Best Practices

Offering Lawyer Payment Plans: The Ultimate Guide

Gabriela Jhean
Gabriela Jhean
December 15, 2022

When legal fees are a leading barrier to clients seeking an attorney, is your law firm taking the appropriate steps to make your services accessible? Lawyer payment plans are an efficient and reliable method of growing your client base while creating a steady cash flow for your firm. They're also in demand, with half the US population using payment plans in 2022.

In this guide, we'll discuss why clients prefer lawyers with payment plans, how this financial arrangement benefits both parties, and what steps are needed to implement them at your firm.

What Is a Lawyer Payment Plan?

Lawyer payment plans are financial agreements that clients will pay an outstanding balance to the law firm over an extended period. These legally binding documents outline how much will be paid, when installments are due, and what happens when a payment is missed.

Law firms can choose to offer either a specific payment plan (for example, half now, half later) or tailor the plan to their client’s individual needs. The most effective agreements are custom, which brings unique benefits to both the client and firm.

For clients, attorney payment plans provide greater financial flexibility than a total upfront payment. When tailored to the client, installments can alleviate anxiety associated with high legal fees and make legal services more accessible.

For law firms, payment plans provide a unique opportunity to demonstrate sensitivity to a client's financial situation and offer a bespoke solution. They also bring a predictable cash flow to your firm since payment plans are most often executed through recurring billing.

Why Should Lawyers Accept Payment Plans?

Lawyers with payment plans are in high demand as clients look for legal financing solutions. In addition to meeting clients' needs, payment plans present an effective opportunity to increase collection rates and help you get paid without leaving money on the table. Here are some of the top reasons to adopt lawyer payment plan agreements at your firm:

Spend Less Time Chasing Payments

When time is money, chasing overdue payments can quickly become a costly expense that detracts from working on a case or expanding your services. Payment plans allow you to schedule recurring payments that guarantee income at steady intervals. Revenue rolls in automatically, so you can focus your attention on areas with greater impact.

Increase Collection Rate

According to the 2022 Report on the State of the Legal Market from Thomson Reuters, lawyers finished last year with a 90.6% average collection rate. This translates to 9.4% of missing revenue.

To capitalize on this opportunity, law firms that offer installment plans make it easier for clients to cover their legal expenses over time, effectively increasing the firm’s ability to get paid.

Make Your Services More Accessible

45% of payment plan users choose this financing option to purchase products and services that are otherwise out of their budget.

By offering a payment plan option at your firm, you'll open your legal services to a wider client base while relieving the financial burden of a total upfront payment.

Customer Satisfaction

Payment plans can have a strong positive impact on the attorney-client relationship. They provide flexibility to clients and their financial situations while nurturing a service-first focus that is prime for referrals.

How to Offer Lawyer Payment Plans at Your Firm

Before deciding to offer payment plans at your law firm, it's important to take an objective view of this arrangement on your cash flow. Are payment plans a sustainable model given the current financial health of your firm? If so, they require thorough preparation before you are ready to present them to clients.

Determine the Type of Plan That Makes Sense for Your Firm

With no shortage of payment methods and billing models to choose from, determining how to handle installment plans will help your firm assess what to offer and effectively communicate with clients. Do you plan on sending invoices electronically or by mail? Will you charge a retainer fee? Who keeps track of payments and client balances?

Finding these answers will help you build a template that outlines the type and conditions of a payment plan that best serves your business.

Choose the Payment Types To Accept

Today's modern clients require more options than ever to finance their legal needs. Whether its traditional credit or debit cards, ACH transfers (eChecks), or financing, offering a variety of payment methods increases accessibility to your services and grows revenue.

Use a Legal Payment Software

Attorney payment plans are easy to execute with the right legal billing software. Whether you're invoicing, tracking payments, checking balances, or financial planning, a legal payment software will do the heavy lifting, so you can get back to your practice.

With LawPay, a trusted leader in legal payment technology, you can:

  • Accept payments and get paid 39% faster. LawPay's secure online payment platform allows transactions on your computer, tablet, and mobile phone for a variety of payment methods.
  • Schedule recurring payments and maximize cash flow. Cardholder data is safely stored in LawPay's proprietary Card Vault, so clients have peace of mind for automatic payments while firms receive a steady flow of revenue.
  • Get paid 100% upfront with ClientCredit financing. With this legal fee lending solution, firms receive the full balance upfront while clients benefit from automated installment plans. If the borrower doesn't fulfill loan repayments, there is no recourse for the law firm. Instead, Affirm (a third-party lender) takes on collection.
  • Access custom reports that make reconciliation a breeze. Whether you need a quick snapshot of year-to-date (YTD) transactions or detailed reports of outstanding balances, LawPay reporting allows you to curate data that helps you tell a story.

Decide What To Do if Clients Miss a Payment

Late payments are a reality that many law firms face, so knowing how to handle them before agreeing to a payment plan is essential. Will you offer a grace period? If so, for how many days? Will you charge a penalty for missed payments? How much? Communicating these answers to clients will set clear expectations that increase the likelihood of getting paid on time.

Create an Agreement

During the initial consultation with your client, transparency is key. It's important to understand their financial situation to determine the most appropriate payment plan for their needs. If they can only afford $200 monthly installments, anything more can lead to frustration and be a recipe for failure. Take the time to assess what amount is realistic for your client before signing an agreement.

In addition to the amount, you’ll also want to discuss the following:

  • Payment due dates (bi-weekly, monthly, quarterly)
  • Accepted methods of payment (debit or credit card, checks, ACH transfers)
  • Late payment fees (interest, penalties, and grace period)
  • How invoices will be sent (by mail or electronically)

If there are any additional points that can clarify the conditions of the payment plan, include them in your written agreement. Then, once you and the client have agreed upon all terms, you can request their signature on the attorney payment plan agreement.

Manage Your Law Firm's Payment Plans

Payment plans offer a flexible yet reliable solution for clients and law firms. The caveat? Accurate and up-to-date account management is crucial to keep them running smoothly. Instead of relying on manual bookkeeping, which can be time-consuming and prone to human error, legal billing software can streamline the process with live data and minimal effort.

At LawPay, you can manage payments, monitor outstanding balances, and build custom reports to determine your cash flow from installment plans. With an instant overview of earned vs unearned fees, the LawPay Dashboard makes it easy to understand where your firm stands at a glance. You'll also get valuable insight into key performance indicators (KPIs), like collection rate, to better understand the current and projected success of your firm.

To start earning more with payment plans and saving time on account management, schedule a demo today. We'll help you set up automatic installment payments in seconds, so you can get back to working billable hours and growing your business.