Should your legal firm be considering ways to improve its payment practices ? and ultimately its cash flow ? alternative fee arrangements and online payable tools are good bets.
But a word of advice from Gavin Geraci, senior vice president, specialty segment executive, PNC Business Banking: couple that examination with an evaluation of the firm’s financial policies.
“Any time you’re going to adopt a new billing arrangement or structure, use that as an opportunity to evaluate billing and collection policies,” Geraci says. “It’s likely going to result in a change in revenue, a change in how clients see their charges and it’s going to have an impact.”
Review how it will potentially impact the budget with which you started off the year. The payables cycle particularly deserves review if the firm does work on a contingency basis.
“Take advantage of the data that is available to the firm to really do some analysis and test the impact of any changes you might make on the firm’s cash flow, because if you do it to any magnitude, it will likely have some impact,” Geraci says.
Moving to a flat fee instead of a traditional hourly billing and using credit cards to pay legal fees are two growing trends being used to improve payment practices.
“Using a credit card as a payment vehicle tends to be a pretty effective means for some firms to accelerate those receivables,” Geraci says. “It’s something more businesses are amenable to, and it’s a little outside the traditional invoicing that you will normally see.”
Other methods to accelerate payments include online tools, such as online bill pay, offered by financial institutions. These tools can also offer access to escrow accounts, master and subaccounts so that legal firms can effectively manage those.
Technology aside, some good, old-fashioned business smarts can help improve the picture.
“You have to actively manage your past due accounts,” Geraci says. “A lot of times those conversations are going to lead to greater collection than if no efforts were made. That follow up could be the difference between full payment and a writeoff.”
Gavin Geraci is the senior vice president of business banking and specialty segment executive at PNC Business Banking. He has more than 19 years of experience in the financial services industry.
How to reach: PNC Bank, www.pnc.com/attorneys or (877) 535-6316.