As a fellow professional reading this article, I am sure that you will agree that 2020 was a tough year with a perfect storm of inter-related Covid-19, geo-political and economic headwinds.
It is to no-one’s surprise, therefore, that the key priorities for finance teams in law firms and other professional organisations for 2021 revolve around improving collection rates and cashflows, optimising costs and digging deep to get revenue billings up.
We recently authored a practical guide on “How to increase law firm collection rates?”, which tackles the specific challenges and the opportunities of improving collection rates through technology.
Here, we will deal with another adaptive strategy of how law firms and other professional organisations can increase revenues by 10–15%, increase collection rates and cashflows by 35–40% through easy-to-use and personalised payment plan software tailored to law firms and other professional organisations.
If you are thinking how to get your billings up and how to improve your collection rates and cashflows… you are not alone. In fact, most of law firms and professional services organisations are in the same boat.
PwC’s Legal Review Survey for 2020 found that, the highest priority for key leaders of law firms is ‘financial and operational performance’, and within that ‘to improve cashflows’, by ‘using technology in their support functions to be able to achieve this'.
“The pandemic has taken working capital performance from a priority to an imperative for most firms. Even those that were well positioned pre-pandemic are now closely assessing their end to-end cycles and taking further steps to ensure a safe level of liquidity headroom. The emphasis being placed by firms on improving their use of technology and centralising processes in their support functions could help to unlock cash if this is properly executed.” (PwC Legal Review Survey 2020)
In our previous article, we wrote about the Thompson Reuters survey of Top 100 Law Firms, which also found that ‘tightening credit controls’ and ‘reducing payment days’ are the top 2021 priorities for virtually all finance leaders of Top 100 law firms.
So the message is clear and consistent. Focus on your cashflows. Focus on technology. But are law firms and professional services firms doing these sufficiently?
Let’s look at instalment payment plan software solutions used by law firms and other professional organisations.
Whereas e-commerce retailers, private dentists, vets have embraced innovative payment collection methods, accounts receivable technologies to increase their revenues and collection rates, law firms and other professional firms have lagged behind in embracing such methods.
There is a ‘disconnect’ of how clients of professional services firms want to pay their fees on the one hand, and the extent of which firms currently address this need on the other hand. Approximately ~70% of professional services clients want to pay their fees via instalment payment plans, but only 40% of professional services firms are currently offering their clients customised payment plans.
Of course, one needs to take the data with a pinch of salt as there is significant variation in the types and subtypes of professional services firms. For example, whereas the need is clearly established for immigration law firms, family law firms and accountancy firms with numerous individual or SME clients, the need is much less prevalent for example for commercial law firms dealing with larger projects and clients.
Some of the more traditional reactions by professionals running their law firms or other professional services organisations have been:
For example, for immigration law or family law client matter that is expected to last 3–4 months, with $1,300 bill agreed on a flat fee structure, one can set up the instalment payment plan to receive, say $400 as initial down payment immediately, and the remaining $900 over 3 monthly instalments of $300 — mirroring the expected work to be performed over that period.
The initial down payment is taken with a click of a button, the client’s card or bank account are charged at that point, and then the same card or bank account details are used automatically to deduct the next instalments — with full visibility and consent of the client. The result is that law firm can onboard the client through empathetic and open discussion about instalment payment plan, the client can afford the legal bill and pay over time with 0% finance charges, and the law firm does not take any additional credit / collection risk.
2. “I hate chasing payments”. We agree. That’s why it’s important to find a software solution that does that for you — not only through smart automation, but also which is designed with deep understanding of your ‘clients’ personas’ and communicates with them via natural methods such as SMS or email, in a hyper-personalised way coming from your firm, and in a customisable language (e.g. English or Spanish) that each of your individual clients feels the most comfortable with.
3. “It’s time consuming to run payment plan program”. Indeed. Historically a lot of admin time would have been spent on this, but now law firms’ practice managers spent on average 50% less on admin tasks when incorporating client payment plan software, which has accounts receivable collections module.
