Improving the Accounts Receivable Process for Law Firms: A Guide

Afterward, utilize financial software for an overview of all accounts receivable debt owed to your firm. With a holistic overview of your firm’s performance and growth, you’re empowered to be proactive rather than reactive. Calculating your collection rate for the past year can give you an idea of how your law firm is performing. To calculate it, divide the total amount you’ve collected by the total amount that you’ve billed. Auditors also assess risk management, which means checking if the business is ready for any problems that could happen. These involve customers not paying on time or the business being unable to collect debts.

Quickly Create Detailed Invoices

A chargeback can be challenging since the outcome is up to the card company’s discretion. Regardless of whether the chargeback is valid or not, you’re still typically responsible Accounting for Churches for chargeback fees. Rocket Homes Real Estate LLC is committed to ensuring digital accessibility for individuals with disabilities. We are continuously working to improve the accessibility of our web experience for everyone, and we welcome feedback and accommodation requests. If you wish to report an issue or seek an accommodation, please contact us at

The Unique Challenges of Legal A/R Management

Credit cards have become an essential tool for clients to manage their finances, and they give clients the increased payment flexibility they need in fast-changing business environments. According to a Total System Services, Inc (TSYS) survey, 75% of people expect to pay for services with a credit or debit card. A separate survey found that as much as 79% of today’s clients expect professional service providers such as law firms to let them pay with their cards. Imagine if a lack of communication lets the clients assume that you’ve withdrawn from the case or, worse, think you’ve failed them.

Case Management

Automating A/R management has a number of distinct benefits for law firms. First and foremost, your attorneys will waste significantly less time on calculating and sending invoices, following up with clients, and chasing payments. Law firm accounts receivable (AR) refers to the money clients owe your firm for legal services you’ve already provided.

• The term “accounts receivables” refers to money your law firm has earned and invoiced for but not yet received.
• Many unpaid bills are the result of clients simply not having enough money to cover the cost all at once.
• Many business clients expect to receive electronic invoices that comply with their specific billing guidelines and include LEDES designations to help them understand their legal spending.
• Each of these actions build client confidence and improve your collection rate.
• To calculate your law firm’s collection rate, divide total client payments by total amounts billed over the same timeframe.
• Added to that, with heavy workloads and multiple clients, it can be easy to miss when a retainer balance is getting low.
• With everything in one place, businesses can see their accounts receivable at a glance, simplifying the audit process.

Effective delegation is a key leadership skill that can significantly improve your firm’s efficiency, productivity, and overall success. If you send unearned revenue your invoices 2-3 months after the case is resolved, there is a chance that clients forget the value you brought to the case or what you did. Hence, it’s always best to send an invoice at a time when clients appreciate you and your work.

With LawPay, you can accept bank transfers via ACH plus credit card payments online or in person. You can also set up automatic, recurring payments for clients who prefer a set monthly fee. In this article, we’ll cover what you can do to prevent this from happening. Digitslaw legal billing software makes it easy to set up payment plans, send invoices and give clients real time updates about their payment via the client portal.

This deduction allows eligible firms to deduct up to 20% of their qualified business income, providing significant tax savings. Firms can also use income deferral to stabilize cash flow, ensuring that resources are available when liabilities are due. Combining this strategy with diligent financial planning maximizes its benefits. Misclassifying personal spaces law firm accounts receivable management or underreporting expenses can lead to penalties.

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• This strategy involves setting up recurring, automatic payments, either via ACH transfer from a bank account or with a credit card.
• Section 179 is a tax provision that encourages businesses to invest in their growth by allowing immediate deductions for eligible purchases.
• Deferring income strategically is a nuanced approach that requires careful execution but can yield meaningful tax savings when applied appropriately.
• Cultivate relationships with other professionals, such as accountants, financial advisors, and real estate agents, who may encounter clients in need of legal services.
• Lawyers experience this all too often—on cases that no one intended to be pro bono.

If not, it’s time to revamp your law firm’s accounts receivable processes. A law firm’s accounts receivable (A/R) represents all outstanding client payments for work that has been completed and invoiced. Some law firms consistently maintain a high A/R, whether due to strict payment terms, unresponsive clients, or a myriad of other potential reasons.