3 surefire ways a law firm can influence clients to pay invoices faster
Clients are taking about twice as long to pay law firm invoices. That’s according to reporting by Richard Tromans for his site the Artificial Lawyer. His piece cites survey data from Harbour, a provider of litigation finance.
The survey polled roughly 200 lawyers in the UK. It found the average time it takes for clients to pay a bill from a law firm grew from 23 days to 39 days – as compared to a year ago.
This is not a new problem but perhaps an enduring one. It directly affects law firm cash flow and profitability. There is a strong correlation between this time frame and realization rates. This is because it tends to lead to more work being written off.
There are some reasons this happens that stretch beyond a law firm’s influence to change. Prime examples include the growth of billing guidelines and the proliferation of e-billing solutions. However, there are also some reasons that are well within a law firm’s ability to change – including the following.
1. Enforce contemporaneous time entry
It’s like physics – you can’t bill for time worked until it’s entered. This sounds simple but law firms have historically struggled with it. In many ways, it’s understandable because lawyers are busy. Every day is a blur – emails, conference calls, research, analysis, filings, deadlines, depositions, memos – and at the end of the day it becomes easy to put off time entry until tomorrow.
The trouble happens when tomorrow becomes the next day, and then the day after that. Soon it’s the end of the month and the billing team is walking pre-bills around for review and approval. That’s when the office-wide emails start coming imploring the team to get their time entered.
There’s another upside to contemporaneous time entry: the final invoices tend to be more accurate – compared to those with time entries that were pieced together days, or even weeks after a matter was closed. Invoices with timely-time entries are less likely to be rejected, or at least, hold up better under client scrutiny.
2. Send invoices to clients promptly
Sending invoices out promptly goes hand-in-hand with contemporaneous time entry. However, it merits being called out because it is a legal process unto itself. In larger law firms, it’s often staffed with a whole team of specialized allied professionals.
Even so, this remains a challenge. It’s not uncommon for work to be invoiced three months after a matter is closed. Think about what that means from a client’s perspective. It’s effectively a fiscal quarter’s worth of legal spend that’s outstanding. Too often, they don’t know the total amount until they get the invoice.
Getting invoices out the door every month may not be easy, but it is entirely within the control of a law firm. Doing so will lower the collection time and typically lead to fewer write-offs.
3. Be transparent with WIP and accruals
Consider giving clients access to view time entries, work-in-progress (WIP) and accruals in real-time. This allows the clients to see the budget status of any given matter – without all the back and forth. It also reduces the chance a client will be surprised by the size of an invoice because they’ve been read-in the whole time.
More than avoiding surprises, this ultra-transparency helps the whole process run smoother – starting with time entry. These entries will be entered sooner and be more hygienic because of a psychological principle known as the Hawthorne Effect. Essentially, when an outside legal team knows a client can see their time entries from yesterday – the quality improves.
This isn’t just a theory. We’ve done this with more than 200 global law firms, including Dentons. As we co-wrote with that law firm in a piece for Bloomberg, “Dentons and Apperio have calculated that ultra-transparency reduces the time between invoice and payment by between 22% and 56%.”
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Apperio helps law firms to build a reputation for transparency, reduce invoice friction and win more business. Learn more about partnering with us and why more than 200 global law firms already have. See for yourself and schedule a live demo by emailing email@example.com.
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