Why Invoices Go Unpaid: Fixing the Law Firm Accounts Receivable Gap at Midsize Firms

If you are an administrator or a partner at a midsize firm, you know this moment: the work is done, the client seems satisfied, the matter is closed… and the invoice sits unpaid, 120 days later. Aging AR is the quiet leak in law firm accounts receivable, draining revenue you have already earned. Here are four ways to stop the leak.

Why Legal Invoices Age

Aging AR often feels hard to tackle because it seems like the solution is chasing clients down. That can be part of it, but the bigger issue is usually process gaps inside the firm.

• Late billing. Statements need to go out monthly, even on contingency matters, and final invoices should be handled more quickly whenever possible. Ideally, the bill will arrive just as the work feels “done” to the client, not after that feeling fades.
• Payment friction. Paying your invoice should be the easiest thing the client does. If clients have to print invoices, write physical checks, or navigate clunky portals, they will delay payment.
• No follow-up. No one likes reminding clients to pay their bills. It can feel rude. But polite silence tends to result in aging AR.
• Attorney reluctance. Lawyers hesitate to chase clients; it takes time away from billable work. Unless you have dedicated collections staff, however, collections is part of the attorney’s role.

In many cases, some or even all of these issues are present. That makes timely collections a real struggle for many midsize firms. Law firm collections best practices can make a difference.

Fix 1: Shorten the Work-to-Bill Gap

This is usually the fastest way to reduce aging. Clients learn to expect statements monthly, and the bill arrives while the memory of the work is fresh in their minds. This looks like:

• Previewing the billing cadence with clients in the consultation and engagement letter.
• Using batch invoicing to create clean, consistent invoices every month.
• Sending statements every month, even for contingency or slow-moving matters.
• Creating an efficient pre-billing process to keep drafts moving and accountability clear.

Fix 2: Remove Payment Friction

Clients pay faster when paying is easy. You want to remove any excuse to delay: no finding stamps, no preparing an envelope, or no waiting for the mail to go out. The closer you can get to a one-click process, the less aging AR you will typically see. Consider these tools:

• Online payments. By offering debit, credit, and other online options like PayPal or Venmo, you can make payment easier.
• ACH for businesses. Many business clients are moving towards ACH payments because they make life easier for the client.
• Evergreen retainers. With evergreen retainers, the client replenishes the retainer as it is used, so you never have to chase the client. Some systems allow you to send out automated top-up reminders.

Fix 3: Automate the Follow-Up

Reminding clients to pay often feels awkward. By using automation, you can reduce human intervention in the process while maintaining positive client relationships. Options include:

• Scheduled reminders. Use your legal billing software to send a payment reminder on a cadence that makes sense for your client base. You might send a note a week before the due date and weekly thereafter if no payment is made.
• Friendly templates. Automated emails can sound natural when you use the same friendly, collegial tone you normally use in client emails. You can experiment with formatting and wording to see what messaging is most effective.
• Escalation rules. Once a payment is late, the invoice should be tracked for escalation. If automated reminders are not working, the attorney may need to make a phone call.

Fix 4: Make Aging Visible

Visibility can help address attorney reluctance to participate in collections. Seeing their own aging AR (not a firmwide total) can help them move from “someone should handle this” and “I need to handle this.” The following reports can be helpful:

• Aging AR by client. If multiple attorneys are responsible for one large client’s matters, seeing broader collections patterns can help them find collaborative solutions.
• Aging AR by matter. Tracking aging by matter can help you find patterns in matter types or practice groups. This allows you to focus your efforts on accountability.
• Aging AR by responsible partner. Providing a monthly aging AR to each responsible attorney can help the attorney see patterns and change collections practices.

Law Firm Accounts Receivable in One System

Tabs3 Billing in Tabs3 Cloud brings pre-billing, invoicing, payment processing, and AR insights into a single platform.

• Compliant, secure electronic payment processing by Tabs3Pay.
• Dashboards and reports that make it easy to track aging AR and WIP.
• Electronic pre-billing and batch billing to speed up the billing process.
• Automated billing reminder statements.

Ready to stop the revenue leak? Schedule a demo today.