The longer an account is past due, the less your chances are of collecting it. Use these quick tips to start your strategy now.
It’s always been true that a dollar today is worth more than the same dollar a year from now. This year in particular, with a pandemic raging and the economy on a precipice, accounts receivable (A/R) pros are under pressure to accelerate payment collection and reduce days outstanding.
If you don’t collect payment soon, you may never get paid, or what you do get paid will be worth less to your firm. And if your firm calculates profits per partner or year-end bonuses based on cash-on-hand, then the clock is definitely ticking to get those payments in the door.
Fortunately, there are some things you can start doing now to set yourself up for a better end to the year.
Get ahead of year-end
First and foremost, get your plan in order. Establish your baseline of unpaid invoices and a mechanism for tracking progress. Then, start contacting clients with overdue invoices immediately. Though it’s still technically summer, time is short. The longer an invoice goes unpaid, the more likely it is to never be paid. Make sure you can immediately take a credit card payment when you’re on the phone. If you can make contact with clients and offer an easy way to pay, you have a much higher chance of receiving payment than asking them to write and send checks.
Be frank about options and consequences
Be prepared to offer solutions for all objections a client can make to paying an invoice:
- If the client doesn’t have enough cash on hand, remind them that you accept credit cards.
- If the invoice is simply too big to pay off at once, there are a couple of good options. You could offer a discount if they pay right now on the phone, or you could set up an automated payment plan.
- Make sure you have a valid credit card or bank account for the client on file, and process payments on the first of the month. Generally, a shorter payment plan is better – think three or six months. And if a payment transaction fails, reach out immediately to the client to get a new payment method.
- If the client still needs more time, remind them that the invoice is overdue and of the consequences of non-payment. No one wants to take calls from a collection agency or see their credit score take a hit.
We all know that times are tough, and you’re not going to enjoy chasing clients for payment. Empathize with your clients, but stand your ground. At this point, you’re trying to get as much money as possible, even if it’s not the full amount of the invoice, to avoid completely writing off this income. Every dollar not collected is a dollar not earned. And then that dollar needs to be written off at tax time, adding even more work to your firm.
Consider early payment discounts
You can also be proactive with clients who aren’t overdue, especially if they seem to present a credit risk. As you send out September and October invoices, consider offering an incentive to clients who pay before the due date. Maybe it’s a 5% reduction in their invoice if paid within 10 days or a discount on future services. Small adjustments like these don’t have a huge impact on your bottom line, and the goodwill you build with your clients will pay off with more business in the future. After all, everyone likes to get a deal. Plus, this is a great time to offer automated payment plans and remind them that you take credit cards.
Be on the lookout for opportunities to streamline
Lastly, use September and October to evaluate inefficiencies and missed opportunities in your A/R processes. That way you can fill the gaps for the real crunch time in November and December and have the tools in place to start 2021 off right.
Are there any areas where you can use technology or automation to get invoices out more quickly or get paid faster? Does your firm have an online payment portal? Can you make it easier to use? Do all of your attorneys know where to direct their clients for making payments? Do you have click-to-pay links? Are they easy to find (i.e., on your invoices and in your firm’s email signatures)?
If your current credit card processor doesn’t offer some of the capabilities listed here, take a look at ClientPay. In addition to our award-winning technology, we partner with the legal industry’s leading practice management systems to streamline the entire invoice and payment process.
Whether you’re in the market for a new payment technology or just want to talk through best practices for a successful year-end collection effort, please know that I’m here to help. I have heard countless horror stories, and I keep up with all industry best practices and can offer plenty of pro tips. I would love to hear what challenges you’re still facing in your plan and offer ideas and technology that can help smooth out any of the rough edges.