Financially Legal

This is a guest post by divorce attorney and firm owner, Russell Knight, of Chicago, Illinois.  

Almost all lawyers have a retainer or a large initial payment for legal services. Lawyers and clients enter into engagement agreements which specify how that retainer or payment is to be accounted for. Specifically, the money will be applied towards the lawyer’s hourly billing or specifically itemized tasks.

I’ve put it off all week, but the time has come. I need to pay our law firm. They do great work and have helped protect our company during difficult times. But paying their bill is not a pleasurable experience.

Collection rate is defined as the revenue you actually collect into your operating bank account divided by the total amount invoiced. Typical collection rates for law firms are around 85%, but they vary markedly by firm. Increasing your collection rate is a great way to earn more without actually doing any additional work. 

Dan Lear was recently interviewed by Mark Homer of legal marketing firm GNGF. Dan and Mark dove into many different topics including: 

• Company culture
• A $70,000 minimum wage
• The Gravity Legal platform
• Law firm finance
• Alternative fee structures
• Expectations of the modern consumer of legal services

This week Dan Lear and Emery Wager joined Erin Levine of Hello Divorce and Liam Moriarty of Lawgood to talk the future Legal Tech. 

Written By Devon Thurtle Anderson, CEO of Financial Consulting Firm, Skepsis

When I first left my law practice to become a law firm bookkeeper and financial strategist, I was shocked to discover how many law firms struggle with cashflow.  Even more surprising was that this struggle isn’t just limited to a few seemingly rag-tag solo general practice firms.  To the contrary, when I had a chance to look under the hood at dozens of law firms’ books and financial records – including law firms I had always seen as hugely successful – I learned that almost every law firm has a cashflow problem within any given 12-month period.  So, as part of my bookkeeping and consulting services, I set out to change that.

Credit cards are a great way to get paid more quickly. The Clio trends report shows that firms who accept credit cards get paid 39% faster than those that don't. 

But credit cards are expensive. For invoice or trust payments where the client enters the card, rather than swiping or dipping, the cost generally hovers around 3%. Furthermore, credit cards are not the only way to provide a high-quality online payment experience.  

Shopping around for better rates can save you a few tenths of a percent, but here are two changes you can make to drastically reduce card fees while still getting the benefit of speedy payments. 

Managing accounts receivable is important when times are good. But when times are tough, how effectively firms turn accounts receivable into cash can be the difference between going under and thriving.

Expert law firm financial consultant, Chelsea Williams of Core Solutions Group has an excellent video outlining four tips for effective accounts receivable management. Below is a summary, but we highly recommend checking out the video.

In this episode of Clio Matters, Dan discusses different ways firms are navigating the new remote work environment. He lists helpful technology resources and tells us whose ideas he's leaning on amidst the chaos (Nate Silver and RJon Robins of How to Manage a Small Law Firm to name a few).  

There are three sets of rules lawyers need to navigate  when deciding whether to charge clients a fee for paying with a credit card:

Whether your firm is in need of financial assistance or you are working to advise clients through these difficult times, we've compiled a list of local, state and national Covid 19 financial relief programs. 

Oklahoma Attorney General, Mike Hunter, in a recent opinion said a state ban on surcharging is most-likely unconstitutional. Surcharging is the practice of charging an additional fee when clients pay by credit card.

Clients should know what it costs law firms to accept credit cards, and those clients should have the option to save money by paying with less expensive methods. Since card brand surcharging rules prevent firms from charging more for the surcharge than the amount of the transaction, it ends up not being a money-making scheme but a clear way to communicate how much those airline miles really cost.

Getting clients to pay isn’t easy. As more invoices remain outstanding, accounts receivable creeps upward. As an attorney responsible for the firm's financial success, it's important to understand the real cost of accounts receivable. Here's a simple way to estimate those costs.