Best Practices

8 Ways Lawyers Can Improve Accounts Receivable Collections

Catherine Brock
Catherine Brock
March 24, 2023

Earning money and collecting money are two very different things. You can put in long hours for a client, obtain a successful result, and still be left with an unpaid invoice for your trouble.

Lawyers experience this all too often—on cases that no one intended to be pro bono. Sadly, collecting law firm receivables may be one of the more challenging aspects of your legal career.

In this article, we’ll cover what you can do to prevent this from happening. We'll touch on why you should prioritize law firm accounts receivable, we'll define the collection rate metric, and share eight accounts receivable collections best practices that'll help get invoices paid faster.


Why Should You Prioritize Collecting Law Firm Accounts Receivable

If you don't prioritize collecting accounts receivable, you end up working for free—unpaid invoices will sit on your books until you turn them over to a debt collector or you write them off.

This is accounting and bookkeeping 101, of course, but those two options are counterproductive financially. Collection agencies may not take your past-due accounts until they're at least 60 days old. By that time, you've done without the cash you earned for two months. On top of that, the agency will charge 25% to 50% of any funds recouped. That's a big income hit—something you didn't build into your fee structure.

Writing off the debt is worse, though. Do that and you essentially fund the cost of the client's legal services out of your pocket.

Fortunately, you can minimize your use of collection agencies and write-offs by re-engineering your process for collecting law firm receivables. While that might sound daunting, don't be intimidated. You'll simply need to adopt a few accounts receivable collections best practices, in return for an improved collection rate and stronger cash flow.

Bonus: If you need a refresher on how to increase cash flow and the financial health of your firm, see our guide to law firm cash flow.

You can track the effectiveness of your A/R improvements by monitoring your collection rate trends over time. So, let’s review how to calculate collection rate.

How to Calculate Collection Rate

Collection rate is the percentage of invoiced amounts that are paid by clients. To calculate your law firm's collection rate, divide total client payments by total amounts billed over the same timeframe. For this metric, using a longer timeframe to calculate (such as one year) will give you a more accurate idea of your firm’s financial health long term.

Let’s say you've collected $90,000 in a given year, off of $110,000 in billings. That means your collection rate is 81%. We recommend shooting for 95% or higher.

8 Best Practices for Accounts Receivable Collections

If your collection rate is less than 90%, use the strategies below to improve your accounts receivable process from start to finish and boost that rate. Over time, you'll see more cash coming into your law firm as a result.

1. Interview Carefully and Thoughtfully

Believe it or not, your accounts receivable process begins with the first client consultation.

Conducting a potential new client consultation effectively is an art form. There may be many objectives in this meeting—you need to assess the legal situation, measure up the prospective client, sell yourself as a reliable advisor, and describe how the relationship will move forward.

That last topic—how the relationship will proceed—should include a detailed review of payment expectations and the billing process.

Here's a framework that can help you address these consultation objectives gracefully:

  1. Determine whether the client's needs and expectations can be realistically satisfied. If they can, give the client a roadmap of key milestones in the case. That roadmap should outline risks and potential issues that may prevent a successful outcome.

  2. Ensure the client understands the cost and the law firm's expectation of payment. Ask directly how the client will fund your services. Describe the invoicing cadence, payment terms, and late-payment penalties.

  3. Exercise your own judgment as to whether this client is credible and a good risk. Admittedly, this is easier said than done. Listen to what the client is telling you and note any information that doesn't make sense. As an example, if you learn that you would be this client's fifth attorney, alarm bells should be ringing. Trust your gut.

Here's what it comes down to: when the consultation ends and the client decides to retain you, you must both be comfortable and confident in the integrity of the other party.

2. Communicate During the Case

According to ABA Journal, one of the more common complaints against lawyers is a lack of client communication. Clients who feel ignored are less willing to pay your invoice and may feel inclined to take out their frustration in an online review.

That is why regular communication is one of the most important best practices for accounts receivable collections.

Keep in touch with your clients, even when nothing eventful happens. A phone call to say, "we're still waiting on…" is better than no contact at all. The more consistent you are with these client updates, the more you can control the narrative as the case progresses.

Otherwise, your clients will make judgments and conclusions on their own. And those are not conclusion may or may not be be flattering to your firm.

Failure to communicate is a no-no, both from your state bar's perspective and with respect to your law firm's financial health.

