To ensure January 1 rings in a better year with more solid financial footing, firms should take steps now and through December 31 to optimize revenue collections. A successful closing effort can mean the difference between a profitable 2020 and starting 2021 at a billing disadvantage. Implementing smart closing strategies will position your firm for a strong first quarter.
The following checklist includes items that go beyond the ordinary accounts receivable practices that you may not have considered. Some are common sense, most are best practices gained from years of experience, and others are unique to this unusual year. They all will help your firm successfully close the books on a year that’s best left behind.
1. ORGANIZE AND MOTIVATE
- Publish clear goals on the firm’s financial objectives for year-end income. Include budget vs. current status, broken down to the attorney level. Provide updates to all attorneys and collections teams daily through year-end so that everyone is aware of progress.
- Both collections teams and attorneys should review any clients that have approved special payment arrangements to see if payment amounts can be increased temporarily through year-end.
- Review all clients with approved extended payment terms and be sure they are billed in time for year-end payment. If “early” billing is not possible, ask the billing attorney to reach out to the client for an “exception” payment for year-end.
- Competition drives performance. Coordinate a year-end push with firm management and billing attorneys that includes internal practice group competitions. Offer bonus potential to top performers or those that surpass collection targets.
- Approve overtime for collections teams when workload volume necessitates.
2. MANAGE EXPECTATIONS — COMMUNICATE!
- Effective communication is essential to maximize year-end collections. Firm management should establish an expectation of attorney participation and responsiveness. When there is no response from an attorney regarding client outreach, the collections team should follow up on accounts automatically.
- Ensure proactive attorney-client communication regarding settlements of larger balances, those more than 180 days beyond terms and accounts where a dispute exists.
3. CREATE INTERNAL EFFICIENCIES
- During what remains of the year, have trusted associates review all prebills with no second reviews. Consider sending December invoices without review.
- Delay any administrative duties the collections team performs that can wait until the first quarter of 2021. This allows focus on collections without interruption. At year-end, collections teams often receive added requests for administrative tasks; many of those actions interfere with collections.
4. MAKE PAYMENTS EASIER
- Preapprove settlement authority for collections teams on aged balances: 10% immediate payment discount on all invoices that are 180+ days old, 20% on accounts receivable balances over 360 days.
- Make sure the standard engagement letter/invoice properly and clearly outlines the approved payment terms.
- Provide clients with FedEx/UPS account numbers to overnight payments during the final year-end push. When the client is local, offer in-person messenger pickup of payment.
- Consider creating an online payment system. This helps convert clients that normally pay by check to electronic forms of payment. If online is not an option, encourage clients to pay by other electronic means (bank draft). Be sure to create a document that outlines this service, include all relevant information (URLs, secure login info, account numbers, etc.) and send it with all new correspondence.
5. DOUBLE CHECK ACCOUNTING
- Review all unapplied cash and trust dollars to get these funds applied before year-end.
- Review January 2020 receipts to identify expected payments that missed the 2019 year-end deadline. Determine if any of those same clients have work in progress or outstanding accounts receivable that should be monitored.
6. ALL HANDS ON DECK
- Firm management should be ready to help salvage large, strategic accounts that are in a delinquent state. It is important to have a defined escalation path for difficult clients.
7. ANTICIPATE UNSEEN OBSTACLES
- Closely monitor e-billing rejections to ensure invoices are successfully submitted to guarantee payment by year-end.
- To address potential U.S. Postal Service delays, avoid mailing invoices and statements if possible. Emailing these documents is preferred.
Maintaining smart billing processes and monitoring accounts receivable are always best practices. These steps are especially relevant in a year that has been beyond challenging, both for clients and for firms. Establishing good, baseline protocols now ensures easier billing and better cash flow in the future.
