Practice Management

Law Firms Accounts Receivable Management: The Ultimate Guide

The LawPay Team
The LawPay Team
January 12, 2023

Hardworking attorneys invest huge amounts of time in their clients, pumping hours and hours into every case. But sometimes, after all that hard work, you send out the bill and get no response. Non-paying clients not only cut into your firm’s cash flow, but chasing every unpaid invoice creates even more work.

When busy practices don’t have an effective law firm accounts receivable management process, unpaid client bills can get out of control in a hurry. However, simply throwing more manpower at the problem isn’t the answer - and frankly, unless you are part of a large practice that can afford a dedicated accounting team, that isn’t an option anyway.


Instead, leading law firms around the country are increasingly turning to digital accounting and payment solutions to increase cash flow and boost productivity. Not only is legal software helping to overcome age-old A/R challenges, but it’s also creating new opportunities to modernize billing processes and improve the client experience.

What is Law Firm Accounts Receivable Management?

A law firm’s accounts receivable (A/R) represents all outstanding client payments for work that has been completed and invoiced. Some law firms consistently maintain a high A/R, whether due to strict payment terms, unresponsive clients, or a myriad of other potential reasons. But ultimately, regardless of how high a firm’s A/R is, the money remains only potential revenue until the bills are actually paid.

Because of this, law firms need to find ways to effectively manage their accounts receivable. The sad truth is that many attorneys don’t have a proactive A/R management process, choosing instead to wait and collect outstanding invoices at the end of the year. Maintaining a high number of unpaid invoices creates a fairly murky picture of a firm’s finances over time. If left unchecked, outstanding balances might outpace actual revenue, making it harder to make payroll and keep the lights on.

The Unique Challenges of Legal A/R Management

So, if A/R management is so essential, why do many attorneys wait until the last minute to collect bills or let invoices go unpaid all together? As is to be expected, the answer is complicated. After all, no attorney wants to go unpaid.

Unfortunately, manual processes traditionally employed by law firms often struggle to address the unique challenges of legal A/R management.

Complex Billing Arrangements

Great attorneys often go out of their way to serve individual clients. Therefore, it’s perfectly reasonable when a lawyer tailors billing arrangements to fit each client’s unique circumstances. However, this can create a complex web of billing schedules and terms that can be a nightmare to keep straight. And with only inflexible, manual processes to keep track of it all, it’s not surprising when some bills fall through the cracks.

Managing Retainers

When a law firm accepts payment for a retainer, they have access to a certain amount that they can bill against. But that doesn’t mean law firms have instant access to that money. To maintain trust account compliance, an attorney can’t actually pay themselves from that retainer until the client reviews and accepts the bill. Added to that, with heavy workloads and multiple clients, it can be easy to miss when a retainer balance is getting low. Worse, if a client doesn’t know when their retainer balance is running out, it can be a shock when they’re suddenly handed a bill they didn’t expect.

Tedious Time Tracking

Similar to the point above, it’s up to the attorney to keep track of billable hours and communicate it to the client. It goes without saying that when done by hand, this is incredibly time consuming. It’s also incredibly important. To maintain trust accounting compliance, firms must be very careful about tracking time correctly to avoid commingling earned and unearned funds, further complicating the A/R management process.

Maintaining Client Relationships

Maintaining good client relationships is a top priority for any attorney. Calling clients for payment follow-ups, sending snail mail, and other manual A/R processes can create a lot of unwelcome stress and tension. If a practice has limited or inflexible payment options that make it inconvenient or difficult for clients to pay, it can make the situation even worse.

The Importance of Effective Accounts Receivable Management

Adopting a more proactive and streamlined A/R management process has numerous upsides for law firms of all sizes. Better yet, digital legal accounting solutions allow even small firms or independent attorneys to take full advantage of the benefits modern A/R management has to offer.

  • Improved Cash Flow: An effective A/R management strategy will directly contribute to more consistent revenue. Making it easier to manage payments and consistently bill clients can significantly boost law firm cash flow.

