are on the same side as your clients – both working together to make the payment process easy. As you may have guessed, the answer is: clients want to pay electronically.
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.
Not only is it convenient for them – it also creates a better, more enjoyable experience.
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.
Creating a great experience for your client requires every possible interaction to be positive and smooth. This includes billing and payment. When you create that great experience you are 1. More likely to get paid quickly and 2. More likely to have repeat business or a referral
Changing your mindset on AR
Does your law firm struggle with AR? You are not alone. It’s extremely common. Because it’s common, it’s easy to have the mentality that “this is just the way it is.” The truth is, you can have an efficient AR process that puts cash in your account and makes your clients happy.
To increase cash flow, peace of mind and save time has a massive ROI for a law firm. It’s well worth your time to put a solid system in place. The first step is to transform your thinking and make your AR process a priority.
If you want to know how Headnote can help or hear general AR advice, schedule time for a demo now.