Top 10 tips to overcome the challenge of managing cash flow
Cash flow is perhaps the key challenge currently facing small to mid-sized law firms. This can be optimised with the right attitude, processes and technology.
Whatever the demand for your services, it’s good practice to ensure that your firm is paid, and on time.
When practising law as part of a small firm, you can spend a lot of time on administrative tasks such as billing and invoicing. This can be stressful and time consuming, and can cause difficult situations if the client disputes a bill at the end of a case.
Fortunately, there are practical things you can do to minimise these things from happening to ensure you get paid correctly and promptly, and to flag up any problems quickly. Here are our ten top tips as to how you can achieve this:
1. Always collect a deposit from the client before you start work
By setting the ground rules at the start of the relationship you control the payment agenda, and your clients will appreciate knowing where they stand. It will also help to ensure you avoid time wasters and non-paying clients.
2. Set a client money retainer limit
Regularly receive payments to keep clients within their limit of paid for hours. Avoid unnecessary exposure, to bring greater value to the client and never exceed your limits.
3. Provide a fee and cost estimate
Keep a track of when you may be approaching the limits, so that you can take an informed decision regarding steps and if necessary, discuss this with your client.
4. Provide a good fee agreement
If terms of the fee are clear from the start, the payment process will run more smoothly during your client relationship.
Always keep your client informed if circumstances change.
5. Give your clients flexible and easy payment options
If you can accept payments online, via standing order, or by credit card, it makes it easy for your clients to pay you.
The more options you can accept, the quicker you will get paid.
6. Keep a close eye on debtors, unbilled work in progress and disbursements
The firms that are the most efficient with financial procedures will be the ones that are paid the quickest.
Make sure your credit control process is smart, persistent and efficient.
7. Monitor the workload of your solicitors
Their priorities may not be the invoicing. They may need help to focus on the areas that will make your practice more profitable.
8. Produce regular bills for smaller amounts
A large bill at the end of a case can create an unhappy client, negotiation, and a subsequent, inevitable discount.
Regular bills for small amounts eliminate this hazard of practice.
9. Ensure that every invoice is in plain English and easily understood
Make sure your invoices are clear and precise, which helps avoid unnecessary communication and potential delays in payment.
10. Apply your own payment terms with discipline
Be prepared to pause work if you’re not properly instructed.
Implement a billing cycle and bill regularly. Make sure your clients realise this is a process and that it’s nothing personal.
Fortunately, there are good software packages out there that link with your case management systems to help provide you with all the above benefits. At LEAP we partner with Xero to provide this to our clients.