Using Technology to Get Paid
In today’s modern law office, typewriters, fax machines, and postage stamps have become sad relics of outdated practices. For better or for worse, welcome to the world of technology. Smart, efficient, and successful law firms have evolved by using new technology and the Internet to better manage their practices. However, with all the new technology available, one key area that is still largely inefficient is the process for billing and receivables. To help keep your billing practices on track with new technology, take a look at current payment trends in the U.S.
Over the past few years, there has been a monumental shift in the way consumers pay. As of 2014, 70% of spending is done electronically—only 30% is spent with cash or check.1 In fact, 64% of consumers write fewer than three checks per month and 52% of consumers aged 18-24 never use checks.2 Instead of receiving paper bills in the mail on a monthly basis, a majority of clients opt to receive electronic bills delivered directly to their email inboxes which they then pay online. With 177 million people in the U.S. who own an average of 3.5 credit cards,3 law firms may be at a competitive disadvantage if they do not offer electronic billing. Major benefits include the increased likelihood of payment and overall client convenience.
Clearly the biggest benefit of electronic billing is the ability to get paid—and to get paid faster. Legal fees can be expensive and many clients choose to pay by credit card to gain access to emergency funds and the ability to manage cash flow on their own terms. Others may prefer to pay with a credit card for the added rewards and benefits.
Credit card acceptance combined with electronic billing makes you and your firm seem much more professional and credible. Clients view billing and payment interactions as an extension of the vendor. From basic utility bills to car payments, modern clients are accustomed to paying bills online. If your payment process is disorganized, inconvenient, and outdated, clients may assume that your approach to practicing law is as well. With electronic billing you can create a seamless, simple, and prompt payment experience for your client.
Electronic billing is convenient for not only your client but also your firm. Billing can be a stressful and tedious process; first you spend hours creating invoices and then print, stuff, stamp, mail, and repeat. Next you wait and hope “the check is (really) in the mail” only to then use more precious time on a trip to the bank to make deposits. Electronic billing allows you to instantly and securely deliver invoices directly to your client’s email inbox with just one click. In turn, clients prefer the convenience of electronic billing because it gives them the option to pay their fees when, where, and how they want. Research also shows consumers pay electronic bills faster than traditional paper bills.
So how do you implement electronic billing in your law practice? A good place to start is by accepting credit cards, which enables electronic payments. A word of caution when choosing a payment provider: make sure you choose a company that understands the specific needs of a law firm. Once you have a professional and ABA-approved way of accepting payments, you can implement the rest of the electronic billing process.
Separate Earned and Unearned Fees
One major consideration when accepting credit cards is the ability to separate earned and unearned fees. Just like your cash and check transactions, it is critical to handle credit card payments the same way by depositing unearned charges into your IOLTA account. If your firm commonly accepts payment for advanced fees or to replenish client IOLTA accounts, ensure your payment processor handles these deposits correctly. With aggregator accounts, like PayPal or Square, you risk violating the Rules of Professional Conduct because your client’s funds will be commingled with others that have no relation to you, your firm, or your client. Aggregator accounts commingle transactions from multiple merchants in one “master” merchant account before sending out payments to individual businesses. You also risk incurring deposit delays or processing fees deducted directly from unearned client funds.
In order to stay in compliance with the ABA’s Rules of Professional Conduct and most state bar guidelines for accepting credit cards, a merchant account must prevent the commingling of funds by correctly separating earned and unearned fees into operating and trust accounts. Furthermore, a compliant merchant account should completely protect your trust account from withdrawals for processing fees, miscellaneous bank charges, and potential chargebacks.
Make It Simple
Attorneys should strive to accept payments in a professional manner. Law firms do not have checkout lanes or kiosks, and your clients are likely not lining up in your office waiting to pay you. Most attorneys prefer not to have a clunky credit card machine sitting atop their well-appointed desk. Nor do they usually enjoy walking around the courthouse with a swiper in their pocket. Look for payment options that not only are designed specifically for attorneys, but also allow you to accept payments in a manner that aligns and coordinates with the billing methods of your firm. In addition to electronic invoicing and payments, you may also want the flexibility of accepting cards in your office, over the phone, or through your firm’s website.
Let clients know what your payment expectations are upfront before starting work. It is much easier to establish these guidelines while your client is new and eager to get started. Make sure your clients fully understand what you will charge for your services. It is always a good idea to put the fee agreement in writing. Include due dates, late fees, and payment options. This allows both parties to refer to the document if there are ever any misunderstandings. In addition, you will have documentation in the unlikely event of a chargeback proving that you have authorization from the cardholder to run the transaction.
Continue to communicate with your clients. Help your clients avoid late payments and fees by sending email reminders on or near the due date. This helps you close account receivables faster and your clients will appreciate the extra effort and service. Include credit card logos or add “Major Credit Cards Accepted” to your invoices and website. Bottom line: give clients clear instructions on what, when, and most importantly, how to pay you.
Let Your Clients Do the Work
Include a secure “Pay Now” web link in your electronic invoices and emails so that payment options are easily accessible to your clients. Take the time to establish payment capabilities on your website. Successful law firms have realized that this can be the most effective tool in reducing account receivables. In 2013, 82% of customers who visited a vendor’s website did so to pay a bill. Not only does this make things more convenient for you and your clients, but it also increases traffic to your firm’s website. Most importantly, this allows you to avoid physically handling your client’s credit card, eliminating any responsibility to accept, store, or protect personal information—which makes this method even more secure.
Bill On Time and Consistently
When invoices are not received regularly, it sends a message to your clients that their payment does not have to be prompt either. Along with accepting credit cards, you may also consider implementing a practice management software or system to easily track time and create professional invoices. The combination of these technologies can help create a more efficient and consistent billing process. Billing clients is not the most exciting aspect of running a law practice, but your firm deserves to get paid. Putting an electronic billing and payment system in place will save you valuable time and resources—and give you more time to enjoy the fruits of your labor.