Law firms can improve cash flow and increase profitability if they improve their billing process and practices.
The client billing process, in many firms is based on a slow, painful monthly schedule. Why … because it’s always been that way. In part 1 of this series we identified the nine (9) current painful and costly steps to client billing. In this posting we’ll discuss the Month End process.
Why do firms have a “month end” process, the same reasons most other businesses do, it’s a convenient segmented time period to measure financial performance. However, from a billing point of view it really doesn’t mean very much. Firms operate on a cash basis, billing as such does not have any significance unto itself. Yes, I understand, without billing you probably won’t have cash.
Here is how to improve cash flow and profitability regarding the Month End process:
- A firm may have clients that specify an exact billing cycle, fine, but the rest of the clients might be billed on a firm developed billing cycle. Bill continually through the month, make billing a process, not an event.
- If you have a really active matter, see if you can bill twice a month. The sooner you bill, the sooner you’ll get paid.
- Ask corporate clients when they would like to get bills, this might sound strange, but CEO’s want to know their expenses as early in a month as possible. Getting a large legal bill on the 25th of the month might be a killer, getting it on the 10th won’t be as bad.
- A firm might find that continually billing through the month is a way to reduce staff. It’s not unusual for a law firm to have billing staff “less than productive” when they are not billing. These same people are all stressed out during peak billing days. Smooth out the workflow.
- If a matter closes, bill it immediately. Get all the time and cost recorder and bill it, regardless of the billing cycle.
In summary, don’t tie the accounting period month end process to billing, bill continually throughout the month.
In the next post we’ll look at dealing with attorneys who don’t have their time in, why is it a problem and what can you do to improve the process and become more profitable.