AR (that’s Accounts Receivable, not Arkansas!) can be a real obstacle for businesses. You’d think just the opposite—after all, receivables are the monies you’ve earned, what you’re expecting to be paid. But many companies—especially law firms—have difficulty collecting all that they’re owed. They spend valuable time and resources chasing down payments after an outstanding balance has rolled into accounts receivable.
In working closely with legal practices every day, I know that collecting client payments can be slow, and often is never completely realized. But it doesn’t have to be that way. If this year’s pandemic taught us anything, it’s to let go of some of our old school ways and let technology take the wheel when it comes to bettering our business. And technology is the key to solving some of those accounting issues and eliminating the AR that puts a strain on a business. Here’s how to make “Zero AR” a reality:
Electronic Payments
Now more than ever, people want (even expect) everything to be virtual and contactless, making this the perfect time to institute an automated and integrated electronic payment method. And not just tinkering with e-payments, but really making a concerted effort to change the client mindset from snail-mail paper checks to the quick-and-easy credit card or automated clearing house (ACH) payments.
One firm I work with, Modern Family Law, has successfully converted clients to e-payments. It recently achieved a 97% collection rate, improving cash flow and increasing revenue while simplifying processes for its clients and its back-office staff.
David Johnson, CEO of Modern Family Law, told me the firm took a few essential steps to make this initiative work. The first is to obtain authorization from the client to keep a credit card (or banking information) on file to make the needed recurring charges proactively. This is a simple ask with new clients by adding it to the intake process, and for existing clients, Johnson’s firm issued an amendment to each fee agreement to establish clear terms and payment methods.
Evergreen Retainers
Modern Family Law used this shift in payments as an opportunity to create a change in trust accounting as well. Rather than holding a traditional trust account, drawing earned income from that account, and continually requiring the client to replenish it, the firm now uses the trust account as more of a security deposit. Johnson calls it an “evergreen retainer.” Since the firm now automatically runs clients’ credit cards rather than drawing down a trust account, these evergreen retainers rarely have to be touched. For the client, that means less hassle and less money tied up in a retainer.
Batch Invoicing
The final step in the process is notifying clients before payment charges are made. I know many firms still print invoices, stuff envelopes, apply stamps, and send them through the mail—a labor-intensive chore. Again, technology can cut costs and speed delivery by issuing invoices via email.
But don’t stop there; make this a completely painless task by using a software application that offers batch invoicing and payment processing. According to Johnson, Modern Family Law reduced its time spent on invoicing, processing, and allocating from two days to two hours by using TimeSolv’s patent-pending batch method.
Imagine putting 2020 in the rearview and looking ahead to 2021 with improved cash flow and revenue you don’t have to track down. This move to Zero AR can require a real mind shift for both clients and staff, but both parties’ benefits are well worth the effort.
About the Author
Raza Hasan is a dynamic senior executive whose entrepreneurial spirit continues to drive him as the President and CEO of TimeSolv Corporation, a leader in time and expense tracking, billing, and management needs for professional services businesses, particularly legal firms. Combining his skills in product management, sales, and strategic marketing of web-based business solutions, Raza has an unparalleled commitment to service as he tirelessly works to exceed his customers’ expectations.