Next to Nothing: How to Tamp Down Your Accounts Receivable

The reason your accounts receivable are high is the same reason every other process in your law firm is relatively untamed: because you don’t apply systems to managing your business.

Everything in your law firm should be systematized.

But let’s walk before we run, and get a basic system in place for managing your accounts receivable.  Collect on those stale invoices first, work on everything else after.

If your accounts receivable are so high, it makes you sick, or if you won’t even look at them because you’re afraid to see the numbers, that probably means you aren’t billing with any kind of frequency.  So, the very first thing you can do to improve your position is to not add to the pile.  By making sure you get billing out like clockwork at the end of each month, it’s more likely that more of your clients will pay you.  That’s simple math.  And, think about it: If you were a law firm client, and getting bloated bills covering 90- or 120-day windows . . . How likely would you be to pay promptly?

If you really want to ramp up your payment processing, add epayment solutions, through which you can automate payment of recurring bills.

And, realize that the billing process is the output end of the funnel.  Before that, you have to get your time input correctly (use a single-entry system, and do it contemporaneously), then added to bills effectively (include a description for time entries that will resonate with clients, and don’t put off finalizing pre-bills) – and, you can also lose revenue as you push those items.  So, that system you’re creating for billing also includes aspects of time capture and finalizing invoices.

Let’s neither forget the existing haystack of unpaid invoices. Most lawyers will look at it, and sigh.  But, you’re going to build a collection process.  Define someone within the firm who will be responsible for collections.  Build a consistent follow-up methodology.  Add and apply penalties and remedies to your fee agreement.  Decide when or if unpaid bills get handed over to collection companies.

This may all sound daunting; but, building a system like this, while challenging at first, will allow you to reap massive benefits on a go-forward basis.

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Need help getting your financial house in order for a new fiscal year?  We can help.

The Wyoming State Bar offers free law practice management consulting services through Red Cave Law Firm Consulting.

To request a consult, visit the Wyoming State Bar’s law practice management page, and start running your law firm like a business.

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