Our recent guide to law firms’ cash flow found that 55% of 40 leading law firms did not have enough cash to cover one month’s operating expenses. This shocking statistic serves as a stark reminder of how slow payment of invoices and low realisation rates can have a huge impact on a firm’s profitability and survival.
Combining an uncertain economic outlook, and rising costs of living it’s easy to imagine that law firms might start to see new challenges in getting their invoices paid on time by their clients – potentially creating a perfect storm for the firms that don’t have the healthiest cash flow today.
What should law firms do to reduce debtor days and improve cash flow?
The legal industry standard invoice payment time is over 60 days.
However, implementing a payment solution like Legl can reduce this period substantially and get much needed cash in the bank.
The average time it takes for firms to get paid with Legl’s online payment request link is just under 8 hours. And with 50% of clients paying invoices out of office hours, enabling clients to pay their bills online and providing a frictionless and convenient payment experience is a key delighter and signifier of a modern law firm.
Across the legal sector, year-end lock up increased again in the last year, to an average of 137 days (from 125). High lock up days restricts firms from accessing the cash they could otherwise spend on investing in and growing their firm. Reducing lock-up will always be one of the most significant ways for law firms to free up cash.
Even a small reduction in lock up can make a significant difference to cash flow. For a firm with turnover of £5m, a one-week reduction in lock up would free up to £100k of cash. For many firms, that can make the difference between operating close to their overdraft limit and operating with no overdraft at all.
How Legl helps reduce law firms’ lockup days:
Legl’s browser-based solution speeds up transaction times by several weeks – complete onboarding checks in less than 24 hours to get started on substantive work and start billing clients sooner.
How can law firms get paid faster?
The most efficient firms reduce their billing cycles by sending invoices immediately after the completion of work, or on a schedule during the progression of a matter.
Moving away from billing at month-end to billing throughout the month can also result in clients paying a full month earlier, and will dramatically reduce debtor days and payment times.
Staggered billing also assists clients in paying for a matter incrementally, rather than receiving an unaffordable lump sum request at the end of a piece of work – particularly valuable in an economic climate where individuals and businesses are looking for more cost-certainty.
With Legl, your clients have a wide range of payment options to choose from (and automated processes that make your life easier, too):
A simple, fast and safe way for clients to transfer funds directly from their bank account to yours. Enable clients to transfer funds securely without the need to enter bank or card details.
Instant Bank Pay
Give clients a convenient method to make large transfers into your account that are automatically linked to the reference from the request.
Ensure that the right amount is paid by the right client into the right account, every time.
All major credit & debit cards
Send secure, firm-branded payment request links for clients to pay through their preferred method.
Payment Plans
Give clients the option to pay invoices in instalments or as part of a payment plan.
Digital Wallets
For instant pay via cards stored on clients’ phones.
Payment Reminders
Automated via email to remind clients to pay invoices over set periods.
Phone payments & QR codes
For handling in-person payments at your firm.
All of the above help firms modernise their financial operations, enabling them to get paid faster and their teams to work more efficiently. With a single source of truth for all payments data, firms can streamline their accounts receivable processes and quickly and easily reconcile and allocate payments – saving hours of manual work every day.
Summing up
Getting clients to pay in a timely manner is foundational to success at any law firms. But improving cash flow isn’t difficult to achieve with the right technology partner.
Now is the time to take action and implement a best-in-class solution to getting invoices paid faster and mitigating risks.
