Achieving a high collection rate is a goal for every law firm, as it directly impacts its revenue and profitability. While the average collection rate for law firms is around 85%, some firms have achieved near-perfect collection rates. In this blog post, we explore four collection rate strategies these successful firms employ and how they can help you increase your collection rate without additional effort.
Transition to Flat Fee Work:
One effective strategy to achieve a near-perfect collection rate is transitioning to flat fee work. With flat fees, clients make payments upfront before work begins, allowing the funds to go directly into the firm’s operating account. This approach ensures that payment is received on time and eliminates the need for billing and chasing unpaid invoices.
Build a Subscription Practice:
Another strategy is to build a subscription practice. By offering subscription-based legal services, clients make regular payments for a set amount of legal services. This model allows for automatic monthly payments from clients’ bank accounts or credit cards, ensuring consistent and timely revenue for the firm. As Kim Bennett of K. Bennett Law says, “The big revelation with my first subscription legal services client was that I got paid on time, all the time.”
Accept Advance Fee Deposits Continuously:
Oftentimes firms that accept advance fee deposits do so only at the outset of a matter. We’ve seen some firms, however, that track as a key performance metric, the percentage of each month’s billings that can be paid directly out of advances already sitting in the trust account. This evergreen retainer model allows for continuous advance fee deposits, ensuring that funds are available to cover ongoing work. Utilizing specialized tools can automate the process and maintain compliance with professional conduct rules.
Keep Payment Methods on File:
No this does not mean writing client credit card numbers down on paper and keeping them in your office or asking for bank account details over email. Systems exist to easily outsource the collection and storage of sensitive payment information. Storing payment methods in this way allows your clients to simply reply to an emailed invoice or trust request, asking you to charge the card or bank account on file. Additionally, you can add to your engagement agreement that you will automatically bill their stored payment method for any outstanding balance a certain number of days after the invoice is sent. For a list of rules by state around this practice, see this resource.
Implementing these Billing Models with Lawcus Payments
Lawcus, in partnership with Confido Legal, offers Lawcus Payments, a payment processing solution for law firms. It enables the implementation of these billing models and streamlines payment collection, trust accounting, and financial management. With features such as secure storage of payment methods, efficient trust account management, and same-day bank transfers, Lawcus Payments empowers firms to achieve near-perfect collection rates.
Conclusion:
Achieving a near-perfect collection rate is strategic but can significantly improve your law firm’s revenue and profitability. Law firms can expedite payment collection and enhance overall financial performance by transitioning to flat fee work, building a subscription practice, accepting continuous advance fee deposits, and keeping payment methods on file.
Lawcus Payments, in conjunction with Confido Legal, offers the tools and features necessary to implement these billing models seamlessly. Start optimizing your collection rate strategies with Lawcus today and reap the benefits of increased revenue and profitability.
Guest Post by Emery Wager of Confido Legal
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