Introduction
Billing, collections, and integrated payments are crucial to a law firm's financial stability and success. This blog post will discuss best practices that can help law firms enhance their billing and collections hygiene, ensuring accurate and timely invoicing, efficient collections, and improved financial performance.
1. Establishing simple and clear Billing Policies
Law firms should invest early on to draft, review, and finalize clear billing policies. These include but are not limited to defining fee structures, billing frequency, payment terms, and late payment penalties. An engagement letter should clearly document these policies and should be reviewed and agreed upon by the Client. By setting expectations upfront, law firms can avoid confusion, reduce billing disputes, and maintain healthy client relationships.
2. Diligent Time tracking
The more accurate the time tracking and documentation process is, the more precise the bill will be. All billable activities should be captured and recorded promptly and in detail. All timekeepers should be provided with detailed training and encouraged to follow this discipline. There are many times tracking and recording software that focus on helping firms successfully accomplish this. Find one that works for your firm's specific needs and roll it out to everyone with guidelines and training.
3. Reviewing invoices regularly
This is a crucial step, and firms need to invest in this process to ensure the accuracy of the invoice before it is delivered to the Client. Having a dedicated billing coordinator or a team allows the firm to ensure accuracy, consistency, and compliance with the already agreed-upon billing policies. This review process further reduces billing errors and ensures the client-specific guidelines are adhered to, resulting in increasing the Client's confidence in the law firm's invoices as well as boosting the professionalism experienced by the clients.
4. Consistent and timely invoicing
Law firms depend largely on the cash flow, and generating, reviewing, and delivering the invoices in a timely manner goes a long way toward supporting the firms' cash flow needs. Define the billing cycle for all activities, and ensure invoices are delivered promptly based on billing guidelines. Ensuring invoices are delivered promptly reduces payment delays and supports collection efforts while increasing the client experience.
5. Define collections steps and process
Collections can be tricky, but having a defined process for escalation, outreach to customers, and approvals during write-offs/write-down can help firms manage this efficiently. Keeping track of outstanding invoices, sending reminders to the Client when appropriate, or sending the latest information to the billing attorney should be defined and largely automated. Aging buckets for the outstanding accounts receivable allow the collections team to prioritize and minimize write-offs.
6. Communicating frequently with Clients
Keeping the Client informed regarding billing and collections without bombarding them can go a long way to increase client satisfaction. Sending invoice reminders, updates, or statements keeps the Client aware of their invoices. Offer payment plan when required or requested by Client and promptly respond to all billing inquiries or concerns. Having transparent and open communication with the Client is important, and it demonstrates the firm's commitment to the Client's satisfaction.
7. Monitor, monitor, and monitor
Firms should define the key relevant metrics, including but not limited to the Billing and Collections realization, aging AR buckets, and average days it takes to get paid (per Client). These metrics will allow firms to monitor the health of each Client, and any deviation from the standard behavior provides an early indication of potential issues. Firms should be reviewing these metrics at all leadership levels and monitoring the evolution of these metrics over months and years to help drive effective billing and collection policies.
8. Review, learn, and adapt
This is an activity that firms perform every month thousands of times, and it is imperative that firms periodically review this process and look for areas to gain efficiency. Every firm is unique, and the goal for each firm should be to optimize this set of core business processes to their specific needs. Getting feedback from lawyers, billing and collection teams, payments, and cash receipt team is critical for this process to be effective. Building trust and transparency with Clients and ensuring they have a superior experience will help firms build a strong, stable, and predictable cash flow for the firm.
Conclusion
Law firms must constantly evolve, manage and streamline the billing, collections, payments, and reconciliation processes. Through clear policies set up front in an engagement, documenting and aligning Client expectations early on, defining and documenting the actual process within the firm, and always looking to improve by monitoring metrics and seeking feedback is the only way for firms to manage the entire Invoice to Cash process efficiently. This is key for the long-term success of the firm and critical for the firm to hold on to its core resources.
Oddr provides a unique platform for law firms to manage the entire Invoice to Cash process, providing visibility, tracking, and traceability for every invoice throughout the invoice lifecycle. With unique dashboards for the Billing team, Collections team, Billing attorneys, Partners, and Practice Group Leaders (PGLs), Oddr is the right platform for firms that want to lower their DSO and lower their write-offs while increasing their client satisfaction score. Oddr provides hyper-automation for internal and external collaborations as well as for sending invoices, reminder statements, and effective collections to increase cash flow.
