Looking to grow your book of business this year? Law firms often see an uptick in their business growth when they offer multiple payment options. Payment methods such as online payments and payment plans can be especially lucrative for law firms because they help reduce the size of large bills.
Payment plans don’t just benefit the client — the American Bar Association (ABA) affirms that flexible payment plans can boost law firm profitability by 10% and increase payment collection rates by 32%.
From how to structure payment plans to assessing your firm’s financial needs and the impact they can have on your cash flow, continue reading to learn the essential steps needed to effectively implement payment plans.
Can Lawyers Accept Payment Plans?
In general, yes. Lawyers are allowed to offer payment plans for their legal services. However, there are implications they should consider.
Taking online payment isn’t risky in and of itself as long as lawyers adhere to ethical and legal regulations. Where law firms often have challenges is when it comes to separating client and third-party funds from their own.
The best way to operate in payment compliance is by adopting legal-specific software. PracticePanther’s law practice management software offers native legal billing and payment processing so lawyers can accept online payments without worrying if they’re meeting state bar regulations.
How Do Payment Plans Work at Law Firms?
If you’re thinking about setting up payment plans at your law firm, it’s important to first consider your clients’ preferences and financial situations. Have an open conversation with them before moving forward with a payment plan. Ideally, you’ll want to get a pulse check if it’s something your clients would find valuable.
Additionally, it’s important to assess whether your firm can sustain itself with payment plans. Charging lower installments over a long period of time could make it challenging to keep your firm financially stable. So, it’s important to get an understanding of your law firm’s finances when designing payment plans.
Three Steps To Set Up Payment Plans at Your Firm
Investing time to educate yourself on the process of setting up payment plans for your firm can prevent future confusion and frustration for you, your staff, and your clients.
1. Determine Your Billing Policy and Terms for Payment Plans
Every client must sign an agreement before they choose to work together, which should include a breakdown of your firm’s legal billing policy. If you choose to accept payment plans, it should be relayed in your billing policy with parameters and should include information like:
- A timeline of payment due dates
- Acceptable payment methods (e.g., e-Check, debit or credit card, check, or wire transfer)
- If you allow a grace period for late payments and how much you charge for late fees
An essential component of your firm’s legal billing policy are the collection and late payment terms. One of the best ways to get a handle of your firm’s collections and reduce late payments is to establish clear late payment terms.
Being upfront and clear with your clients about how payment plans work can help mitigate confusion and ensure your firm is paid on time.
2. Efficiently Communicate Payment Terms
Beginning at intake, your clients should have a firm understanding of your firm’s operations and an outline of the business relationship. This includes the services available to them to communicate with your firm, access documents, and of course, pay you.
We all get busy so it’s important to have standardized processes that keep you and the client accountable.
With PracticePanther, you can create a client intake workflow that has specific tasks for the client to sign contracts, including your legal billing policy. You can create a template of this document, store it in PracticePanther and easily share it with clients. To streamline the process further, you can request documents for electronic signature and store them in the client portal for future reference. The client portal is also a great place for clients to view balances, pay invoices, communicate with your firm, and more.
3. Adopt Legal Billing Software
As mentioned above, legal-specific software is the best way for law firms to securely and compliantly accept any form of online payment. However, not all law firm software solutions are created equally.
When adopting legal billing software, it’s important to have an all-in-one solution that keeps your billing and collections in one place. With PracticePanther, your firm has access to full legal case management software on the same platform where you’ll manage your collections and legal billing without a third party.
Here are a few ways PracticePanther keeps your firm’s billing on track:
- PantherPayments: The native payment processor to PracticePanther that allows law firms to easily accept online payments, including the ability to create custom payment plans. Easily set up payment amounts, set due dates, and send automated reminders to clients on one platform.
- Client Portal: Having every client’s billing information and financial standing in one portal allows you to track and monitor every payment in one go. Enable the client portal to allow clients to securely pay their invoices, review payment history, review documents, and more.
- Custom reporting: Generate robust reports to monitor your law firm finances, cash flow, and overall performance. Use custom tags to filter by contact, matter, or other naming convention your firm chooses to track.
- Automated reminders: Save yourself time and awkward conversations by sending automated alerts to clients whenever they need to complete a task, make a payment, or attend an appointment.
Benefits of Payment Plans for Lawyers
Lawyers can reap various benefits from incorporating payment plans into their practice without a heavy lift. In fact, when implemented effectively, law firms can adopt payment plans with little impact to their billing operations.
A few benefits of payment plans include:
- Accessibility: Large upfront legal bills can be intimidating for some clients and may close the pool of clients who can afford your firm’s services when they need them. Payment plans can reduce the shock value for clients while also creating a steady cash flow for your firm.
- Client retention: As mentioned before, your firm can expand its book of business by creating more digestible bills for clients. When you offer various payment plans that both you and the client can agree on, this flexibility can broaden the net of loyal clients you service, which can ultimately generate more revenue.
- Reduced administrative tasks: You won’t have to spend part of your day chasing down clients for their payment, especially if they’re late. PracticePanther allows your firm to configure automatic payment plans that deduct funds from the client’s desired account on a predetermined schedule.
Reduce AR and Get Paid Faster With Payment Plans
The proof is the numbers with over 80% of law firms reporting that offering payment plans improved their client relationships and over 70% said it helped them increase their overall revenue.
To conclude, payment plans are a valuable resource to help law firms to improve their financial stability while making their services more accessible to clients. If you’re ready to start accepting payment plans at your law firm, PracticePanther is the law practice management solution for law firms to streamline not just their billing and collections, but their entire operations.
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