You’re always looking for ways to improve your business - from attracting new clients to streamlining your financial management. What if we told you there was a way to accomplish both these goals through one simple tactic?
Lawyer payment plans are a great way to earn a client’s business if they would otherwise go with a cheaper option. You can also extend payment plans to clients who are struggling to make payments on time to prevent cash flow problems from accumulating.
That being said, it’s important that you're aware of both sides of the coin, as payment plans for lawyers can also present a few challenges.
Don’t worry - we’ll help you navigate these below as we discuss law firm payment plans and show you how to set one up with InvoiceSherpa - the #1 lawyer invoicing software.
Payment plans are used across just about every industry, from automotive to cellular, consumer goods, and more. The legal field is no exception, as this is one of the most popular alternative billing arrangements for lawyers.
This is a structured financial agreement that allows clients to pay their legal fees over a specified period rather than requiring the full payment upfront. This arrangement breaks down the total cost of legal services into more manageable installments, which are paid according to a predetermined schedule.
They typically start with an initial deposit, followed by regular monthly or quarterly payments that continue until the full fee is settled. The specifics, such as the payment frequency, amount, and duration, can vary based on the agreement between the lawyer and the client.
This is part of what makes them so appealing. You can tailor payment plans to fit the nature of their services and the needs of their clients.
For instance, more extended payment terms might be suitable for complex cases that require lengthy litigation or ongoing support. Conversely, simpler cases might only need short-term plans.
Payment plans are particularly beneficial in making legal services more accessible to a broader range of clients who might not have the means to pay all at once.
They’re also a great way to capture payment from clients who are not settling their invoices because they don’t have the full amount, allowing you to offset cash flow problems.
However, lawyer payment plans aren’t without their drawbacks. So before we get into how to set these up yourself, let’s look at the pros and cons of payment plans for lawyers below.
Payment plans can be used to diversify your clientele and bring new cases into your firm. You’ll be able to serve clients who might otherwise be unable to afford legal representation all at once by allowing clients to spread the cost over time.
You can use these as a marketing tool in this sense, as so many people in your area are probably looking for lawyers with payment plans.
This payment structure also improves client satisfaction as clients feel their financial constraints are respected and accommodated. Satisfied clients are more likely to return for future legal needs and recommend the firm to others.
Despite the fact that payments are spread out, having multiple clients on payment plans can stabilize and project accounts receivable. Regular installments keep the revenue coming in more consistently, which can be especially beneficial during slower business periods.
So if you’re wondering what a lawyer can do to get a client to pay an invoice, consider extending a payment plan! Before you do, though, consider the downside associated with law firm payment plans…
The obvious risk is not capturing the full payment you’re owed when you let clients take their time to pay. This can leave a firm with unpaid invoices and potential cash flow disruptions.
That being said, there is always the risk of a client not paying you - payment plans are not unique in this concern. Managing these risks is as simple as implementing careful client screening and possibly implementing stricter terms for payment agreements.
Another disadvantage of payment plans for lawyers is the administrative burden associated with tracking ongoing payments, following up on late payments, and reconciling accounts receivable.
This can take up tons of time and resources if you aren’t using automated billing management - which is why part of offering lawyer payment plans involves leveraging AR automation software like InvoiceSherpa.
Of course, there’s also the fact that law firm payment plans inherently delay the receipt of full payment for services rendered. This can impact a firm’s ability to fund large expenditures or reinvest back into the business quickly.
So, you’ll need to manage your finances carefully to accommodate this delay without affecting operations. The good news? We’ll help you get started on the right foot by showing you how to offer payment plans for your customers below!
Only you can determine if setting up law firm payment plans makes sense for your specific firm. But if after careful thought you do decide that the pros outweigh the cons, great!
It’s as simple as choosing your eligibility criteria for offering payment plans, structuring the terms, and setting everything up in the best AR automation software, InvoiceSherpa.
