For law firms, cash flow is more critical now than ever before as many law firm clients are facing financial issues. Some clients have asked for extended terms, and some others have just slowed down payments. While some may be inclined to be especially understanding given COVID-19, having the big picture in mind is important in order to protect the firm. The following are some key indicators your firm should keep an eye on to retain strong cash flow and weather the storm.
Ongoing Tracking of Delinquency Data
Delinquency data is vital because, when managed, it can have an incredibly positive impact on cash flow. BI solutions are especially helpful for keeping related data all in the same place, which allows firm managers to focus on clients who are paying slower than they have historically. While your client’s cash flow may be out of your control, BI data can help firm managers identify red flags, and manage through the turbulent months ahead.
Timeliness of Bills Posted and Sent
Most understand that the sooner bills get posted, the sooner they get out. And the sooner they get out, the sooner your firm can get paid. To maximize collections, it’s important to know where your firm stands on unposted/unbilled time, and what obstacles are preventing full realization and collection at all times. For those needing a quick start toward daily reporting, Iridium, now part of BigHand’s Daily Insights Tracker may do just the trick.
Work from home may be causing other bottlenecks in your firm’s processes. One such bottleneck might be paper bill review, which is all but impossible at the present time. Any firm still relying on a paper-based process should consider tools such as Iridium, now part of BigHand’s Steere AlertManager, Steere PrebillManager, or Steere ReportManager to streamline the billing process.
Evaluating Requests for Extended Payment Terms
We all get it; times are tough, and some clients might need extra time before they can make a full payment. Communication is especially important in these situations. Understanding your clients on a daily basis—both on a granular level and as part of the big picture—is a critical aspect of preserving profitability and cash flow. Client data can come in handy for many decisions, not the least of which being whether to grant extensions. Firm managers need to be able to access a wealth of information, including accounts receivable data, financial reporting, and profitability by client and matter.
While everyone would like to be as understanding as they can in uncertain times, offering flexibility can be dangerous without the data to back it up. You need to understand the cash flow implications of extending terms, how it impacts client profitability, and the likelihood of getting paid at all if you allow the client to delay and a bankruptcy ensues.
Billing, collections, and cash flow can be stress points for many law firms, especially now, but greater transparency can make that easier for all involved.
