In the past, most established law firms were able to confidently predict their cash flow based largely on an assessment of past performance combined with an assessment of incoming work. The impact of COVID-19, however, has changed this forever.
A law firm’s future income has never been more uncertain, making forward planning extremely difficult. The drastic impact of widespread shutdowns was a risk that few businesses could have foreseen. From court closures, slowdowns in the property market, rent payments in arrears to moratoria on evictions, both commercial and personal solvency have been thrown into disarray. Similarly, once established law is also being changed or suspended by announcement with significant consequences. With this in mind, we now know that no business is too big to have a cash flow crisis. It is these threats that provide law firms with an opportunity for transformation.
What can be done?
With these risks becoming a reality for more businesses each day, the goal for every law firm should be to secure a revenue stream that is both certain and predictable. A simple and often overlooked way to do this is to introduce a payment plan model.
LEAP gives you the tools to reduce risk and transform your firm into one with a reliable revenue stream through its wholly owned subsidiary, RapidPay (AFSL 485573). As the Australian legal profession’s trusted provider of financial services, RapidPay offers an easy-to-use instalment plan service that allows your clients to pay their bills in regular fortnightly or monthly instalments.
Some firms already have a payment plan system in place. However, these are often only turned to when they need to collect (potentially) bad debt. These payment plans are difficult and time consuming to manage because they’re often implemented too late in the piece.
- An instalment plan through RapidPay and LEAP allows you to arrange for a client to make regular fortnightly or monthly payments, using a credit card or bank account, directly into the correct matter for the correct client and into either your trust or office bank account, for an agreed affordable amount.
Introducing instalment plans at the right time
Instead of requiring large upfront deposits, managing the dangers of bill shock, and spending time collecting debt, you can set up a certain and affordable method for funding matters. The amount can be adjusted at any time, but many clients will appreciate the predictability of regular payments.
Proactively using instalment plans can help to not only forecast your firm’s cash flow, but provide you with a competitive advantage against firms demanding large upfront trust deposits. Updating your retainer agreement to cover instalment plans and training staff on how to initiate new plans as well as speak to clients about them can go a long way to ensuring their adoption and ultimate success.
Avoiding bad debt
Collecting bad debt is one of the most unpleasant aspects of legal practice, with the traditional debt collection process often accentuating the problem rather than offering a solution.
A client’s inability to pay is often followed by accusations of poor service and at times, incompetent legal advice which is often without foundation – a demoralising experience for all involved the matter.
Instalment plans can go a long way to alleviating this frustration as well as the threat of litigation by providing an opportunity to convert debt into affordable, and most importantly, predictable regular payments to your firm. Offering clients a reasonable way to reconcile their debts will make resistance and conflict less likely, providing relief for not only the client but for you and your business.
Managing instalment plans
Instalment plans are easy to set up – once you’ve created the plan an email is sent to your client inviting them to agree to the terms, then your client’s credit card or bank account details are securely shared with RapidPay to process the transactions.
RapidPay’s instalment plan management tool gives you a simple way to manage all your instalment plans – view plans that are pending client activation, payment schedules and payment plan history from the one location. Having this visibility over incoming funds gives you the confidence to predict your firm’s revenue and cash flow far more accurately. This is something that should not be taken for granted as it gives you not only greater certainty, but the opportunity to plan for the future in what are still turbulent times.