Want to get paid faster?

It's the time of year in firms when the "big push" for collections is on. This has always been foolish and unnecessary, because firms should keep on top of their payables throughout the year.
 
The following trends, in addition to more active and assertive attention being paid to collection efforts, will improve the cash flow of the law firm and shorten the collection cycle:

-Firms are taking advantage of the new check scanners offered by some banks to more quickly and securely deposit client checks.

Scanners treat a check as a sort of debit card, making deposit instantaneous. A related but more comprehensive strategy is to negotiate for a lockbox with the bank. Many banks now advertise this as one of their premier business services. In this arrangement the bank uses online technology to pick up remittances several times a day, record them and send details of the transaction to you as the customer, either the same day or the day after funds are deposited.

-More firms are closing their billing on the 25th day of each month to get their bills into the "first of the month" billing cycle of clients—both businesses and individuals.

I've long been an advocate for law firms developing alternatives to diversify their receivables stream. Sending out invoices on or about the 25th of the month is a good example. It shortens the receivables stream because clients receive statements on or before the first day of the following month. Since most people pay their bills on or about the first of the month, a bill that comes after that is frequently kept for payment until the following month. Another idea is to bill one-fourth of the alphabet each week. That way the firm receives money from one-fourth of all clients weekly, rather than once per month, which helps to even out cash flow.

-To get partners to collect bills sooner, firms are using automated e-mail and other added technology features now available in many time & billing programs to keep the pressure on automatically.

This is particularly effective when combined with incentives for lawyers to have a high collection percentage on the fees they bill (called realization rate) and enforcement actions against those who lag on collections (such as withholding compensation, or deducting collection expenses from it).
 
Best wishes,
 
Ed Poll
lawbiz.com
800-837-5880
 

Law firms today are moving toward operating in a more businesslike fashion, rather than just as a group of professionals—and those that are truly businesslike will recognize that a key to responsible management is establishing a strong banking relationship. Importantly, banks are looking for profitable new niches so law firms and banks are natural allies in today's competitive world.
 
When you have the right relationship, a good banker will be creative in helping you become aware of opportunities to grow your business in ways you didn't know existed.
 
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