Six Biggest Challenges in Improving Law Firm Cash Flow

We previously talked about how Law Firm Cash Flow is a Four Stage Relay. Collections, the last stage, actually brings cash in the door, resulting in one of the most straightforward ROI calculations you’ll ever see in law firm administration.

Having worked through the collections process with many firms, I see a consistent set of challenges:

No Defined Strategy

Attorneys are protective of their clients, and therefore often want to handle A/R themselves. This often results in no set standard on when collection efforts are made and a varied approach to delivering collection requests. There may not be consistency in when old A/R is written off or when services are suspended. Attorneys and their staff spend a substantial amount of time manually attaching invoices and individually sending emails. All of this results in haphazard reporting on the status of delinquent accounts.

Difficult to Enact Change

Some firms don’t see an issue with the current process or are aware that there are issues, but would prefer to maintain their existing process because they’ve been soured by automation projects in the past.

No Additional Bandwidth

The firm understands they are struggling with the current process, but limited resources mean there’s no extra time to enact change. Usually, this is reflected in opportunities for process enhancement being unrealized because billing staff is spending time on these manual efforts rather than overall firm efficiency and reporting.  Often these are the people that know the firm’s financial systems the best but must focus time on low-value work. 

No Collaboration

Often, firms view themselves as “different”: practice areas, clients, etc. This mentality prevents even the most basic standardization within a firm to find areas of commonalities that can share efficiencies (and they are there).

Lack of Timely Information

A billing attorney is on the phone with a client, but can’t get instant access to A/R information. Instead, a request is sent to accounting, and they try to track down the client again later. When billing attorneys are responsible for A/R follow-up, it works in the other direction, with the accounting department often out of the loop.

Fear of Upsetting Clients

Attorneys understandably want to protect their client relationships. This is perhaps one of the most difficult challenges to overcome: no one wants to unnecessarily upset a client in an effort to collect money a little faster. However, without a unified collection strategy, clients are often as frustrated by sporadic collection efforts as attorneys are.

How to Move Forward

How do we overcome these challenges? Often, starting with numbers is the best approach. The ROI of implementing a consistent, efficient collections process is clear-cut. By reducing A/R days and write-offs, it’s realistic to increase cash flow by 2.8% in the first year. That provides the business case for recommending the adoption of best practices with demonstrated success.

Learn more about the automation and process in CollectionQ.

Author

Bill Bice

CEO | nQ Zebraworks
Recognized as a legal tech industry visionary, receiving Thomson’s innovator of the year award. Founder of ProLaw Software (acquired by Thomson Reuters), West km (used by 70% of the top 1000 law firms worldwide) and Exemplify (acquired by Bloomberg Law).

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