How Law Firms Could Ensure Being Paid?
During an economic downturn, consumers often demand less products and services. Due to limitation in budget, clients could start to have cash flow problems, necessitating them to cut down on all expenses. This could also be a reason why many law firms start to not get paid for their previous legal services. Businesses often have long-term relationship with specific legal firms, by the harsh reality of the business world, could cause them to become non-paying clients. In this case, legal bills are not seen with the same kind of urgency compared to other bills. In this case, legal professionals should know that their clients are financially smart. They would be unwilling to spend money on something that’s considered as less essential.
Regardless of the situation, especially in tougher times, law firms should take proper actions related to the management of their accounts receivables. When collecting payment from clients, one of the main priorities is to maintain good relationships. Collecting overdue bills in aggressive manner may help to improve cash flow for a period of time, but the law firm could be in the worse quandary down the road. In this case, clients should be able to identify potential payment collection problems early. This could allow them to take proper actions without severing relationships with clients. Collection problems that have long existed should be handled properly.
There should be a person from the firm who active purse accounts receivable. The payment status should be continuously monitored and it’s important to make sure that they’re getting good results. Law firms can be more successful in dealing with accounts receivables, especially if they have employees dedicated for this purpose. Firms can be better able to manage accounts receivable if they have regularly updated information the payment status of the clients, so they can act quickly. Receivables should be properly categorized, so they would know whether bills are collectible and when they can expect payment. If these receivables are problematic, they should know how good the chance is so that they will get payment. In some cases, receivables are not collectible, so they should know about this.
When managing receivables, it is important for the law firm to review their financial reports. They should also be able to review the relationships with clients. It is important to start digging for information. In general, they should know about the financial performance of their best clients. In some cases, 20 percent of the clients are responsible for 80 percent of the firm’s revenue. If any of these best clients have stop paying, this is a problem that needs to be remedied very quickly.