4. “There is no easy-to-implement, easy-to-use, affordable and secure technology solutions to solve for this”. Nearly true. At least, until recently. Solutions like payink.com offer this now. They are tailored to needs of law firms and professional services firms, and designed with detailed input by lawyers and their clients.
1. Client demand — several recent surveys point out that ~70% of clients do want to pay their professional services fees via instalment payment plan. Did you know that as you are reading this article, there are 596 different Google keyword searches involving ‘lawyers’, ‘attorneys’ and ‘payment plans’ that are being used by prospective clients now? For example, there are 320 Google searches on “family law attorney payment plan near me” or 360 Google searches on ‘criminal defence lawyers with payment plans near me” (source Spyfu.com). All of these searches represent additional prospective addressable market for a law firm or professional services organisation - right now.
2. Empathetic conversion tool for winning new clients — by offering payment plans, you can have open and empathetic conversations with prospective clients. You could discuss how you could help them professionally in a way that establishes a relationship of openness and trust from the outset.
3. Increased revenues by 10-15% through offering easy-to-use payment plans, law firms can gain competitive advantage, and win new clients that need their services but have some short-term affordability challenges.
4. Increased collection rates by 25-35% and corresponding improved cashflows.
One should look for the following key features and functionalities when selecting a payment plan software for a law firm or professional services firm:
· Easy-to-set-up and easy-to-use: payment plan software should be easy to set up, it should be pre-integrated with your practice management systems and your payment providers.
· Automation: automation of sending out bills and accounts receivable process, including automated notifications and reminders to clients.
· Personalisation: the solution should be built around deep understanding the ‘persona’ of the client of the law firm, and sending highly tailored automated notifications and reminders in a language (e.g. English or Spanish) and methods (e.g. SMS or email) that the clients feel mostly comfortable with.
· Communication: optimising the communication channels with the law firm clients in most effective methods (e.g. through automated SMS and email reminders, delivered in a balanced and highly personalised way, in a language most suitable for your clients e.g. English or Spanish).
· Alternative payment options: enabling the law firm’s clients to be able to pay the bills through variety of payment alternatives, ranging from bank / ACH transfer, direct / ACH debit, credit / debit cards, and not just wires.
· Smart reconciliation: ability to reconcile the vast majority of the bills back to the payments received, without the need of manual intervention.
The simple answer is yes. There are some generic payment plan software led solutions, and others which are tailored to law firms and other professional organisations, like payink.com. The solution takes less than a day to be implemented and integrates well as an ‘add on’ to the practice management systems and payments processors of law firms.
If you are a professional within a law firm and would like to get further thoughts on how you can implement an easy-to-use payment plan software, please reach out to the payink.com team.
In summary, payment plan software can be an enormously powerful tool for your firm.
1. 70% of your clients do prefer to pay via payment plans, so be open minded about implementing a payment plan software and offering it to your clients.
2. Choose a payment plan software tailored to your law firm or professional organisation, which plugs into your existing practice management software.
3. Once implemented, inform your clients that you do offer a personalised payment plan, and you will gain a competitive advantage almost instantly.
4. The payment plan allows you to have empathetic and open conversations with your clients and acknowledge the affordability issues at present.
5. Tailor the work and payment plan for each client to strike the right balance of addressing their short-term affordability issues, whilst ensuring you do you do not take credit risk.
6. Monitor your collection rates, cashflows and revenues closely.
About the author
Branislav Trajkovski is Director and investor at payink.com, a financial technology company aimed at increasing collection rates for law firms, accounting firms, clubs and other SMEs.
After starting his career with PwC London, Branislav moved into investment banking, investments and subsequently in financial technology companies. Branislav is a senior professional with operational and board level experience gained in financial technology companies such as Dlocal.com and Direkta24.com, which grew from humble start-ups to unicorns.
His experience comprises operations, compliance, finance (Chartered Accountant), corporate development / M&A and capital allocation.