The numbers are in.
Study after study has shown that one problem keeps topping the charts and plaguing law firms: collections. Now, when I say “collections,” I’m not talking about shakedown phone calls from a debt collector. I’m talking about the entire end-to-end process of making sure you actually collect the money due on your invoices, so you’re getting paid for your work. And it really is all about the process.
There’s a good chance that your current collections process is dropping the ball and leaving you with a lot of unpaid invoices. It’s crucial to update that process so that a) you collect more invoices faster, and b) you don’t spend too much of your time or focus on juggling collections when they should be running smoothly in the background.
Here are two simple steps to check in your collections process:
First things first. Before you can collect an invoice, you have to send it out. Are your invoices going out in a timely manner? The faster you send out an invoice, the more quickly it will be paid. Make sure you send your bills on a regular schedule, so you don’t fall behind when work or your home life gets busy.
Let’s say, for example, that you choose to send invoices on the 5th of every month. By setting that schedule, you always know when bills should go out. No matter what’s going on at that time, you’ll be invoicing for your hours on that day like clockwork. This also makes it predictable for clients, making it more likely they’ll be prepared to pay the invoice when it arrives.
Now that your invoices have been sent, follow-up is key. How often are you following up with your unpaid invoices? Are you sending follow-up statements? You’d be amazed how many law firms don’t send follow-up statements unless, of course, you’re one of them.
I know that sending out an invoice can feel so…final. Of course, in our own lives, we often receive an invoice, and it ends up in a pile of paperwork somewhere and gets forgotten. Clients do the same thing. Sending out regular follow-ups when an invoice reaches 30, 60, or 90 days is a service both to your cash flow and your client. Sometimes we all need a reminder.
Invoicing and collections are a major problem for law firms, but that doesn’t mean you need to struggle. Put a simple, consistent process in place and follow it carefully. You’ll collect more of your invoices, improve cash flow and profitability, and spend less time stressing or wondering if your invoices are being handled properly.