Is account receivable one of your main pain points?
One of the main accounting problems in any small and medium-sized businesses not only law firms is Account receivable. As accounting experts we manage this on a daily basis, that is why we want to share with you some possible solutions.
The most common scenarios you can encounter If you manage Accounts Receivables are:
Clients who pay you on time, because they respect the agreements and are organized with their finances.
Clients who are always behind, however after a short period they pay.
The "dark side of the force" LOL, clients that never pay.
Reality is, Accounts receivables can really add up over time pretty fast if you don't address the situation on a monthly basis. But, What’s the solution to the accounts receivables’ problem? We share with you three suggestions to a question many law firm owners ask.
Create a standard rate schedule by looking at the type of case, the complexity and in consideration of the time and effort the case is likely to take. If the potential client does not have the funds for that matter, it’s almost always better to pass on the case instead of waiting to realize you spent valuable time with no financial reward.
Use the Trust account which we have talked about so much in our previous posts. Instead of allowing clients to run a big negative balance, and expecting that they will pay that balance off on the back-end, consider having that client maintain a positive trust account balance while the case is pending as security for future work that is to be performed. If the balance reaches zero, ask them to replenish the funds.
You should pay attention to accounts receivable. Get an accounting software that allows you to invoice in an orderly manner and manage accounts receivable in the same way. In case you do not want or that time is not enough, contact My Books and Taxes, here we are experts in law firms.
You might consider increasing your initial deposit and fees / retainers and collecting the rest after you finish the job 😉💡
Never forget that having a lower number of high paying clients almost always is preferred to having a higher number of clients that do not pay. Attorneys should be able to help clients and get paid for doing so at the same time.
Of course, if you get your accounts receivables problem under control, a lot of the pressure in owning a law firm can be relieved. You can ensure that payroll is met, taxes are paid and that you have the funds to pay your bills and even allocate some funds to marketing.
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