As we mentioned earlier, one of the risks of issuing payment plans is failing to capture the funds you’re owed. But like we said, this can be avoided through a strict set of criteria for who is allowed access to a payment plan.
Consider factors such as the client’s past payment history, the nature and duration of the legal services, and the total cost involved. For new clients, you might require a credit check or references from other professionals to gauge their reliability.
Setting these criteria helps minimize the risk of non-payment and ensures that payment plans are offered to clients who are most likely to adhere to them.
Just as with the invoice late fees you charge, it’s important to be fair and clear in laying out the terms of your law firm payment plans.
The most important aspects include the size of the down payment, the lawyer billing frequency, the number of installments, and any interest or administrative fees that will be applied.
We also recommend including terms regarding past due payments in your invoice late fee wording. You should also include verbiage about the potential for plan cancellation after multiple missed payments.
Each plan should be tailored to suit the financial interaction with the specific client while protecting the firm’s financial interests. There is rarely a one-size-fits-all answer as to how you should structure your legal payment plans.
Much of the problems associated with late or nonpayment can be attributed to poor communication.
So, clearly explain the available plan options, terms, and conditions before the client agrees to or begins receiving services. Use simple, straightforward language to outline the responsibilities and expectations on both sides.
Regular communication should continue throughout the duration of the plan to remind clients of upcoming payments and provide updates on their account status.
Now, how do you actually go about getting your client set up on their payment plan? You’ll need to use software that supports this payment structure.
This will help streamline the process for both parties by automatically scheduling payment due dates based on the agreed terms and sending out timely payment reminder emails to clients.
There are many different accounts receivable management services that support this feature, but you should do your due diligence before choosing to ensure it aligns with your unique needs.
For example, if you use LawPay or Clio, you’ll need software that integrates with these to track your lawyer billable hours and generate invoices accordingly. The system should also allow for different payment methods, from credit cards to direct bank transfers.
Beyond facilitating the payment plan, the software should grant you real-time monitoring of your payment statuses and alert the firm to any delays or missed payments. This way you can immediately follow-up to address potential issues before they escalate.
With so many options at your disposal choosing the best automated invoice processing software can be overwhelming. Fortunately, you needn’t look further than InvoiceSherpa - the #1 solution for the legal field!
InvoiceSherpa helps you get paid faster while reducing your administrative burden and strengthening customer relationships. You can effortlessly set up payment plans through our solution.
But, this is just the tip of the iceberg. Our sophisticated system accelerates your cash flow cycle by sending out scheduled reminders customized to your own liking via email or SMS. when a payment is made, it automatically reconciles into your accounting software - be it Clio, Quickbooks, or Xero. We also integrate with PayPal, Stripe, and a number of other software.
This all happens automatically without you having to lift a finger, so you can focus on serving more clients rather than stressing about payments.
Getting started takes just a few seconds, and you can experience firsthand what makes this the #1 legal billing solution today through a 14-day risk-free trial. You don’t even need to put a credit card down. So, take the first step today and reap the benefits of AR automation as we wrap up our guide on lawyer payment plans below.
It’s clear that law firm payment plans have their place in making legal services more accessible. Clients can feel more confident committing to necessary legal support without financial strain.
Now that you know how to implement clear, fair, and tailored payment plans for lawyers, you can try it yourself to see how it not only fosters stronger client relationships but also ensures consistent cash flow and reduces financial risks.
Looking for more small business accounting tips? Browse our blog for advice on how to do billing for lawyers, including the ideal lawyer invoice template, how to send a bill to collections, writing a demand for payment letter, accounts receivable outsourcing, how to find accounts receivable, how to project accounts receivable, unbilled accounts receivable, and more.
But at this point, there’s only one thing left to do today - get set up with InvoiceSherpa so you can effortlessly offer lawyer payment plans to your clients.
Transform your law firm’s payment processes with InvoiceSherpa’s powerful features designed to automate and simplify financial management. With a risk-free trial, what do you have to lose?
Posted on May 3, 2024
