Tips For Improving Your Law Practice Cash Flow: Bill Early, Bill Often
In this last piece in our series on improving law practice cash flow, we look at how you bill. It doesn’t do you any good to provide services if you don’t get paid for them. How you use your legal billing system to invoice is even more important to your cash flow than what is listed on the bill. Invoices are what turn your unbilled balance and unpaid balance into real money in your operating account.
It goes without saying that you will need to bill before you can expect to get paid. For quick matters that take less than a day, you should bill immediately. For longer and more involved cases, send ongoing invoices at least once a month. Note that even if you collect a retainer from the client and pay bills from that fund, you still should send monthly invoices. That shows the client the work being done as well as highlighting the dropping retainer balance.
Look over the invoices produced by your law office software. Do you need to be an attorney to understand them? You don’t want to bill a simple lump sum every month but you also don’t want to send a twenty page invoice. Find the right balance of itemization so client can see the services they are paying for and can quickly find the amount that needs to be paid. Clean and professional invoices get paid faster than confusing ones.
Don’t Ignore Unpaid Accounts
One of the leading causes of poor cash flow in legal practices is unpaid bills. A paper by the Center for the Study of the Legal Profession at Georgetown Law shows that lawyers don’t collect 16% of what they earn, and a big part of that is because the law firms simply don’t try. They make half-hearted efforts to collect and then write it off as a bad debt.
It’s understandable. Attorneys often build rapport with their clients and don’t want to come off as heartless and mercenary. Well, you are a mercenary. You practice law because people pay you, and when a client doesn’t pay you, that client is taking advantage of your relationship. That doesn’t mean you have to be rude or unfeeling. Often a gentle reminder of an aging account is all a client needs. If the client is having financial trouble, you can talk about a payment plan or even forgiving part of the bill. After all collecting 50% of your bill is better than collecting 0%. The smallest effort to collect on unpaid balances can have an enormous positive effect on your firm’s cash flow.
CosmoLex law practice management software offers one-click billing and late payment reminders that make it easy for your law practice to notify clients of their obligations. The innovative dashboard gives a one-screen overview that lets you find lost sources of income so you know where to focus your attention to boost cash flow. To learn more about using CosmoLex for your legal billing, visit our Legal Billing Software feature page.
Start a one-month free trial to see for yourself how CosmoLex can improve your law practice’s financial health.