How to Stop Wasting Time on Law Firm Collections

by Alexa Drago on August 8, 2017

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Every law firm has its sights set on recording an ever-increasing amount of billable hours. Unfortunately, it’s not always that easy—particularly for smaller firms that lack the resources and efficiencies that industry juggernauts enjoy.

If you work at a small law firm, you likely spend more time than you think engulfed in non-billable activities—according to Clio’s Legal Trends Report, the average law firm achieves a utilization rate of only 28%. In other words, out of a standard eight-hour workday, lawyers record only 2.24 hours of billable work, and they bill and collect on even less.

More specifically, solo firms recorded fewer billable hours than any other firm size in the report (1.76 billable hours per day, amounting to 22% of an eight-hour working day). That figure is concerning because most small firms are already stretched thin. Mid-sized firms that employ at least 12 lawyers fared better, recording more than double the billable hours of their smaller competitors (four billable hours per day), but even then, half the day slips away.

Whatever your firm size, you likely want to record more billable hours per day. So if the average firm only bills 2.24 hours, where do the other 5.76 hours of the day go?

Billing clients cuts into billable time

Not every firm is blessed with having a full workload, and the hours that aren’t spent on client work are likely spent tracking down new clients. But, since many firms lack the resources of larger competitors, it’s not uncommon for a lawyer who runs a solo firm to double as the finance department, marketing team, receptionist, and clerical staff.

A recent report published by LexisNexis revealed that more than 50% of law firms say administrative tasks and practice management functions are the primary activities responsible for decreasing billable hours. These duties include recruiting clients, filing, docketing, document management, accounting, marketing, and billing, among other things.

While such tasks might not be the most exciting aspect of a lawyer’s job, they’re still necessary. If you’re not spending enough time billing your clients and collecting payments from them, how can you expect to keep your firm open for the foreseeable future?

Indeed, billing clients is one of the more time-consuming tasks that eats into every small firm’s billable hours. You need a lot of manpower to create invoices, double-check them to make sure they’re accurate, and then send them to the appropriate clients. Making matters worse, law firms wait an average of 83 days to collect payment on their invoices. A lot of follow-up is required to make sure payments come in promptly—or even at all. As Clio’s report points out, the average collection rate for a law firm is 86%. Phrased another way, lawyers don’t recoup 14% of the dollars they bill.

3 tools to help you spend less time on collections

There aren’t any lawyers who went to law school hoping to become collection agents just so they could keep their practices open (not as far as we know at least). The good news is, technology can help you get paid faster with less effort, so that you can get back to practicing law.

Here are a few examples:

1. Advance invoices at the click of a button with Fundbox

Small payment delays have big impacts–especially when you’re taking on more work, and growing your law firm. “Sometimes the client could pay in 15 days and sometimes 90 days,” explains Brian Dengler, the man behind one of U.S. News & World Report’s top information technology firms.  “You can’t get upset with them because they’re large. They have their own account payable practices, and you know they will pay—you just don’t know when.”

Rather than waiting on these slow-paying clients–or worse, spending time chasing them down–Dengler turns to Fundbox. With Fundbox, Dengler clicks a button to advance an invoice, and receives the money in his bank account as soon as the next business day. He can use it for payroll, a new marketing campaign, or whatever else will help his business in the near-term. Dengler then repays the advance in weekly increments for up to 24 weeks, with a small fee for each week he needs.

2. Automate payment reminders with InvoiceSherpa

If you find yourself sending reminders to the same clients over and over, take back your time by automating the process with InvoiceSherpa. This tool lets you send automated reminders via email or text message when a due date is coming up, or when a bill is past-due. You can also automatically send a thank you note after a client pays their bill (better customer service is always a good idea).

Bonus: InvoiceSherpa integrates directly with Clio, so you can bring all your contacts and invoices from Clio directly into InvoiceSherpa, making the service even easier to use.

3. Get paid faster with Clio Payments

The Legal Trends Report had another interesting finding—law firms who used Clio Payments got paid 35% faster than law firms who used check-based payments. This tool allows you to bill clients via email, and gives clients the opportunity to pay instantly via a link in said email. No more processing checks!

Note: There are ethical considerations that come with accepting credit cards, but legal-specific credit card processors like Clio Payments ensure compliance with all relevant requirements.

Time saved on collections = more time for practicing law

Suffice it to say that most law firms on the smaller side routinely suffer from cash flow problems. Nearly 75% of law firms regularly deal with past-due accounts. Making matters worse, more than half of them have between 10% and 49% of their accounts overdue.

However, there’s no sense in spending a good chunk of the day tracking down payments from customers who may take several weeks to send checks in. Instead of racking up non-billable hours, lawyers would be wise to outsource their collection responsibilities by using new technology designed specifically to help small business owners in their particular situation.

As a result, you’ll have more time to invest in billable activities that boost revenue—giving your small firm the potential to become a bigger one.


Originally featured on the Clio blog.


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