By Alan Chan, Head of Legal & Company Secretary, Parseq.
Your firm has a team of profitable fee earners. You’re efficient and your in-house processes are running effectively. So why do your figures not look as healthy as they should be? An issue many firms, big or small, new or established, have is clients who don’t pay their invoices on time.
So what’s the answer? Put more pressure on the fee earners to gain the payment, instruct your finance team which is already over stretched or employ a third party of credit control specialists? The latter is growing in popularity amongst legal firms in the UK and here’s why.
Relationship over revenue
Relationships are valuable assets for fee earners and subsequently law firms. If you build a strong relationship with a client then nine times out of ten they’ll come back when they have another legal issue and what’s more, they’ll recommend your services to colleagues, business associates, friends and family. They are the best source of new business you could wish for.
Because relationships are so important, it’s rare that fee earners will want to rock the boat, especially if it’s to prompt them to pay outstanding invoices. But that’s the reality for many – an uncomfortable conversation after the finance department has pressurised them to push for the account to be settled.
Time is money
Very few firms want their fee earners chasing for payment when they could be charging out their time with other clients. Finance departments can however, do some of the chasing for payment, but often this job gets left to the bottom of a pile of invoicing and before you know it days, weeks and months pass without the account being settled.
A bit of distance
One of the clear advantages of having a third party specialist focus on a firm’s creditors is that it gives distance between the action of debt collection and the firm. In effect the credit control specialist can act as a buffer between client and firm, which can be beneficial if the client is embarrassed or takes exception to being contacted – which of course helps maintain relationships.
Leaving credit in the hands of the experts
Specialists in managing credit are not only experts in collecting credit, they can also see opportunities for creating financial processes to improve cash flow and profitability by establishing an agreed SLA framework which rewards the credit controllers when the debtor days are within, or above agreed levels and equally penalises us when they fall below.
“Parseq has demonstrably taken outstanding debt from 35% to less than 2% within a six-month period recently for one of its clients.”
It’s vital a firm takes control of its credit and debtors so it can be as profitable as possible. Many have found that credit is best left in the hands of the experts.
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