Professional Accounts Receivable Workflows for Attorneys | AR Aging Reports


Open Accounts Receivable is a major issue with many law firms. When I specialized in my accounting firm to work exclusively with attorneys, one surprising discovery was the significant amount of open receivables law firms typically have. Although attorneys usually collect retainers and operate in a trust account system, there are instances where there are accounts receivable moments that do not involve any trust funds collection. 

Regardless of the reasons behind this, one of the initial steps I take with a new client is reviewing the open accounts receivable report or an AR Aging report. My eyes are always drawn to that over 90-day category. Checking this one report presents an opportunity to collect funds that may have been discounted as uncollectible.

The process

Now, let's discuss the process for assisting clients in collecting on aged accounts receivable:

  •  Email #1:  Craft a polite email to remind the client that they may still need to receive the original billing email. This should be done professionally and without any accusatory tone. A gentle reminder can often result in payment as emails occasionally get missed or buried in inboxes.
  •  Email #2: Send a second payment reminder email if the first email remains unanswered. In both of these steps, make sure to include a copy of the open invoice and a statement indicating the age of the matter. Additionally, provide a specific date for follow-up if this email needs to be addressed. Typically, giving the client a week to respond is reasonable.
  •  Call #1: While maintaining a professional approach, feel free to call if the previous steps have not responded. Although these conversations can be uncomfortable, they often prove effective in securing payment for the law firm.
  •  Call #2: If the phone call also goes unanswered, attempt a follow-up call as a final attempt to communicate with the client.
  • Collections: If all previous attempts fail, consider transferring the matter to collections. Although this may not result in full payment, it could help the firm collect at least two-thirds of the outstanding amount.

Regarding accounts receivable, it is important to understand the proper management of staying on top of the open items and tracking them. Many law firms need help collecting payments for their services, which can significantly impact their bottom line. Ignoring aged accounts receivable is not a viable solution as it may lead to legal repercussions such as malpractice lawsuits.

To address this issue, it is essential to implement effective strategies to optimize collections. Relying on the staff attorneys to collect on open receivables is inefficient and lends itself to a growing accounts receivable situation.  One option is to seek assistance from professional accounts receivable specialists trained in the legal industry's intricacies. Collbox, a software solution with a proven track record, is an excellent service that can provide such support.

Collbox operates differently from traditional collection services. Instead of taking a percentage of the collected amount, it offers the service at a monthly fee. This allows law firms to benefit from an outsourced team of experts without the hassle of training them. The setup process is straightforward, requiring collaboration to tailor the communication to your specific practice area.

It is high time that the legal industry recognizes the value of proper accounts receivable management. Regardless of the case's outcome, attorneys should be rightfully compensated. Embracing solutions like Collbox can significantly improve the financial performance of law firms.

Please contact me if you want to learn more about this critical topic. I am here to ensure that attorneys have the necessary knowledge and tools to handle accounts receivable successfully in their practice.