How Accounts Receivable Automation Can Help Your Law Firm Thrive

Why law firm accounts receivable management is challenging

Efficient billing remains a persistent challenge for law firms, largely due to the complexity of legal work and the demands of precision and compliance. Attorneys often juggle multiple cases and clients at the same time, requiring meticulous timekeeping and documentation to ensure accurate billing. This level of accuracy is also essential to meet increasingly rigorous regulatory and audit standards.

At the same time, the systems that many firms use to manage accounts receivable may not have evolved in step with broader financial technologies. In some cases, longstanding processes and tools — valued for their reliability — can hinder responsiveness and efficiency. For example, many firms still do not accept electronic payment methods, such as credit cards, despite their growing popularity in business-to-business (B2B) transactions.

This technological gap can ultimately affect the client experience. Today’s clients often expect greater transparency, flexibility, and promptness when it comes to billing and payments — expectations that can be difficult to meet with manual or outdated systems.

How law firms can benefit from A/R Automation

To overcome these limitations and others, we at Invoiced (a Flywire company) believe that automating your billing efforts offers the greatest opportunity for you to stabilize your cash flow, limit the accrual of bad debt, and keep your clients positive and cooperative as they make their payments. In particular, automation can yield:

More revenue 

Clients are much more likely to provide payment — and do so on time — when they receive an invoice shortly after receiving the corresponding service. Of course, given the prolonged nature of court cases and other legal matters, this timeline is often inflated. But by removing the unnecessary wait times from manual processes and accelerating invoice creation and validation to the speed of technology, you can get those payment requests out the door more quickly. 

Similarly, automation routinely assists with standardizing and formalizing your dunning — those communications efforts focused on collecting funds that are due or past due. And when these touches are consistent, they’re much more likely to yield positive results.

Fewer billing errors

Human error is inevitable, and the more manual input involved in your billing process, the higher the risk of issues such as data entry mistakes or calculation errors that can disrupt the payment cycle. Conversely, most A/R automation solutions leverage integration capabilities with outside enterprise resource planning (ERP) platforms to migrate billing data directly between systems, keeping your records more accurate.

Better customer relationships

Thanks to these more timely and accurate operations, you can expect better interactions with your clients. Few things will sour a business relationship more quickly than requesting payment for more than is owed. At the same time, automated billing typically delivers increased transparency into why particular amounts are included on any given invoice, leaving clients with fewer questions and confusion.

Improved security

Most platforms either serve as or offer access to payment gateways that deliver encrypted channels to receive funds and associated private payment information from your customers. Alternatively, some solutions — like our Accounts Receivable Automation platform — also provide self-serve payment portals that empower users to send funds through various channels in a highly secure format.

Streamlined auditing

Automated solutions also lend themselves to more robust reporting capabilities. When financial data is collected consistently over time using the same format, you can easily capture key performance indicators (KPIs) in historical records that will prove critical when demonstrating compliance to auditors, regulators, and other interested parties.

Why it makes sense to outsource accounts receivable services for law firms

Admittedly, if you, like many larger firms, have the internal staff and resources available to dedicate to the minutiae and complexity of manually driven A/R, feel free to stay the course. But when it comes to invoice management for mid-sized or smaller legal firms, you likely wouldn’t mind freeing up those workers for more strategic efforts. Outsourcing, whether through a third-party vendor or using automation technology that can accommodate the unique requirements of law firms, is an effective way to tap into many of the advantages already discussed.

This likely explains why, in the previously mentioned Clio report, researchers found that since 2013, IT spending among study participants had steadily increased by an average of 20% each year. Among those organizations that billed more hours per day than the industry average, they spent 12% more on software than their peers and were 21% more profitable.

You should consider offloading your A/R onto technology as soon as it makes financial sense for your business. And more than likely, it already does.

5 best practices to improve your law firm’s accounts receivable management

1. Leverage automation

It bears repeating that automating your A/R is one of the most straightforward, cost-effective strategies that you can employ to improve your invoice-to-cash (I2C) cycle. With the right solution in place, you can avoid common mistakes, promote process efficiencies, and keep on-time payments at the front of your clients’ minds, making you more likely to get paid quickly and consistently.

2. Set a precedent

Confusion is the enemy of efficient A/R. And if there is any confusion surrounding your payment terms, expect problems downstream. Instead, you want these financial expectations to be clearly and simply spelled out, making it easy for your clients to understand what is expected of them in a billing context. Commonly, these will cover:

• Payment timelines
• Billing rates
• Available discounts and their underlying requirements
• Penalties for late or missed payments
• Financing options
• Dispute processes
• Acceptable payment methods

During initial discussions with any potential client, be sure to share these terms with them and verify that they understand all of the relevant nuances before moving forward.

3. Offer flexible payment options 

Buyers often have a preferred payment method and are more likely to settle an invoice quickly if that option is available. As such, you’d be wise to accept as many methods as financially feasible. Similarly, consider offering diverse payment timelines or financing options that let clients break up their costs over a longer period.

Returning to the Clio report, 71% of clients surveyed stated that they would prefer to pay a flat fee for their entire case. And 51% indicated that they would like this approach for individual activities within their case. Given the clear interest, you might consider offering this option, particularly since practices that participated in the survey and provided flat fees were five times more likely to send out an invoice within a day and twice as likely to receive full payment in that same timeframe compared to their hourly billing peers.

4. Communicate early and often

Beyond your payment terms, you want every billing-adjacent communication to be clear and easy to understand. Ensure that your invoices contain all the relevant information, and consider switching to an e-invoicing strategy. For your dunning, use standard templates for your notices. Even better, employ multi-channel touches (e.g., text, email, phone) for these payment follow-ups — an approach built into our software through the Smart Chasing feature, which automates and optimizes outreach across preferred client channels. 

And be consistent with your messages. The more time that passes, the less likely that you’ll ever receive payment. Above all else, make it easy for your clients to reach you with billing questions. Disputes are one of the most common causes of payment delays, with most customers unwilling to release any funds if they believe an error has been made.

5. Look at the numbers

If you have invoice data available, use it. Leverage this insight to monitor ongoing performance, allowing you to isolate and react to process bottlenecks, payment anomalies that might indicate fraud, and other challenges. At the same time, as you track these metrics historically, you’ll likely gain new insights into your client base, such as which parties or cross-sections are more responsive to early payment discounts or scheduled payment plans.

Automate your A/R today with Invoiced 

When it comes to automation, not all platforms are created equal, so you’ll need to do your due diligence to find the solution that’s right for you, particularly one that’s designed to support the unique demands of law firms. For that, we recommend our Accounts Receivable Automation software, which delivers centralized invoice workflows that keep your payment requests moving with little human intervention.

Alongside the dunning, integration, and payment portal features already mentioned, we also offer CashMatch AI, which can efficiently route incoming payments to the appropriate customer accounts even for the most complex invoices. We’ve also augmented the platform with the global payment capabilities of Flywire software to support transactions in 140 currencies.

Schedule a demo today to see firsthand how we can help your firm streamline billing and accelerate cash flow.