Tips For Improving Your Law Practice’s Cash Flow
There is a very good article in the May/June 2014 issue of Law Practice entitled “Improving and Managing Cash Flow“. The author, Allison C. Shields, says, “Inconsistent billing practices, long delays on accounts receivable and languishing WIP (work in process, i.e., work that has been completed but not billed) can wreak havoc on a firm’s finances.” CosmoLex law firm billing software helps you put some of the strategies outlined in the article into practice. Here are a few of the tips she gives:
Get Paid Up Front – Shields suggests using retainers but also using normal billing, saving the retainer for the last payment. CosmoLex allows you to pay invoices from retainer balance or to generate bills.
Bill Consistently – Even if you get paid up front, you should still send invoices every month at the same time so clients can see the work being done. Invoices should be itemized but avoid legal jargon. CosmoLex’s one-click invoice generation allows you to produce clear, professional invoices for all outstanding matters simultaneously. As Shields puts it, “If you can’t be bothered to send your bill on time, why should the client pay on time?”
Follow Up on Unpaid Bills – Don’t let balances languish. Nobody likes doing collection calls but you don’t have to be confrontational or unsympathetic. Start with reminder letters when a balance is 30 days overdue, another function built into CosmoLex time and billing software. If a balance gets old enough then it might be worth a telephone call to find out what the client’s situation is. Shields goes so far as to suggest, if it’s allowed in your jurisdiction, that you stop work if a balance becomes overdue.
Be Open About Billing – Talk about your billing and retainer policies, and your specific fees during the initial consultation. Clients who haven’t retained attorneys before are often surprised by how expensive some services are but it’s better to lose a client before you start work then to be surprised later by a client who refuses to pay your “outrageous” fees.
Review Your Finances – You should regularly take a look at your practice’s overall financial picture. What work hasn’t been billed? What has been billed but not paid? What matters are not seeing any activity? How are your retainer balances? All of this can be seen from the main screen of CosmoLex giving you a 360-degree view of your firm’s financial health.
The full article contains far more information and is a good read, especially for solo law firms. It shows the same kind of proactive attitude toward practice finances that is the guiding principle behind CosmoLex legal software. Try CosmoLex for yourself and get started on smart practice management today.