Poor Law Firm Cash Flow – Strategies for Improving Cash flow in Small Legal Practices
The results of our 2011 survey of small legal practices listed poor law firm cash flow as the number one concern of principals of practices. Fortunately there are plenty of strategies that you can adopt to quickly improve cash flow in your practice.
While it is easy to blame the clients for the practices poor cash flow, this isn’t going to help you fix the problem and will only stress you further. It is true of course, that there are some bad clients and you tend to remember them, but most clients are basically good people trying to do the right thing, just like you.
So what can you do?
Let me talk about one obvious strategy that is so often overlooked.
A client’s recollection of the fantastic work that you have done in the matter you have just completed for them, diminishes rapidly. They are busy just like you and they simply forget. The moment of maximum appreciation of your immense skills, is the moment that their matter is completed.
So it stands to reason that if you have a client at the maximum level of awe of your services, that that is the absolutely best time to give them your bill. Not at the end of the month, which may be weeks away.
Most likely they will pay you immediately and if you want to improve your chances of this happening, then you need to create what I call “payment expectation”.
This can be created very simply. When an appointment is made for your final client contact, the client is simply told that “Colin will have your account ready for you when you come in”. If you like you can add “If you would like to bring along your cheque book, you can fix it up then”.
Back in my accounting days when I first initiated this practice, I saw seven small business clients on the first day. Four of them paid the bill as they left, even though from memory our policy was 30 days of credit.
This simple but powerful strategy provides you with a number of benefits:
1) Many of your clients may well pay you immediately as well. That has got to be good.
2) If the account is higher than anticipated, you have the perfect opportunity to explain why and deal with any objections face to face.
3) You can also reiterate the great value they got by using your services.
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