In every legal practice, there are important processes that happen before the legal work begins and others that happen once the legal work is done. These are your “bookends.” And if they’re not efficient, you’re wasting time and leaving money on the table in every single file that moves through your firm. Your law firm’s invoicing process is one of the most important processes to get right.
Five Tips for Improving Your Law Firm’s Invoicing Process
Invoicing delays were costing a fortune for one of our clients, a midsize firm with a lot of insurance clients. Their large insurance clients required an invoice within 15 days of the start of the month for fees incurred in the previous month. Fees incurred in previous months would not be paid, and invoices submitted more than 15 days after the first of the month were immediately rejected. However, the law firm’s invoicing process was exceptionally slow. They couldn’t generate any pre-bills until all attorneys had submitted their time, and there were invariably laggards. Every month was a panic.
Your situation might not be as dire, but delays in your invoicing process can still have a big impact on your cash flow. Here are five tips to help you fix invoicing problems.
1. Communicate Your Billing Policies Up Front — and Stick to Them!
Poor communication is one of the most common complaints clients make about their lawyers. Whatever your billing process is, ensure you communicate it clearly to your clients in your engagement letter. Include it in your client onboarding package, if you have one. And then stick to your stated policies. Once you’ve created an expectation, clients will be confused, flustered and possibly quite annoyed if you deviate.
Ensure you are very clear up front about your fees. Whether you charge hourly or use fixed fees or some combination, provide your clients with a very clear explanation of the scope of your services, so they know what is included in the fees they’ll be charged.
Include your payment terms and acceptable payment methods.
2. Use Standard Invoice Templates
If you use standard invoice templates that contain everything you need to comply with regulations in your jurisdiction, you’ll reduce errors and save time. Also, regular clients will know exactly where to look to find the information they need on your invoices.
As part of your standardization, ensure that you are also using standard narratives. This will maintain consistency between attorneys and individual bills that clients receive. Attorneys will save time, and clients will have more clarity on what they’re being billed for.
3. Send Invoices Promptly and Regularly
People are most likely to pay willingly and quickly when your great service is fresh in their minds. Conversely, the longer you wait, the more likely they are to complain about the bill.
In one firm we know, one of the attorneys had a months-long backlog of clients he had not billed. For the firm, it was an embarrassment. Who wants to send out a bill more than a year after work was completed? It was also a serious drain on cash flow and, ultimately, revenue. The long delays gave clients a potential excuse not to pay at all.
Sending interim invoices not only allows you to even out your cash flow but also provides clients with smaller, more manageable amounts to pay. The last thing you and your clients want is sticker shock at the end of a mandate.
If you bill hourly, consider billing clients biweekly or monthly rather than waiting until the end of your engagement. If you bill in stages, consider breaking your stages down even more so that you can bill more frequently.
4. Make It as Easy as Possible for Clients to Pay
You want to make payment of your invoices as frictionless as possible. That means creating a process that allows multiple payment methods, including electronic transfers and credit cards.
Using an invoicing platform that generates electronic invoices with links to pay by credit card is another way to remove friction in your process. While you may incur fees when you use credit card payments, those fees will likely be offset by the benefit of being paid quickly and by reduced internal payment processing costs.
Clients may be more likely to pay immediately when they can pay by credit card. In fact, Clio reports that firms that accept credit cards get paid 39% faster! Credit card payments make it easy for clients and may even earn them loyalty or travel points that offset the cost of your fees a little.
Immediate payment benefits you as well. You have the fees right away, and you reduce administrative costs related to late payments and collections. The last time we had our wills updated, our notary had a point-of-sale machine in the office where we signed our documents. We paid by credit card before we left the room. She had her money, and we didn’t have a bill to worry about paying later in the month. It was done.
Payment plans are another way to make it easier for people to pay. Clients make an initial payment and then a monthly payment after that until their bill is paid. Lawyers using this system report great success and very little default. And, according to Clio’s 2020 Legal Trends Report, clients ranked payment plans as a really important factor for hiring a law firm.
5. Delegate and Automate
If you’re a senior lawyer or law firm owner, most of the invoicing process is not in your power zone. That is, it’s not work that requires your unique abilities, you probably don’t love it, and it is not where you are adding the most value to the firm.
Invoicing is important, don’t get us wrong. You may have a role in reviewing pre-bills and confirming final amounts, write-downs and write-offs, but most of the process can be automated or delegated to others.
Most practice management platforms and law firm accounting systems include an invoicing system that eliminates many steps, ensures that time, fees and disbursements are properly attributed, and generates invoices in just a few clicks. Automate as much of your process as you can with the tools you’ve already got, or consider investing in a new system that will take on the invoicing for you.
This month, take a look at your law firm’s invoicing process.
Consider the five tips in this article and ask yourself: How can I make it easier for me to manage and for my clients to pay? When you get your invoicing process right, you’ll be paid faster, reduce administrative costs related to billing and collections, and your clients will be happier. Everybody wins!
Work In Your Power Zone!
If you want to learn more about getting out of the grind and working more in your Power Zone, join us online for our free training, August 14, 2024, 12 p.m. ET.
Presented by Gimbal.
More Process Improvement Tips:
- 5 Tips to Make Time Entry Less Painful for Lawyers
- Law Firm Intake: 3 Tips to Save Time and Convert More Clients
- New Client Onboarding: 5 Tips to Win Over New Clients
- Time to Build Your Team: 5 Steps to Improve Your Hiring Process
- From Hire to Higher: 6 Ways to Improve Employee Onboarding
Karen Dunn Skinner and David Skinner help lawyers and legal professionals build more efficient, productive and profitable practices. They’re the co-founders of Gimbal Lean Practice Management Advisors and lawyers with over 20 years of experience each in Canada and Europe. Together, they’re the exclusive Global Advisors on Legal Process Improvement to the International Institute of Legal Project Management. They write and speak regularly, facilitate legal process improvement projects across North America, and have taught Gimbal’s LeanLegal® approach to thousands of legal professionals.
Image © iStockPhoto.com.
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