Every company starts somewhere. In the beginning it’s a simple, manageable process. You can probably run everything out of your head. Then you start to grow. Now all of the sudden you can’t manage every single process in the company. You have new clients coming in. More attorneys have joined and that means more billing and invoicing. Something is going to fall behind. Is it your sales and marketing? Are you not spending enough time recruiting? Are your invoices being sent out late?
The first thing that typically falls behind is sending invoices. It might not seem like such a big thing but it creates a lot of cash flow issues. All of the sudden, you’re not collecting the cash you should be, and your business suffers for it. This happens for a few reasons:
- Invoicing is not fun, unless you are an accountant
- Physically creating and sending invoices can be time consuming
- The more lawyers and clients you have, it gets exponentially harder to accurately track and review time
- Invoices are typically reviewed and determined if the total amount can be billed or a portion needs to be written off
What do you do when invoices are late? Are you spending time calling or emailing? I love the scene in Caddyshack where Rodney Dangerfield’s character says, “Hey Moose… Rocco… Help the judge find his checkbook.” If only collection were that easy (and legal!). Most attorneys do not start law firms with dreams of spending their time collecting money from clients.
When you are not getting paid on a timely basis (either due to late payments or late invoices), there can be devastating effects on the company; partners or lawyers may go without pay, credit card debt balloons, employee morale fades, decisions become short-term instead of strategic.
Outsourcing invoicing and collections can be extremely cost effective.
A client started with us several years ago. He was a one-person firm and everything was fairly manageable. There was only one person accumulating time and that one person also had the direct relationship with the client. All of the promises to the client and fees were all in his head.
Then, as the firm grew and needed to scale, he had to get it all out of his head.
We developed a process for him that looked like this:
This was great for a few months until one day I received a call from my client saying, “Hey, Trevor, I’m just falling behind. This isn’t something I want to do. It’s just really tedious for me. Do you all have somebody at your company that can help?”
One of our CPAs shadowed his current process and saw the way he did everything (everybody does this process a little bit differently). She shadowed him and then deter- mined what she could take off his plate. We then documented the entire process and trained the lawyers on what they needed to do.
The client now has more efficient billing and better cash flow. Days Sales Outstanding (DSO) was reduced by 23%. He can now take a step back and breathe, and simply focus on growing the business and going forward.
If you are an attorney and you want more detailed info about how to minimize taxes and maximize profits, check out this free digital book entitled "Accounting for Attorneys: How to minimize taxes, maximize profits and create more time for the things you love"
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