Why Modern Law Firms Must Use Electronic Payment Solutions
As more of the economy moves online, law firms must adapt in order to serve present and future clients. A crucial part of this adaptation is being able to accept electronic payments.
But what is electronic payment? In this article, we’ll answer that question, and discuss why law firms need electronic payments to support clients, get paid faster, and increase profitability.
What are Electronic Payments?
Electronic payments, sometimes known as e-payments, are technology-enabled methods of handling transactions. Usually done online, e-payments obviate the need to use physical cash or checks.
Types of Electronic Payments That Firms Can Use
As the popularity of electronic payments has grown, so too has the number of methods for how lawyers get paid.
- Two of the most popular types of electronic payment, debit cards and credit cards, will already be familiar to you.
- Another option is virtual cards, which are electronic tokens that are only valid for a single use and a predetermined amount. Virtual cards are typically emailed to a vendor and treated like credit cards.
- It’s also worth being familiar with ‘Automated Clearing House,’ or ACH payments. Most ‘direct’ forms of paying online, i.e. through direct deposit or electronic checks, are ACH payments.
Advantages of Electronic Payments for Law Firms
The COVID-19 pandemic isn’t the only reason electronic payments have become so common—they also offer substantial benefits. Below, we’ll outline some of the many advantages that electronic payments offer a legal practice such as yours.
1. Provide a Positive Client Experience
Perhaps the most salient advantage comes from the fact that your clients will want to use e-payment solutions. This isn’t speculation, it’s backed up by hard evidence.
According to a 2021 study covered by Insider Intelligence, 75% of respondents indicated that they would transfer one or more bills to electronic payments. This was true across all generations surveyed, but millennials were the strongest enthusiasts for the digital approach, with 87% wanting to make the switch to paperless.
This is confirmed by data from fiserv, whose survey found that credit and debit cards rank the highest on consumers “nice to have” and “must have” lists for bill pay options. Among younger consumers, 95% prefer to use debit cards, 83% consider payment apps desirable, and 82% want mobile wallets.
These numbers clearly illustrate the trend toward making greater use of electronic payments, as well as the crucial role this option plays in keeping clients happy.
2. Attract Prospective Clients
Electronic payments will not only help you serve existing clients, but also help you attract new clients. These days, everyone goes into a transaction assuming the business they’re dealing with can support electronic payments. That’s likely to include anyone considering hiring you for legal services.
According to Payments Journal, 60% of consumers are using some form of digital payment, 44% have set up automated payments with their checking account, and 39% pay over a mobile app or website. These figures speak to a strong preference for handling transactions electronically, and there’s no reason to believe this trend will abate in the years ahead.
With the move towards a cashless society, electronic payments are becoming the preferred method of payment for law firm clients. Not having electronic payment options, therefore, could mean damaging your firm’s reputation. They may see a failure to keep up with widely available electronic payment solutions as an indication that your firm may not be keeping up with the latest legal tools and developments in the law, for example.
3. Issue Immediate Payment Confirmations
With electronic payments, there’s no need for paper invoices or checks to work their way through the mail. You can issue immediate payment confirmations, meaning both you and your clients know instantly whether a transaction is successful.
4. Get Paid More and Faster
So far we’ve talked a lot about customer satisfaction, but electronic payments are beneficial from a business standpoint as well. Utilizing electronic payment solutions helps attorneys save time and effort when running a law firm.
First, electronic payments translate into faster payments. Our internal research concluded that firms accepting electronic payments get paid 39% faster than practices that only accept old-school payment methods.
Electronic payment solutions also make it possible for lawyers to easily see whether a client has paid their bill, and to send automated or manual reminders. Finally, electronic payments eliminate the risk of invoices or checks getting lost in the mail. This all means you’ll leave much less money on the table.
5. Optimize Law Firm Workflows
Because online payment solutions allow for automated invoicing or recurring payments, electronic payments prove incredibly useful when you have client work on retainer or over repeated transactions.
Many electronic payment solutions on the market also offer integrations with other software solutions that lawyers may use for their practice, such as case or practice management software, timekeeping software, and accounting/bookkeeping software. This prevents law firm managers from having to jump between multiple tools or reconcile data from different programs.
6. Enable Data-Driven Decisions
Electronic payment solutions make it easier for firm partners and managers to track and review the firm’s financial performance. In particular, these solutions can enable lawyers to see what type of work drives the most revenue or identify the firm’s most lucrative clients.
As a result, firms can diversify their work to ensure they have a more balanced caseload. If necessary, they can protect themselves against relying on one client for a significant portion of the firm’s income. Attorneys can also use this data to target profitable, satisfied clients for referrals or additional services.
7. Increase Data Security
Imagine you didn’t have to worry so much about the security of client financial information. With electronic payment solutions, that dream can be a reality.
Having an online solution means that your firm doesn’t have to store bank account details or credit card numbers on your own servers. As long as you select an established payment processor with high-grade security, your firm shouldn’t have to worry about the safety of your clients’ financial information.
Concerns About Electronic Payments for Law Firms
1. Appropriateness for the Legal Industry
Perhaps owing to common myths about online payments, there was a time when lawyers saw credit cards as more appropriate for retail transactions than for paying for professional legal services. However, those attitudes have slowly melted away as more people (lawyers included) have adopted credit and debit cards as their preferred form of payment.
2. Complying With Interest on Lawyers’ Trust Accounts (IOLTA) Guidelines
In light of ethical obligations, many lawyers still express concerns about accepting electronic payments. In particular, attorneys have struggled with using electronic payment solutions while complying with IOLTA guidelines.
Fortunately, in recent years legal-focused electronic payment solutions have come onto the market. These payment solutions enable lawyers to manage electronic payments by separating payments into earned and unearned funds—and directing both into their proper accounts. In addition, these solutions deduct processing fees from the lawyer’s or firm’s operating funds rather than from funds that may still legally belong to the client or a third party.
3. Payment Processing Fees
Some lawyers still take issue with the idea of having to pay credit card or electronic payment processing fees. But firms are beginning to recognize that these fees represent just another cost of doing business and should be incorporated into the firm’s overhead. Plus, most attorneys are willing to pay a small processing fee if it means they get paid more and faster, and can improve cash flow.
Manage Your Law Firm’s E-payment Methods
The world is quickly becoming more digital, and electronic payments are here to stay. If you want to optimize your firm’s finances while better meeting client needs, contact a LawPay representative today to learn how our solutions can work for your firm or practice.