Tips to help Attorneys with Large amounts of Open Accounts Receivable

Hi there, Linda Artesani, Artesani Accounting. This week we're going to talk about accounts receivable, and I have to say that if I had to pick one major pain point at a law firm, it would be accounts receivable. Accounts receivable from most of the law firms that come to me that maybe they want me to look at their records has an extensive amount of money just sitting there waiting to be collected. And a lot of times we find that the law firms don't chase it, which I was surprised at that because I always thought, well, they're a law firm, they just send a letter scaring the person to pay. Most people would pay if they got that legal letter. But it's just odd to me that that's a thing. But it definitely is. When you start working with law firms, you'll get a hold of that. First thing you're going to do is look at their— when you go through their records, look at their balance sheet. And if you see a high number there, you're going to look at their open AR and see What's still outstanding and look at that aging report and see where their pain point is. And then hopefully, as you're— as the accountant, you can hop in and be the person to the rescue that can get that money in the door. That's just money sitting there that needs to be collected. Instant cash flow makes you the instant accountant hero, which is always a good thing. I know that we have processes in place that will help you to get to that point. So if you're looking to have help in that area, we can definitely help you. I think the best part about us helping you is it takes it out of the firm. And I know when I've partnered with a few other firms for the collection side, they're so happy to offload that because they might have already interacted with this person, or the person may still be— the matter or the case may still be going on, and they see this person and they don't want to have to say, hey, nobody wants to have that money conversation. It's always uncomfortable. So this way you can, You can have it be somebody that's got nothing to do with the firm handle it. And usually the reasons that it's not handled in my experience is they don't have a workflow in place. It's forgotten. It's not collected. Sometimes it's not billed. And that's a whole nother topic where maybe the attorneys are tracking their time and they don't bill it. And there's plenty of metrics around that that I can get into in another video with how we use LeanLaw for that. But for the most part, it's something that either A, nobody chases, or B, they just, they just let it get stale. And then eventually they just say, look, write it off. We want to write this off. We want to write this off. A lot of this has to do with practice area. So if you're working with an immigration firm, tons of AR. It tends to be a firm that will have a department to chase down the open accounts receivable. Family law, the same thing. Lots of smaller invoices that are paid So you might see that more where you really got to keep a few people in, in the process, which is why we use QuickBooks Online Advanced. One of the other reasons is we love this product for automation, and automation with accounts receivable is definitely a big part of Advanced, the Advanced version of QuickBooks. I'm going to show you exactly how that works, and it's a set it and forget it. So it'll take you a few clicks and a few mindful thoughts to figure out how you want to set it up, and then once you set it up, you set it up and it's done. You don't have to worry at all about how it's processed anymore. Let me share my screen. I'll take you on a little guided tour. So the Workflow tab is over here on the left-hand toolbar. We'll populate it. Pretty sure I've already got a workflow open here in this section. And there's many different kinds of workflows. In fact, every time I come in here, there's something new. So you've got an open estimate reminder, uh, in workflow now. Estimate follow-up reminders, so you can follow up on any estimates that you might send out to a client. Really not anything for the law firms, but it is something that is in here now. Bank deposit reminder is definitely one that can be used with law firms because I see this a lot of times if they're using— if you're using outside software like a LeanLaw, a legal software, and software pushes in, maybe the law firm goes over Friday to the bank. Those days are kind of ending now, which I think is a good thing with automation. But if you have that firm that likes to go to the bank on Friday, you can record all the payments during the week and then gather them into one bucket and put them into one big deposit and then, and then take it to the bank. So it will all align when you show that deposit. So that's there too. Invoice approval is kind of interesting. Now, I don't recommend using QuickBooks Advanced alone as a standalone. I think you should add the legal software just because of the metrics The reporting, the fact that you're locking in and you can't really overstate a trust account like and end up giving back more money than you actually had. There's just so many reasons