Payment Plans Options: Does It Suit Your Law Firm?
The cross-currents of world news have streamed at startling speeds in recent months, with climate change and war, making stock markets volatile and inflation soar. In some quarters, the latter issue prompted innovations in payment plans to help keep businesses afloat.
We chart the changing trend of lawyer payment plan options, discuss payment plan innovations for the ease of the client and consider all factors to help you decide.
The Changing Trend of Payment Plans
Shifting socio-political-economic landscapes and technological advancements with e-wallets and online shopping have transformed public purchasing habits.
A TSYS survey showed that 75% of people nowadays prefer to pay with a credit or debit card. Additionally, research from Fiserv found:
- 74% of households with internet access report having paid bills online,
- 79% of consumers have switched to paperless billing, and
- 70% say having multiple ways to pay a bill increases their satisfaction with the biller.
The ease that these new payment technologies offer is attractive to people. All industries, including the legal sector, are shifting to cater to these new purchasing habits. Clio’s 2020 Legal Trends Report confirmed this, showing consumers ranking whether a law firm offered payment plans as one of the most crucial criteria for selecting a law firm. This data illustrates how setting up payment plans at your legal practice can significantly increase the number of clients and revenue you receive.
What Payment Plans Should You Have in Place?
Many law firms offer a complimentary initial consultation upon which they may seek a down payment, establish a retainer, and determine an hourly rate. The next step is to decide which payment plans a law firm should have.
Before deciding, it is prudent to study all angles to see if it makes sense for your law firm. Consider the following:
- Can a low, longer-term installment plan work for your firm’s cash flow?
Would this amount adequately sustain your law firm so you can help other clients? Be completely objective about what you can and cannot take on.
- Is your client able to take on the payment commitment?
Always have an honest conversation with your client to work out a payment plan that can be of mutual benefit. If your client can only pay $500 per month for a $1,500 per month commitment, it is a recipe for disaster. Hence, determine their financial situation before agreeing on the payment plan.
- How often should you collect payment?
Would it be a 30, 60, or 90-day term? Again, this would directly affect your law firm’s cash flow, so consider it carefully before implementation.
- What payment method would you accept?
Will you take bank transfers, cheques, cash, crypto, or credit cards?
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- Bank transfers are quick and easy, but it depends on whether your client is comfortable using this payment method.
- Cheques typically take two business days to clear, but it can be a hassle for your client to send the cheque.
- Credit card payments are great for law firms. According to the Legal Trends Report by Clio, firms that take credit card payments get paid faster. However, consider setting up an installment plan facility backed by the bank to make it easy for your client.
- Crypto payments aren’t widely implemented by law firms because of their fluctuations in value. However, crypto payments could be very valuable in years to come.
- Cash payments are fast, but they come with security and health risks, especially when transporting or handling them.
- Do you have measures for when the client is late for payment?
Will you charge interest for late fees or allow a grace period? Discuss this with your finance team to ensure that it is reasonable.
Next, Build Your Payment System
Once you have decided on your law firm’s payment plan options, the next step is to build your systems and processes to make it easier for you and your staff. There are two things you can do.
- Create Your Agreement Templates
Create agreement templates for your practice areas that you can customize based on your client’s needs. Specify your service, the terms of each payment plan, and other matters in your engagement letter or as a separate agreement. This would help you streamline the process of implementing the payment plans for each client.
Once you have done that, consider using a cloud legal practice management and accounting and billing system like #CoreMatter. You can upload these agreements and link them to #CoreMatter’s accounting and billing system.
- Have a system for billing clients and collecting payments
To simplify your processes, use #CoreMatter to set up a system of calendar reminders to send out invoices, process payments, invoice reminders, and check balances regularly.
#CoreMatter’s cloud technology gives your attorneys access to the appropriate agreement template for each client’s signature. Upon confirmation of the agreement, your law firm’s finance team can seamlessly check on the agreed payment plan and follow up on invoicing, payments, and accounting. Automating this entire process with #CoreMatter significantly reduces errors and makes the whole process more efficient.
Finally
Use technology to simplify the day-to-day management of payment plans, and make sure you and your team know when to give payment plans and when not to. You should also make sure that all agreements and invoices are clear. When your processes are clear and established, you’ll be able to spend more time attracting clients rather than chasing payment collections.
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