Better cash flow in the law firm
How do you improve a law firm’s cash flow? It’s actually quite simple…
Invoicing has to be done often, and customers have to pay on time. In practice, however, it isn’t that simple.
There are a great many steps you can take to optimize cash flow, and the vast majority of law firms take little or no advantage of those possibilities.
Two questions crucial to cash flow
It is arguable that optimizing cash flow depends on one’s self-discipline as a lawyer and on the firm’s procedures, but the Abakion Legal IT system can support the process more than you may think. Let’s look at the possibilities so that you can consider what you will ask of your law practice solution going forward.
How often do you send invoices
We find that, when law firms issue invoices ‘frequently’, we’re talking about once a month at the most. We have also encountered many law firms who invoice less often than that.
It is obvious that this has a big impact on cash flow; it sounds basic, but for a great many firms it is the easiest improvement to make.
We’ll come back in a moment to the question of how you can start invoicing more often, because there is another basic question begging to be asked:
Have you included everything in the invoice?
If you forget some hours or some expenses, it will take longer for you to get the money from the client. And expenses cause extra cash flow pain. After all, they’re not just parking charges.
Expenses might be court costs or stamp duty, in which case you may have a lot of money owed to you that will not appear in your cash balance until you bill your customer at the end of the month… Unless you forget to put the expenses on the invoice, and another month goes by.
IT should make workflows easier easier, not harder
Now, let’s look at how Abakion Legal can help with these basic questions.
You need a set workflow, so the quality of your invoicing won’t depend on self-discipline and a good memory – and set workflows are precisely where a good IT system’s strength lies.
First of all, you need to make a decision about what you want.
If you are ambitious in your answers, the IT system can cope easily. Once it has been set up with the desired criteria, your system will be ready to support your processes, making it simple and easy to invoice often.
How Abakion Legal makes your workflows easier
Monthly invoicing is the bane of many law practices’ life.
There are also some firms who invoice ad hoc or when a case is closed, and that too can be time-consuming.
But Abakion Legal can help to organize a less burdensome workflow.
Imagine getting a weekly list of the cases that have more than ten hours’ work or big expenses recorded, and then being able to use these lists to invoice customers on an ongoing basis.
Fewer queries and
You’ll receive fewer invoice queries from your customers, because they can still remember what you did for them last week, and you can often get paid sooner, because it is easier to receive fast payment for many little invoices than for one big one.
The task becomes easier because you only have to think one week back, and the system compiles the underlying data for you. That means you won’t need to spend as long answering clarifying questions about your time worked, and you won’t spend as long on invoicing.
IT should do the work for you
The IT system’s job is to compile the underlying data and present it so that it’s easy for you to make decisions. The IT system should also ensure the process runs unfailingly, week after week.
And the IT system can remind you to complete time registration and input vouchers. Let’s be honest: important as it is for cash flow, this sort of registration work isn’t the most fun in the world. So the next question is:
How can IT help you perform the registrations more easily?
How to make registering expenses easy
Do you get all your time recorded against the right cases the same day, and do you include everything? Or do you wait a few days? And can you then remember exactly what you were doing on a particular case for a quarter of an hour last Wednesday?
The IT system can only help you with invoicing if you make sure it has data to work with. If you are slow with your time registration, the invoices will also be sent out later or, in the worst case, not at all.
Get customers to pay on time
The smartest way is, of course, to let Abakion Legal pull in the requisite details by itself, as part of your workflow.
For example, when you send a document to your client, in the same workflow in Outlook you record which case this is and how many hours are to be registered. The point is that you don’t need to come back later on and register your hours.
You also need to make sure customers pay on time. It hurts your cash flow if customers can pay late without consequences and perhaps even without anyone actually noticing. This is where your law practice system again enters the picture and can help you.
Abakion Legal records which customers make payments, and it matches the payments to your invoices. On that basis, the system can quickly show you which invoices are not being paid on time, so you can respond to that fact.
The system also needs a reminder procedure that can be activated automatically. Clients need to know that you are keeping track of whether they are paying on time. This is basic stuff, but your system can actually be even more proactive.
You can also opt to vary payment deadlines, billing thresholds or reminder procedures according to how good the individual client is at paying on time.
With artificial intelligence, Abakion Legal can now even predict which clients won’t pay on time in future. The system can recognize the patterns indicating a slow payer to an impressive degree of certainty.
Gentle reminder procedures
Reminder procedures can often be something of a taboo subject in the legal industry. Firms want to maintain their good relationship with clients and avoid bad feeling. How much do you want to tighten the thumbscrews on your clients when they don’t pay on time?
Our first suggestion, therefore, is that you can send out reminders with the accountant as sender. This way, the faceless accountant can be strict with the clients while you can maintain your positive relationship. As we’ve mentioned, you can also opt to send reminders only to customers who have exceeded the payment terms several times. Abakion Legal can help you with this, too.
Very few law firms add interest or reminder fees. Some put this in their terms and conditions without really expecting to enforce it in practice. If you wish, though, Abakion Legal can of course help you do it – including merely writing it on the invoice without charging it in practice.
Speaking of reminder procedures, it is also important that the system can record when the client has objected to an invoice. It is important not to send reminders if you are in dialogue with the client about the details of an invoice, so the system must of course keep track of this.
Are you on the way to? better cash flow now?
You can now consider how your law practice system should provide you with a broader picture and better information to act on. How about a cockpit showing active cases, the items ready for invoicing in each case, the person in charge of the case and the hours and expenses registered against it?.
Or perhaps an approval workflow for invoicing. We have lots of good ideas for how your law practice solution can support your day-to-day activity.
But let’s start with Abakion Legal speeding up your invoicing process and ensuring that invoices are always complete and that your clients pay on time. Then you will be well on your way to better cash flow.