Legal Back Office was able to increase Stock Legal’s collections rate from 91.04% in 2018 to 98.02% in 2019 and reduce aging A/R by more than six figures.
“As a law firm owner, I now know that removing hats and delegating out A/R is one of the smartest business moves you can make,” Stock said. “Collecting on the money owed is how we pay people and reinvest to grow our business, so it’s incredibly important and shouldn’t be ignored or devalued.”
– Sara Stock / Stock Legal
It was 2018 when Sara Stock knew she had an A/R collections problem on her hands. As the founder of Stock Legal, a growing boutique business law firm in St. Louis, Stock was used to wearing many different hats trying to find the balance between working attorney, business developer, and operations manager.
“When I first started Stock Legal in 2015, I was admittedly naïve,” Stock said. “I figured if I went out and did the work and sent the bills to my clients, then they would pay. So I was very surprised when there were so many clients not paying in part because we had no collections process.”
Sara created a basic A/R process in 2016 that involved resending invoices and emailing to follow-up. There was some improvement, but there were also still A/R struggles.
Toward the end of 2017, Stock Legal’s rapid growth lead to growing A/R and no capacity or internal capabilities to handle the collections process.
As she watched her company’s A/R reach into the six figures at the end of 2018, Stock knew her firm needed help.
“You could be doing the best work in the world as an attorney, but if you aren’t collecting the money owed to you, then you won’t be in business long.”
Stock used a simple math equation to justify her decision to look outside her firm for help.
At an average hourly bill rate of $300, Stock realized by spending 15 hours a month of her own time on A/R efforts that the opportunity cost of her time was $4,500 each month.
If she could delegate that time for a fraction of the cost, then she could use those 15 extra hours each month to bill existing clients and add another $4,500 in monthly revenue, or devote those hours to business development to increase the number of clients that could lead to six figures of revenue or more annually, or focus on building the infrastructure of her company.
She calculated by hiring Legal Back Office she was at a minimum getting $4,500 in extra billed hours a month and the maximum could be unlimited based on potential new client development efforts.
“As I grow in my experience as a business owner, I really understand the most valuable thing I have in my life and my business is my time,” Stock said. “The best advice I can give is truly understanding the opportunity cost by not working with outside help on your collections efforts.”
Faced with more than $100,000 in outstanding invoices clients owe, Stock Legal hired Legal Back Officeto build, implement, and execute an effective collections process.
The biggest problem facing Stock Legal was the need to create a coherent system in its workflow, communication, and data entry so that the Stock Legal attorneys and legal staff were always on the same page with the Legal Back Office collections team.
While reporting out of a law firm’s client relationship management (CRM) system certainly is necessary to a good collections process, documentation and communication will ultimately determine the success of those efforts.
Data integrity issues were critical to fixing, such as incorrect or missing client contact information, along with consistently transparent and forthright documentation of any communications with clients.
If the collections representative doesn’t have the correct information and the attorney told the client one thing about the invoice without documentation, and then the collections representative told the client something different than the attorney did, then there is going to be an issue. The biggest hindrance to collections is the lack of information sharing regarding communication between the attorney and client and the collections representative and client.
“When we established we’re a team and Stock Legal provides gives good information to Legal Back Office, and Legal Back Office provides good information to Stock Legal, then there is a consistent message in client communication and that trust forms amongst all parties when everyone is on the same page,” Stock said.
“Legal Back Office worked with us to build spreadsheet that is delivered once a week that gives me exactly what we need, where we stand with A/R, and where my staff stands with their duties as part of the process,” Stock said.
In addition, there truly is a skill and personality needed to be effective at this sort of work. Legal Back Office takes a non-traditional approach to collections by treating clients with compassion and understanding. When representing clients, Legal Back Office collections representatives take a client-friendly tone in their outreach by acting as a team member and extension of Stock Legal.
“Clients having a good relationship with us is critical,” said Jaimee Hall, CEO of Legal Back Office. “When people owe money, they typically expect an authoritative, threatening approach to collections, but our posture is to treat them with dignity and respect. We see all clients as humans that have lives and stresses, too, but we are professionally assertive to get our law firm clients paid while also making new best friends out of their clients.”
The Legal Back Office process opens up a channel of communication with the clients that proactively answers questions and provides an opportunity to reach a resolution with the client without resorting to threats or ill feelings.
By being incredibly professional and personable to clients that owe money, implementing a standard operating procedure for the collections process, and opening clear and consistent lines of communication, Legal Back Office was able to increase Stock Legal’s collections rate from 91.04% in 2018 to 98.02% in 2019 and reduce aging A/R by more than six figures.
“I have never felt as good with A/R as I do now with Legal Back Office,” Stock said. “I can genuinely say working with Legal Back Office to build and execute an A/R process is in the top 10 best business decisions I’ve ever made.”
The turnaround in A/R reduction has dramatically improved Stock Legal’s productivity, efficiencies, and operating capital.
“This improvement allowed us to hire new lawyers, accommodate additional client needs, and invest in technology to better serve our clients,” Stock said
Invoicing and collections is one of the most important things any law firm does; if it’s not done correctly upfront, then it will cost hours on the backend trying to collect money and address client concerns.