3. Leverage Law Firm Billing Software

Law firm billing software, like LawPay, can enforce a specific invoicing cadence, minimize billing mistakes, and send automatic payment reminders. Each of these actions build client confidence and improve your collection rate.

Billing software built for lawyers also minimizes the time you spend on non-billable tasks and ensures compliant handling of trust accounts.

4. Accept Online Payments

Physical check payments are cumbersome, for you and your client. If you only accept checks, your client might delay payment because the account balance is low, the checkbook is in a drawer somewhere, or stamps are in short supply at home.

Providing online payment options removes those check-related obstacles. Ideally, you'd accept eCheck and credit card payments—so clients can choose to pay with cash or credit.

5. Send Easy-to-Understand Invoices and Follow Up

Always provide clearly written, detailed invoices. You don't have to outline your time to the minute, but you should separate larger tasks and include a summary of each.

Remember that your invoice has a critical objective, beyond getting you paid. The invoice is an important touchpoint, where you give the client visibility into the work you're doing. To that end, keep the language simple and avoid legal jargon. You want the invoice to answer questions, not raise them.

Then, implement a disciplined follow-up process. If you send invoices on the 4th of every month, for example, schedule follow-up time on your calendar for the week of the 18th. Call or email every client who received an invoice. Offer to review the billing and answer any questions the client has.

Additionally, call every client who has not paid a prior month's invoice and ask for payment. While these phone calls can be unpleasant, they are effective. If you're feeling reluctant, think about whether you'd rather ask for what you've earned or write off this client's balance.

6. Be Timely With Your Billing

Clients routinely complain that they receive law firm bills 90 days or more after the work is done. By then, the client likely doesn't remember what you did, and therefore doesn't remember the value you provided. In that scenario, your client probably doesn't feel motivated to pay your bill.

Clients typically appreciate what you just did for them—not what you did months ago. What's more, a timelier invoice is more likely to reach them when they appreciate you and the work you're doing. That's when their motivation to pay you is at its peak.

For internal consistency and external predictability, plan on billing clients around the same day every month. Even better, aim to have your clients receive their monthly invoice three to four days after the first of the month. This increases the chances the client has recently received a paycheck and therefore has funds available.

7. Utilize Scheduled Payments

Scheduled payments can be an effective solution for clients who are habitually late payers. This strategy involves setting up recurring, automatic payments, either via ACH transfer from a bank account or with a credit card.

A fixed-amount monthly payment is easier for your client to budget and provides steady cash flow for your firm.

The best time to pitch clients on scheduling payments is during intake. You can have them sign payment authorization forms and set up the payment plan from the get-go. From there, the payments will process automatically, without hands-on intervention from you or the client.

8. Tailor Your Collection Method Depending on A/R Aging Reports

Implementing these collection practices can dramatically improve your payments experience with new clients, but what about the old ones? Overhauling your client consultation process or improving the clarity of your invoices won't affect the aged accounts already on your books.

It may be tempting to ignore those old unpaid balances. Don't do it. Instead, devise a process for turning them over to a collection agency. This process should involve some actions on your part before calling the debt collector.

You'd start by ceasing work if you haven't done so already. From there, you might escalate the frequency of telephoned requests for payment. If you are calling once monthly on accounts under 30 days late, bump it up to once weekly for accounts over 30 days late. You could also send a written notice that you'll turn the account over to collections when it reaches 90 days past due.

If those efforts don't result in payment, let the debt collector take over.

Start Collecting Your Law Firm Receivables With Ease

You set the tone for collecting accounts receivable at your first meeting with a client. From there, you reinforce your payment expectations, either directly or indirectly, by communicating clearly and consistently with your client.


Use of reputable legal billing software that supports online payments and scheduled payments can streamline this process for you and your clients. LawPay provides these features and many more. With LawPay, you can accept bank transfers via ACH plus credit card payments online or in person. You can also set up automatic, recurring payments for clients who prefer a set monthly fee.

LawPay integrates with dozens of legal software products, too. Integrate your timekeeping and case management software with LawPay, and you have a comprehensive system in place to produce detailed and accurate invoices—as well as payment reminders and account statements.

Want to learn more about how LawPay can help you manage your law firm's A/R and drive more cash into your law firm? Schedule your one-on-one demo today.