Top 5 Things to Consider in 4th Quarter to Maximize Your A/R

Many law firms find themselves at a pivotal time in the financial calendar during Q4. This period represents more than just the winding down of the year; it’s an opportune time to strategize and fine-tune your Accounts Receivable structure. Maximizing A/R performance during these critical months is not just a matter of routine financial management—it’s a strategic move that can significantly impact your organization’s cash flow. In this article, we’ll explore what firms should consider to optimize A/R, streamline operations, and set the stage for a prosperous year ahead. From invoicing strategies to collections techniques, we’ll delve into key considerations that can help your organization thrive in the challenging yet rewarding world of finance.

1. Difficulty Reaching Clients

As A/R Managers, a primary concern is contacting clients as year-end approaches. It’s crucial to involve attorneys to ensure a clear understanding of year-end goals. In cases where A/R managers face difficulties reaching the client, escalation becomes essential. Additionally, closely monitoring eBilling is critical to expedite invoice closure.

• Firm/Attorney participation is key. Firm management should communicate the expectation of attorney participation and responsiveness now.
• Do-Not-Contact (DNC) Clients need to be reviewed, vetted, and escalated. These should not present a barrier to reaching Fiscal Year End (FYE) budget.
• Non-A/R related tasks should be handled elsewhere or tabled until FYE.
• Closely monitor eBilling rejections so that invoices are successfully submitted to ensure payment by year-end.
• Ensure that bills are getting to their clients timely and accurately to avoid payment delays.
• Many companies and staff take PTO at year-end, or the company shuts down their AP. Acting sooner rather than later is advised.

2. Ways to Gain More A/R and From Whom

Attorneys’ active involvement is vital. In cases of prolonged non-participation or unresponsiveness, it becomes necessary to escalate communication, either to the A/R Committee or another influential figure within the firm. These committees typically convene for monthly calls to review the A/R report and collaboratively explore strategies for resolution. Now’s the time to get on the agenda.

• Showcase any challenges (non-participating attorneys/DNC clients) to firm management and partners.
• When there is no response from an attorney regarding client outreach, the A/R Manager should be instructed to follow up automatically and escalate to a manager at the firm/committee.

3. Is Your Client Likely or Unlikely to Pay in Q4?

Most Likely

• Clients with preapproved payment plans or long-term clients encouraged to pay by FYE by the AR department.
• Clients that are contacted on a regular basis by the AR department.

Least Likely

• Clients with financial hardships
• Clients who no longer have a relationship with the firm but have aged A/R.
• Clients who do not respond to the AR department.
• Recommendations: Create a report of clients with A/R 180+, no younger A/R, and no WIP. Consider a letter campaign and possible discounts if received timely.
• Review clients with extended payment terms to ensure billing is timely for payment by year-end.

4. Technology Support and Managed Services That Help

Given that the billing and eBilling process is critical, it is imperative to ensure its accuracy. Frontline’s eBilling solution offers transparency, enabling the early identification of potential issues within the process to proactively address payment discrepancies.

Create dedicated year-end reports through our iRIS software tool to predict projected collections. These reports offer valuable insights for up-to-date information such as tracking weekly payments, KPIs to see payment trends year over year, new clients, and missed clients and monthly snapshot reports. Create an iRIS report that shows payments received during the first 3 days of January. If these were clients who missed the 12/31 deadline, get them on the radar for this year-end.

5. Other Insights

• Get WIP billed early.
• Get December invoices billed during the first week of December.
• Encourage electronic payments vs. USPS (Snail mail doesn’t work).
• Allow A/R representative to work OT, where needed. It’s worth it to help reach goals.
• Escalate to senior management any clients with balances over 180+ or 365+ that have not indicated they will pay by year-end.
• Reminders for the last week of the year: overnight mail, wires vs. ACH, encourage credit card payments if firms take them.
• A/R Managers should call clients with payments promised the last week of the year. Confirm that the payments are set up to go out timely.
• If large clients typically pay in 45 days, ensure they are billed in time to get payment in by the end of the year.
• Review clients with extended payment terms to ensure billing is timely for payment by year-end.

By: Melissa Duff, VP at Frontline Managed Services.