Business impact of inefficiencies in the Invoice to Cash process

May 8, 2023
Business Efficiency

Legal billing is critical to law firms of all sizes. Legal invoice payments have many moving parts: the stress of meeting varied client requirements and focusing on redundant administrative tasks such as managing billable hours, reviewing and sending invoices, tracking down late payments, setting reminders, and manual and paper-based processes.

Although most law firms recognize the issues in the legal invoice-to-cash process, they fail to address the inefficiencies. In 2023, with market downturns and the volatile economy, the business impact of the broken invoice-to-cash process for law firms is becoming hard to ignore.

Throughout this article, we cover the major legal billing challenges and how Oddr’s AI-enabled invoice-to-cash platform can streamline the entire billing experience through automation while lowering your bottom-line costs.

The following are the major challenges in the legal invoice-to-cash process.

#1. Longer time to process invoices

On average, 60% of legal firms take over a week to process and publish client invoices, burning up their time editing and reviewing pre-bills. The factors that lead to longer billing cycles are:

- The billing process is not user-friendly. It has to go through several departments before the bill is finally sent to the client in the format they want.

- Reviewing pre-bills is time-consuming due to inaccuracies in time entries, guidelines validation, and so on.

- Manual processes are inefficient: timekeepers might miss out on the guidelines in the front end, leading to more work for the back-end office.

- Complex billing requirements: each bill has to be tailored to the level clients will accept based on the agreed estimates.

These shortcomings have strengthened the case for modernizing the law firm billing process.

#2. Delayed payments

Corporate clients hold law firms to the letter on issues such as the number of attorneys working on a matter or paying for legal research. What’s more, they routinely reject charges that fall outside their guidelines. Firms lose approximately 20% of their original billing amount in this process. Especially in a tighter economy, this lag creates headaches for legal firms as their compensation and budgeting decisions are based on revenues and profits. Even worse, some legal firms still print invoices for partners to edit in red pen before being submitted to clients.

The consequences of an inefficient legal billing process are:

- Bills getting kicked back for noncompliance

- Delayed payments

- Write-offs

- No traceability

Ultimately, it directly impacts the cash flow of the business.

#3. High operational cost

Law firms incur unnecessary operational overheads from paper-based approaches, lack of automated workflows, and manual cash receipt reconciliation. The hidden costs related to collections and reconciliations:

- Billing staff or legal secretaries would be responsible for generating, submitting, and tracking invoices each month.

- Law firm billers are mostly busy tracking status updates, so an additional resource for legal collections must be added.

- Full-time collection employees are responsible for staying on top of whether clients pay and when the payments are received.

- The legal collections team is responsible for making sure the bills are sent out and paid and has to access vendor sites to reconcile the invoices and payments and identify write-offs and short payments.

#4. Leaders do not have a comprehensive view of the invoice-to-cash cycle

There are two kinds of insights that the C-suite leadership expects related to legal invoice payments:

- Operational: Where are the bills in the billing cycle, has the client viewed the invoices, and who has scheduled payments, among many others.

- Business: Who are the best customers who always pay on time, which customers ask for discounts/reductions, the customers with the highest write-offs and longest payment cycles, and so on.

For a CFO and the business department, cash flow is the #1 priority based on actual client behavioral patterns. Without a granular view of historical insights, law firms fail to make accurate cash flow predictions. AI-led invoice-to-cash platform Oddr for law firms helps implement a reliable cash flow mechanism.

#5. Disjointed systems

At any given time, a mid-sized law firm uses the following software to streamline overall efficiency:

- Time tracking

- Billing and invoicing

- Client billing portal

- Document creation and management

- Payroll and taxes

- Payment processing

Now, imagine having to curate data from multiple business sources, clean up, and validate this data manually. The process is time-consuming, prone to errors, and leads to inefficiency.

#6. Multiple invoice formats at the billing stage

Legal billing invoice formats include:

- PDFs in emails - The billing team has to encrypt all emails before sending them to clients. Adding to that is the pain of having to mark multiple people from the client’s team in the email and endless threads when the client wants more information. There is no way to view historical invoices automatically.

- Client billing portal - Implementing a client billing system is becoming the norm for next-generation law firms. Clients can independently view all current and historical invoices over the centralized dashboard.

Clients can schedule recurring payments depending on your firm’s fee structure, leading to improved payments and shorter invoice-to-cash cycles. Law firms have a comprehensive view of where the invoice is at the clients’ end, saving them the extra step of having to send weekly/biweekly payment follow-ups.

#7. Poor customer experience

Without a unified client billing system, the invoices are delivered to the clients by different people each time. There is no single view of the law firm’s payment terms, the preferred mode of payment, or access to historical information. Adding to the pain is the lack of collaboration between the law firm’s billing department and the client’s legal terms, leading to communication over multiple channels like emails, messaging platforms, and calls. The entire billing process lacks transparency which ultimately results in poor customer experience.

#8. No visibility at the collections stage

At the collections stage of legal billing, there is no visibility into whether the invoice has reached the client or if the client checked the invoice. As a result, most collection teams keep following up with clients over email: these follow-up emails are automated and often impact the customer experience.

The AI-enabled invoice-to-cash platform Oddr can track if the client has received the invoice, opened it, and when the payments are scheduled. This data enables the legal collections team to send personalized and intelligent collection prompts.

#9. Broken payments system

Due to the lack of collaboration between the billing and collection teams, the payment experience becomes siloed at the payment stage. There is no single source of truth where different teams can view the legal invoice payments lifecycle.

At Oddr, we make the legal payments process more functional and streamlined. We generate deep insights into the invoice-to-cash process using one-click payments through the Stripe payment gateway. Oddr is an AI-enabled invoice-to-cash platform for professional services like legal firms aimed at improving the legal invoice payments process.

The key features of Oddr which reduce inefficiencies in the invoice-to-cash process are:

- A unified billing approach - Reduces errors and improves traceability and collaboration of the bill generation and submission process.

- Intelligent collections - Invoice tracking, predictive AI, and automation build reliable cash flow models.

- Seamless payments - Provides one-click payments, scheduling future and recurring payments, and automated cash reconciliation.

- Client billing portal - Access to current and historical invoices improves the customer satisfaction score.

Wrapping up

Law firms spend most of their time giving their customers the best service. However, their legal billing, collection, and payment processes are archaic and broken, leading to significant revenue loss for the firms. Data and AI-backed business decisions by Oddr positively impact the law firm’s cash flow and align all the departments involved in the legal billing process.

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