why you'd want to have that extra layer of a LeanLaw or a Clio on top of QuickBooks. Just integrate them. It's like putting that attorney suit on top of the platform, but it's it's critical because it will help you with the program. It'll help you to have that specialized platform that and it makes it so many less clicks because you have to do a ton. Workarounds to make it work for a law firm. Now you've got invoice approval. If you are just using it, maybe you're solo and you don't really want to delve into the software, really recommend that you do. But if you don't, yeah, you can use invoice approval. If you've got a paralegal, they can put the invoice together and then you can approve it. Uh, we've got unsent invoice reminder. So this is one of the ones that I really like because, uh, unsent— I'm sorry, unsent invoice reminder is just to remind yourself or your staff that there's invoices in here that never were processed. So that's a different one. It's a new one. We do use it on occasion with some firms. It really depends. It's kind of firm-specific, but you can put that there. Now they have one, and they used to— maybe they took it away, but they had one that would say automatically send unsent invoices over here. That one I'm not a huge fan of. We've had a couple of people, and when we work with law firms, that they've actually turned that on, and then everything went out that they didn't want to. So Be really careful with that one. But the one we like to send out is right here, Payment Due Reminder. So this is the one we really prefer because it will remind anybody who hasn't paid their invoice that it's due. So you set up the parameters here, you set up to send a reminder email, and then you're gonna set up the words specific to your firm. Don't take the generic ones that come with the platform. Take the time just to set this up. It really will help your firm It just helps with the professionalism of the, of the content going out, right? The emails going out. And then you can have it send it out 1 day, 2 days, you pick how many days, you know, 1 day before it goes out. You really want to do this around when the invoice is due. So in this scenario, what you're doing is you're setting up a reminder to go out. So maybe you send the invoices out net 15, which is very typical for law firms. Net 15, you email it out on the 1st and then you don't hear back, but people haven't paid it. How do you get it paid? You get it paid by sending this reminder right before it's due. Hey, because emails get stacked, they get lost. It's the main reason why I use Lissio, because it's just too much noise in an email box. So it's really simple. Maybe the person's on the go or they're in the car waiting at a red light. In Florida here, we have red lights that last about 5 minutes. So maybe they're at a red light and they happen to look down. Oh, look. She— they sent— the law firm sent me an invoice. I have to pay that when I get home, and then you forget about it. So this is just that piece that's going to help remind any open invoice. And you can set this up so you can create the reminder in Tasks if you'd like. So there's a Task section in Advanced, so you can, or you, you don't have to. And then you can send the client an email. And if you click here on the dropdown arrow, you can see what the email is going to say. And this is where I said you really want to customize this. So invoice needs your attention, you know, is about to become— is due in 1 day, or due in 3 days, or due in 5 days. And please take a look at the attached invoice and contact us if you have any questions. You might want to put something else in here that's specific to your firm, just some verbiage that makes more sense and looks a little bit less like a canned email. And then there's a lot of— you have variables in here. You can add a BCC, a CC to it. You can go in here and add some other things that happened here. So when you want to send this When the invoice payment status shows that the invoice is unpaid, but you can add other conditions— unpaid and the balance due is less than $5. So you put it in there. So maybe you're not going to bother somebody if sometimes people short pay an invoice by pennies or dollar or whatever. You might want to put this in there so you're not sending out this repeated email sequence. bothering somebody for less than $5. So that's up to you and firm. Maybe you collect every penny and that's great, but just, you might want to set up those, those conditions. So there are a few other ones here that you can, uh, add in. Invoice amount, maybe a specific client you never want to remind, so you want to put that in there. Maybe certain locations you don't want to remind. So there's a lot, a lot here that you can add. Um, there's so much you can do in this program. So this is— that's just one. So I'm going to save this one and I'll take you back. I got to give it a name, um, Invoice Reminder. So I'm just going to save that one now because you can create multiple. So now I'm going to create the overdue one, and this is really key where you want to add the really strong language because now the invoice was, um, they've