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Set Yourself Up for Better Year-end Collections

The end of the year is always a busy time. Working to finalize your books, collecting outstanding invoices, and getting ready for tax season can often seem like the perfect storm. Plus, you’re trying to maximize the amount of revenue your firm has brought in this year. Fortunately, there are some things you can start doing now to set yourself up for a better year end.

First and foremost, start contacting clients with overdue invoices immediately. The longer an invoice goes unpaid, the more likely it is to never be paid. Make sure you can immediately take a credit card payment when you’re on the phone. If you can make contact with clients and offer an easy way to pay, you have a much higher chance of receiving payment than asking them to write and send checks.

Be prepared for all objections a client can make to paying an invoice and be ready to offer solutions. Don’t have enough cash on hand? We can take a credit card. The invoice is too big? We can offer a discount if you pay right now on the phone. The client needs more time? Remind them that the invoice is overdue, and if it’s not paid immediately, it will be turned over to a collection agency, which comes with a whole host of negatives, including impacting credit scores, etc.).

Empathize with your clients, and let them know that you don’t want that to happen. But stand your ground. At this point, you’re trying to get as much money as possible, even if it’s not the full amount of the invoice, to avoid completely writing off this income. Every dollar not collected is a dollar not earned. And then that dollar needs to be written off at tax time, adding even more work to your firm.

Second, think about offering early payment discounts. Chasing down clients with overdue invoices takes enormous amounts of time that could be spent better elsewhere. Consider incentivizing your clients to pay before the due date. Maybe it’s a 5% reduction in their invoice if paid within 10 days, or you could offer a discount on future services. Small adjustments like these don’t have huge impacts on your bottom line, and the goodwill you build with your clients will pay off with more business in the future. After all, everyone likes to get a deal.

If your client tells you that they’re having trouble paying the full amount of their bill, offer to set up an automated payment plan. Make sure you have a valid credit card or bank account for the client on file and process payments on the first of the month. Generally, a shorter payment plan is better – think three or six months. And if a payment transaction fails, reach out immediately to the client to get a new payment method.

Lastly, start thinking about ways to improve your process in 2017. Are there any areas where you can use technology or automation to get invoices out more quickly or get paid faster? Does your firm have an online payment portal? Can you make it easier to use? Do all of your lawyers know where to direct their clients for making payments? Make your “click to pay” links easy to find and keep them in front of your customers by including a payment link in your email signature.

There’s always room for improvement in the collections process, and getting started as soon as possible will make your life easier and help your firm get more money. Want to learn more? Get the Collections Best Practices whitepaper here.

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