{"id":16815,"date":"2024-06-18T12:49:01","date_gmt":"2024-06-18T18:49:01","guid":{"rendered":"https:\/\/nqzw.com\/?p=16815"},"modified":"2025-02-20T07:11:33","modified_gmt":"2025-02-20T14:11:33","slug":"why-your-firm-should-aggressively-use-online-payments","status":"publish","type":"post","link":"https:\/\/zebraworks.com\/en_gb\/why-your-firm-should-aggressively-use-online-payments\/","title":{"rendered":"Why Your Firm Should Aggressively Use Online Payments"},"content":{"rendered":"
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\n\t\t\t\t\nShort answer: If you like making more money \t\t\t<\/p>\n\t\t\t\t\t<\/blockquote>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t

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No one likes paying credit card fees\u2014particularly attorneys. One \u201csolution\u201d is to pass on the fee to your clients. That\u2019s better than not accepting online payments at all, but it\u2019s also an excellent way to make sure you don\u2019t actually get the benefits of doing so.<\/p>

Here, however, is the irony: not only will your client experience be better, but it\u2019s also more profitable to accept credit cards.<\/p>

The challenges of growing A\/R aren\u2019t going away: according to Citi Hildebrand, law firm A\/R increased by 9.4% in 2023, on top of an increase of 10.4% in 2022.<\/p>

A\/R Turnover<\/h3>

A\/R turnover is the standard way to track collections performance. It is a simple calculation: how many months of billing do you have in A\/R? If you bill $1M per month and have $3.5M in A\/R, then your A\/R turnover is 3.5 months. That\u2019s the average for law firms.<\/p>

Firms’ clients who pay online do so about one-third faster. That\u2019s a reduction of over a month in A\/R turnover, which means, in our example, if all paid online, of moving $1M of cash flow into the current year.<\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t

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Collection Realization\u00a0<\/h3>

Another critical measure is collection realization: what percentage of your billing do you collect? Collection realization rates have also faced increased pressure recently, now averaging 89%.\u00a0<\/span>\u00a0<\/span><\/p>

The faster you collect A\/R, the lower your write-offs and therefore the higher your realization rate. We consistently see a higher realization rate of 2.5% to 4.5% within a firm\u2019s client base that regularly uses online payments.<\/span>\u00a0<\/span><\/p>

Like most things in billing and collections, there is variation by size of firm and practice areas, but we see an average of 28% of online payments through ACH. Although first-generation legal merchant accounts charge a percentage fee with a cap, these days you should only be paying de minimus transaction fees on ACH payments.<\/span>\u00a0<\/span><\/p>

ROI<\/h3>

Let\u2019s walk through an example where you aggressively adopt online payments; we\u2019ll use round numbers so it\u2019s easy to scale to your particular firm and assume that you expand the use of online payments to an additional $10M for the year:<\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t

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That is an impressive increase in cash flow. However, we need to consider the cost. Most firms are paying all-in 3.2% to 3.4% (depending on the mix of credit card types) in fees. We offer a flat 2.95% rate, which is more common in the industry outside of legal, so we\u2019ll use that number.<\/p>

We\u2019ll ignore the benefit of moving cash flow into the current year (as significant as that is!) and focus on the bottom-line numbers:<\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t

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Client Experience<\/h3>

The client experience is an important component in achieving results like this in your firm:<\/p>