At MVO Resources, our law firm clients consistently report that one of their biggest challenges is maintaining a healthy cash flow. Law firm cash flows are often indicative of timely payments from clients. Add a global pandemic like COVID, and this task can feel almost impossible. Why is that? To understand, we are breaking down the challenges of accounts receivable and collections management for law firms, along with solutions that can help your firm.
All our law firm clients share a similar complaint: there just is not enough time in the day. Everyday tasks in a firm are endless. This is the same for the partners all the way down to the receptionist. Everyone’s schedule is jam-packed with communicating with opposing counsels, depositions, mediations, trial preparation. The list goes on.
Given this, often the management of who is managing the law firm’s clients and ensuring there is enough money coming in to keep the firm profitable falls through the cracks. Some may say it is the in-house bookkeeper’s job – but let us be honest – the bookkeeper likely has just as much on their plate as the lawyers do.
Where does that leave the law firm’s cash flow? Client payments? Billing? Too often, these are placed on the backburner. Many firms will push out billing another cycle and “trust” that their clients will follow through on their obligations to make timely payments and trust replenishments.
Now let us add COVID to the mix. Many Americans are out of work. But they still need their attorneys to continue performing at the amazing levels they always have. Knowing that they rarely get a call about paying their bill or replenishing their trust, it is common for them to just stop paying altogether. Depending on the state the firm practices in, and the practice area, the option to withdraw may not be that easy.
Not only are clients going to stop paying, because they know they can “get away with it,” but the firm will have to continue putting in work on the case until the court permits them to withdraw. This does not provide for a healthy cash flow.
The management of accounts receivable and collections should lie in the hands of one person and/or department. Their sole responsibility should be billing, managing balances due and trust replenishments. While small law firms may feel it is unnecessary to dedicate this to department, the repercussions of not doing so can be detrimental to the firm’s success.
Now you are left with two options, hire some in-house to manage this, or outsource.
The idea of having an in-house staff member take on this role can make you feel all warm and fuzzy. I get it, I am the same way! But warm and fuzzy does not pay the bills and does not set your firm up for success long-term.
Yes, they will be there face-to-face. Yes, it will feel like you have more control knowing that they are your staff. But with that comes payroll taxes, benefits, additional management oversight, setting up SOPs, etc. All of this goes against the two big issues here – not having enough time and getting your cash flow up.
Outsource Accounts Receivable & Collections
Hiring a consultant to work so intimately with your firm is a scary idea for some. However, they already know everything that is required to make this role a benefit to your firm. They are experts in their field, so they have already established tried and tested SOPs that give results. They know all the tactics to get clients to make payments. Better yet, there are no payroll taxes or benefits your firm must pay to an outside consultant. And, you gain more time by not having to manage any of this.
“Danielle and her team will help your firm grow! Two years ago, MVO resources began helping our firm in a bookkeeping capacity. Before long, they were handling a high percentage of our outsourced business management needs, including accounting, payroll, and client collection management. We have doubled in size since MVO came aboard. They have both helped us grow and scaled their services with us to help solve new problems that pop up. We trust Danielle so much that she is a member of our decision-making team, sitting in on meetings and acting as a financial officer for the firm. I fully endorse this group and would be more than happy to chat with anyone who wants to know more.”
Denmon | Pearlman
When law firms or attorneys make the decision to partner with MVO Resources to outsource their accounts receivable and collections, these firms see immediate results. Some of these are intangible, such as peace of mind and more time to do the things they love. Others are in the numbers. Billing is completed on a regular schedule that is conducive to the firm. Cash flow is up, and clients are happier.
You probably had to re-read that last sentence to make sure you saw it correctly! Yes, clients are happier! They are giving you more money on time, yet they are happier. I know, it doesn’t make sense.
Look at it like this: prior to implementing our processes, our clients’ clients don’t normally keep up with what they owe. Then suddenly they get a call to collect on a large sum of money they were not prepared to pay. When MVO steps in, all your clients will know how much they owe at all times. This form of direct and transparent communication for accounts receivable is a proven tactic to ensure timely collections, especially in the time of COVID. MVO Resources is a powerhouse business management partner for law firms and attorneys. We offer more than two decades of combined virtual bookkeeping services. From trust accounting for QuickBooks to employee performance management, MVO Resources is your answer for timely collection management. Learn More