Information can be pivotal to running a financially successful law practice, but it must be the right information, presented at the right time.
Keeping track of how much you are owed, for how long and by whom is critical data. Many solo practitioners and small law offices have cash flow problems that are the result of not knowing this information and therefore, not taking the necessary action to collect all bills in full and on time.
Cash turnover is important. You can bill $30,000 a month with an average collection time of 60 days and have a law practice income of $180,000 or you can bill $30,000 a month with an average collection time of 30 days and have a law practice income of $360,000. You work the same and bill the same, but when you collect on all your sent bills within 30 days you have twice the income than if you collect on all your bills within 60 days.
The first step to better collections is better payment information.
Years ago the Aged Accounts Receivable Report was the way we kept track of how much was owed, by whom and for how long. Most billing software produces an Aged Accounts Receivables Report.
Today that kind of reporting looks a bit old fashion and crammed full of information we don’t care that much about. These days we like to manage by exception which means “tell us only the problems and we will work on those.”
We at Interbill are developing overdue payment notifications that are sent to attorneys via mobile devices and email. These notifications display how much attorneys are owed, how much is overdue and what clients are overdue. It is simple, complete and actionable.
So what kind of action do you take when you know this information? It is important to communicate with clients that you know their payments are overdue and suggest ways in which they might be able to pay. Minimum installment amounts are usually welcome by both attorney and client but they must be structured to be effective in the long term.
Clients who are paying are happier clients than non-paying clients. Clients who do not pay usually make up reasons they are not paying. Those reasons are never favorable to the attorney nor for developing a business based upon referrals.
I suggest attorneys keep in touch with what Interbill is developing not only regarding information on Due and Overdue accounts, but on methods for collecting faster and in full.
You can reach us: email@example.com. You can keep up with our cash flow acceleration innovations by going to www.interbill.com. You can always call us at 800.733.9933.