Question of the Week: How Can Our Firm Stay on Top of Past-due Accounts?

How-Law-Firms-Stay on-Top-of-Past-due-Accounts

You work hard for a client and then they never pay your bill, forcing you to follow up in what can be an uncomfortable scenario. If that sounds familiar, you’re not alone – a LexisNexis survey showed over 73% of small law firms deal with past-due invoices. Fortunately, there are ways to prevent this situation from occurring and to streamline the collection process if it does happen.

Avoid Them All Together

The most effective way to deal with past-due accounts is to put measures into place to make sure they never even get to that point. These steps will give you better cash flow and also reduce the headaches associated with trying to collect payment. From there you can handle what limited accounts go on to become overdue.

Using evergreen retainers, where clients are sent a notice once their trust account balance hits a certain minimum, is an effective way to make sure there’s always enough funds available to cover invoice amounts. You can automate this process using a practice management program to automatically send notifications to the client once their account hits a certain level. Being proactive in addressing depleted funds and setting up this process with your clients from the start will mean less time tracking down payments later.

Detailed and regularly scheduled billing is another way to ensure bills are paid promptly. Failing to include enough information about what the client is being charged for often results in questions or failure to pay. Be specific as to what was done, using detailed task descriptions to spell out what was done. For example, instead of listing “Document Review” you could include exactly what documents were assessed using terms your client would understand and update to “Review of Defendant’s Motion.”

Be sure to send invoices on a regular basis so clients aren’t presented with work from two or three months ago. Such back-dated invoices are likely to be met with non-payment as it becomes harder to see the value in work done the further away you get from the time it took place. To avoid these problems, practice management tools that provide batch invoicing can make it easy to send out multiple invoices at once on an ongoing basis.

Accepting credit cards is an additional method to make sure your invoices are getting paid. Many clients expect to be able to pay by credit card these days and you’ll be offering a way to ensure payment, even if they’re unable to do so by check or cash. Law firms should be mindful of their specific compliance requirements when choosing a credit card processor, as noted in A Look at the Challenges of Accepting Credit Card Payments in Law Firms, but with the right vendor, the additional payment option can significantly increase payment rates.

Efficient Follow-Up

Once an account becomes past due, one of the worst things you can do is to not follow up promptly. Of course there are clients who always send their checks in two weeks past the due date, but for the most part, getting ahead of these accounts is in your best interest. If a client doesn’t hear from you about an invoice for a long period of time they may start to think you’ve forgotten about it.

Manually tracking invoices and their due dates can be tedious and time-consuming, but this is another situation where the right tool can be useful. Programs like CosmoLex can produce regular reports showing which accounts are past due and send automatic reminder notices to these clients. From the reports, you can determine who needs a personal call as a follow-up.

Getting Paid

As many clients as your firm has or billable hours that make their way onto an invoice, none of that will matter if you aren’t getting paid. Dealing with past-due accounts takes away from time that could be better spent on other tasks, so be sure to avoid it where ever possible. When the accounts do become past due, automating as much of the follow-up and reducing manual tracking of overdue invoices will help cut down on time spent on the task while increasing your likelihood of getting paid.

Learn more about keeping up with past-due invoices in How do I Track Overdue Accounts?


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