  • Better Client Experience: Maintaining a healthy client relationship is top of mind for an attorney. When a client gets an uncomfortable call or email from their attorney about a bill or late payment, it can erode that sense of trust. Simplifying or automating your A/R management process makes it easier for clients to make payments faster and creates a better overall experience.

  • More Secure: Having to personally follow up on billing and invoices creates more chances to accidentally leak sensitive information. Streamlining the A/R processes makes accepting payments easier while keeping client information secure.

  • Easier to Maintain IOLTA/Trust Compliance: Automation and other features of digital law firm accounts receivable management makes it significantly easier to avoid commingling funds.

Modernizing Legal A/R Management With Digital Solutions

The challenges of maintaining an effective A/R management strategy at law firms are by no means new. However, the rapid expansion and popularity of digital payments have transformed the way modern businesses manage payments. The convenience and speed of digital accounting solutions has provided legal professionals with an easy way to implement the latest best practices for accounts receivable management. Modernizing your practice’s A/R processes is essential to meeting today’s client expectations and increasing revenue.

Specifically, there are several areas where legal accounting software can streamline and improve A/R management:

Use Accounts Receivable Automation Features

One of the biggest advantages of leveraging tech, like a legal billing and payment solution, is how they can digitally automate your end-to-end billing processes. Automating A/R management has a number of distinct benefits for law firms. First and foremost, your attorneys will waste significantly less time on calculating and sending invoices, following up with clients, and chasing payments. Letting your legal payment software handle the A/R heavy lifting is not only more efficient, but less prone to human error, especially when handling unique billing arrangements or payment schedules.

Accounts receivable automation is also hugely beneficial to maintaining good client relationships. Since automation makes invoicing more consistent and eliminates uncomfortable personal reminders, it takes the stress out of payment reminders and other client follow ups.

Send Electronic Invoices

Manually preparing and sending invoices is both tedious and time consuming. If this manual process isn’t streamlined, it not only adds frustration for clients but delays payments. Electronic invoices can be calculated automatically, go out as soon as they’re ready, and can be paid instantly. Since the heavy lifting is done in the backend, you can easily customize every invoice to a client’s needs in a fraction of the time. Digital payment is also easy to schedule in advance, making it easy to set up future or recurring payments. Electronic invoices also help firms save costs, by eliminating time spent on preparing bills and reducing the use of paper and stamps.

Offer a Variety of Payment Options

With so many ways to pay digitally, it can be hard to know which one is right for your clients. Truthfully, there isn’t just one right answer. What one client is comfortable using might pose problems for another. That’s why legal payment solutions, like LawPay, provide firms with a variety of flexible options to accept payments, including eCheck, credit card, and other digital payment methods.

In addition to offering flexible payment methods, digital payment solutions also offer more flexibility with payment terms. Many unpaid bills are the result of clients simply not having enough money to cover the cost all at once. Electronic payments are easy to adjust and customize without disrupting your overall accounting processes.

Keep Track of Customer Information

Having an easy way to store client details and payment information is an essential piece of increasing payment efficiency and streamlining your A/R management. When using manual processes or multiple pieces of disjointed software, this can be easier said than done. Legal-specific payment processors like LawPay are designed to seamlessly support your firm’s A/R management by bolstering your billing, compliance, and reconciliation processes with automation, integrations, and user-friendly payment options. Convenient features like Quick Bill and Scheduled Payments help firms collect more payments while ensuring that money goes into either the correct trust or operating account automatically.

A Better Way to Manage Your Law Firm’s Accounts Receivables

A modern and streamlined A/R management strategy can help law firms of all sizes increase efficiency, drive revenue, and improve client relationships. But while there are many digital payment solutions out there, few are equipped to handle the unique operational and compliance challenges faced by legal professionals. Modernizing your firm’s accounting without disruption requires a specialized technology partner you can trust.


LawPay is an industry-leading legal payment solution, designed to help streamline the legal billing process. With powerful and flexible tools to accept and manage payments, LawPay helps practices automate and streamline their A/R management.

Schedule a demo to learn more.