been able— now the invoice has been You sent it on the 1st, it's been reminded on the 15th or the 14th, and you're still not paid. And now you're looking at down the road, maybe in another 15 days— I'll just hit discard— another 15 days, you're still not paid. So this is the part of the workflow that's critical because you're going to stay on top of the accounts receivable. So you want to, as a firm, have an action plan. And this is automation. So this is automating the workflow so that no hands have to touch it, no invoices that are unpaid paid will be missed because you're not having an admin maybe print a report or pull a report down, put it in Excel, make a checklist, check off the ones that went. You now have a system in place that happens automagically. One of my favorite lines, that this is automagic. This is AI at its, at its finest, right? So now I'm going to come over to overdue invoice. So we'll create one of those, and then it's an overdue invoice, and maybe you want to set some conditions in with certain customers. I don't think I have any, so I can't really do that. But if you had customer types, like maybe only divorce clients, but not the estate planning ones, because you might have invoices that might stay unpaid for some time. So you have the ability to do that. You can do— there's some conditions here that you can set up for within so many dollars. Again, the balance is more than zero, and then you can fill up, put in the words you want to put in here. You don't want to just have it stamped overdue. You probably want to have This is just going to stamp the invoice as overdue. You want to fill in some words to say, hey, usually on the first one that they're 15 days out, you are 15 days overdue. We wanted to bring this to your attention. We want to provide you good service, but part of good service is, you know, you being— us being compensated. However you want to word it. And there's plenty of ways to craft the wording so that it sounds strong enough that you want to get paid. but not so much that you're kind of badgering. So that is another one that you can also set up. Those are my 2 favorites. Now we do have tasks. I just wanted to touch upon tasks over here. Uh, tasks are where you can add tasks in here. So I've already set up a few of them, but you might want to add a task that a specific person, the AR person, the AR clerk, or the person in charge of accounts receivable On a once-a-month date, maybe the 16th, the 18th, whatever you determine, have that person run the accounts receivable, open AR, and take a look at all of the people that got the warning and then the reminder that it was overdue. And then take that list. Now you're a little bit more manual, but you're staying on top of it because if they ignore the overdue list, now they're probably going to need a phone call. However your workflow is to get paid. And then you can also by then maybe make the decision after so many months that you need to offload this to a collection agency. We've partnered with one that does a great job. They only work with law firms and architect firms. They're very classy. They do it very professionally, just kind of what you would want with the— with your firm. Now, with, with that being said, I can honestly tell you that one of the biggest things you can do for your firm, and I know a lot of firms don't do this because they don't want to pay the fees is to add the ability to pay with a credit card. Having that payment link attached to the invoice increases your likelihood of getting paid on the invoice. When the person sees it, they pay it, they click it, it's done. And that can happen in a matter of seconds. So we see that 39% more invoices get paid if there's a payment link on the invoice. And if you give them the ability to pay by credit card, that also increases it. So more than ACH, I know there's fees involved. We recommend Gravity Payments, Gravity Legal. They can work— they work with LeanLaw. They're embedded and integrated with LeanLaw. So it's actually in the product to have that send for a trust retainer. A request of a trust retainer is right inside the program. It's amazing. You can set it up. So that you can be paid over time. So it can be paid like recurring charges and segments. You can work it with evergreen payments. You can work it with being paid if someone owes you evergreen retainer balance on an evergreen retainer and also accounts receivable. You can set it up, and that system is meant for law firms, and it will actually put the money aside. So this all saves admin time when you're trying to— and improves accuracy. To track the payments for the firm. We highly recommend it. I'll put some links in the article itself that goes along with this video if you'd like to read it, and gives you a little bit more details around how we use these tools, these automation pieces, to help not only modernize your law firm but to get your accounts receivable paid, get you the money you deserve, and really to improve your cash flow. If you want more help, please reach out to us. Thank you for watching. Hit the subscribe button so you don't miss any of our videos. Thank you. Bye now.