How Law Firms Can Collect More of What They Bill
Every unpaid invoice is work your firm has already done for free. Most collection problems come from slow billing, inconsistent follow-up, and not watching the aging report. With clean books and a simple process, firms can collect more without damaging client relationships.
Why Collections Matter
Your collection rate is one of the three numbers behind each attorney’s effective rate. A firm that bills well but collects poorly is leaving real money on the table. See: Attorney Effective Rate.
Reading Your A/R Aging Report
An accounts receivable aging report groups unpaid invoices by how long they’ve been outstanding, usually current, 31 to 60 days, 61 to 90 days, and over 90 days.
The older an invoice gets, the less likely it is to be paid.
Look for patterns by client, attorney, and practice area.
Make sure the report is accurate. Unapplied payments and duplicate invoices make it look worse than it is.
Habits That Improve Collections
Bill promptly and consistently. Invoices sent soon after the work is done get paid faster.
Use clear invoices. Descriptions clients understand lead to fewer disputes.
Use retainers and evergreen retainers where appropriate, held in trust until earned.
Make it easy to pay with online payment options.
Follow up on a schedule: reminders at set points, not only when cash is tight.
When an Invoice Goes Unpaid
Contact the client early to find out why. Sometimes it’s a simple issue.
Offer a payment plan when it makes sense.
Check your state’s rules on fee disputes. Many state bars offer fee arbitration programs.
Decide when a balance is uncollectible, and discuss write-offs with your CPA.
How Bookkeeping Supports Collections
Payments applied to the right invoices, so the aging report is accurate
Billing software and books that agree
Monthly A/R review, so overdue balances get attention while they’re still collectible
See: Clio & QuickBooks Bookkeeping
How Azar Insights Helps
Accurate receivables and monthly aging reports
Payment application and reconciliation between billing software and the books
Collection rate reporting by attorney or practice area
Frequently Asked Questions
What is a good collection rate for a law firm?
It varies by practice area and client type. What matters most is your own trend over time and how each attorney compares. A falling collection rate is an early warning sign.
How often should a law firm review its accounts receivable?
Monthly at a minimum. Many firms review aging weekly or every other week as part of a regular follow-up routine.
Why does my A/R aging report look wrong?
Common causes are payments that weren’t applied to the right invoice, duplicate invoices, retainers handled incorrectly, and differences between your billing software and your books.
When should a law firm write off an unpaid invoice?
When the balance is truly uncollectible after reasonable follow-up. Discuss write-offs with your CPA, because the treatment depends on your accounting method.
Can retainers help with collections?
Yes. Retainers held in trust and applied as work is billed reduce the risk of unpaid invoices. They must be handled correctly under your state bar’s trust accounting rules.
Related Reading
Attorney Effective Rate · Law Firm Profit and Loss · Clio & QuickBooks Bookkeeping
About Azar Insights
Azar Insights provides outsourced bookkeeping, accounting, and fractional controller and CFO services for law firms nationwide. With 15 years of accounting experience, we work remotely with solo attorneys and multi-partner firms using secure, cloud-based tools.