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Monday, May 4, 2020

Law Firm Best Practices for Managing Receivables in the COVID-19 World


Most law firms are extremely dependent on receivables for working capital. Here we have compiled best practices on how you can manage your receivables from start to finish during these turbulent times.

Before we get started, let's get the obvious off the table — you can't control what you don't measure. At the very least, you should be reviewing receivable reports weekly and assigning responsibility to individual team members for collecting any outstanding client balances. The team should also be reporting on the status of those receivables on a weekly basis. Beyond those key points we’ll add the following:

  • Client and matter intake are more important now than ever. You can't afford to get it wrong so don't let your standards slip.
    • Do your due diligence on payment capabilities.
    • Know how much risk you can take on.
    • If it’s a new client, be honest with yourself if the matter doesn’t fit your profile.
    • If you have to put in extra time learning or investing in new programs, take that into account.
  • Matter management. Make sure you can bill your work. The opportunity cost of write-offs and write-downs is perhaps more critical now than ever.
    • Focus your resources on your most profitable work. Again, don't just take any matter. A/R collections start here, so do your best to make sure your WIP is
    • billable and collectible.
  • Timely billings. This is obvious, but the faster you get the bills out, the higher the likelihood you collect more quickly.
    • Daily time entry requirements — this is the new normal. You need to monitor and enforce it. Time that is submitted weeks or months late cannot and should not be tolerated any longer.
    • Make sure attorneys know their billing/e-billing guidelines. Billers who are not properly educated on their billing guidelines put your WIP and receivables at risk. You may not have realized how much your billers and accounting staff have done to enforce these in the past.
    • If you've reduced your admin team this may increase the risk of non-compliance and may delay or reduce collection of your invoices.
    • Learn to make edits directly in the billing system. This can cut down the turnaround time dramatically, especially in this environment. If your time and billing system can't handle this, now's probably not a great time to contemplate a system conversion so try to do the best with what you've got.
    • Bill mid month or as soon as you are finished with the project.
    • Email bills to clients. If you're not e-billing/emailing the bills out, you should be, period.
    • Carry over as little WIP as possible, make sure you know how much you are carrying and why. This is as much of an investment to your firm as A/R, except it goes stale a lot faster. Turn it into A/R or write if off quickly. Don't make excuses. You need this to be as accurate as possible to get a good idea of your cash flow expectations.
  • Proactive collections efforts. You have great clients, but they are not watching out for your receivables. You are the only one who can do this.
    • Responsible/billing attorneys should be reviewing receivables weekly.
    • Reach out to clients before their invoices age. A simple check-in to make sure an invoice is received goes a long way.
    • Ask clients to pay invoices quickly.
  • Make payment easy for clients.
    • Use LawPay or Bill.com to allow various payment options.
    • Be willing to waive credit card fees.
    • Provide exceptional value with your services.

While these best practices help, you need to first make sure you have the right mindset. Not a day should go by that you are not just thinking about the receivables but nurturing them. In times like these, cash is king and receivables management is the last step to conversion into cash. While you may face challenges today with reduced staff, technology issues or problems with remote capabilities, there are plenty of ways you can adapt to overcome your receivable issues.

If you would like more information or need assistance with any of the above, please contact Derek Barto. For the latest regulatory changes and other information on keeping your organization running through disruption, visit our COVID-19 Resource Center.

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