6 Simple Ways Law Firms Can Improve Cash Flow

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Are you wondering why you don’t have more cash in your checking account? Struggling to pay yourself? Find yourself using your business line of credit too often? Try these six tips to increase your cash flow and sleep better at night knowing you have money in the bank.

1. Do you accept credit cards?

It is a way of life today. Many clients don’t have the cash to pay a retainer. Not only are you probably waiting longer for your hourly clients to pay you, you are probably losing business if you only accept cash for retainers. The credit card fees you pay will be offset by the increase in business and getting paid faster.

2. Do you know what the balances are on your client retainers?

Do you ever get surprised by a client retainer running out? Bill your clients for additional retainer BEFORE they run out. Your #1 goal is to get paid in advance. You will have $0 in collection costs and write-offs this way.

3. Flat Fee Billing

Moving to flat fee billing allows you to collect the fees upfront without having any invoices to send or accounts receivable to track down. The client also feels more comfortable knowing how much they will be spending on fees. Win/Win!

4. Review your Accounts Receivable at least once a month.

Statistically speaking, once a receivable is older than 60 days, the likelihood of collection goes down drastically. Pick up the phone and call the clients that have not paid.

5. Get your client bills out quickly

Set a monthly deadline to get client bills out by. If they are sitting in your briefcase waiting to be reviewed for weeks, that is cash that is not sitting in your checking account!

6. Do you pay your bills on the due date?

If you don’t have good cash flow management practices, you are likely either paying your bills early or paying them late. Paying them early ties up your cash when you don’t need to. Paying them late costs you money in late fees. Pay them on time for maximum cash flow management.

Proactive cash flow management allows you to sleep at night knowing you are covered for your upcoming expenses. Creation of an eight to 12 week cash flow forecast is critical to knowing where the gaps are creating a plan if you do have a cash crunch on the horizon.

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