Year-End Financial Health Check: Optimizing Your Law Firm’s Billing Practices

Why a year-end review matters for your law firm 

Your financial health checks go beyond tallying income and expenses. They highlight where you’ve succeeded, what needs work, and what changes will benefit your business in the coming year.  

Unlike many other sectors, law firms can face unique billing, collections, and client management issues, which is why a focused, end-of-year analysis is extra beneficial. A clear picture of where revenue is coming in, your client payment habits, and overall cash flow can help you: 

• Plan for potential economic shifts, such as slower months or unexpected expenses, by creating a financial cushion or budget plan 
• Make informed hiring decisions by understanding whether your firm has the cash flow to support new team members 
• Identify high-revenue practice areas so you can focus your resources on the most profitable services 
• Allocate marketing budgets wisely by seeing which client acquisition strategies bring the best return on investment 
• Areas to review during your health-check 

A thorough financial health check should include a few core areas that affect how your firm functions and grows. Understanding them will reveal where you can better invest time and resources to improve revenue intake and simplify operations. 

Billing and collections performance 

How well are your current billing and collections practices working?  

Evaluate time-to-bill, average days receivable, and the percentage of outstanding accounts. 

This will give you a clear view of cash flow issues and collection gaps. If you identify patterns involving slow payments or invoicing discrepancies early, you can adjust accordingly to optimize your payments.  

The more you know, the better you perform.  

Client payment patterns 

Are your clients habitually late with payments? Which ones?   

If you’re relying on traditional, outdated billing and invoicing practices, your clients likely are jumping through hoops just to pay you.  

You could offer incentives for early payment or set penalties for late fees based on trends found during your review. You could also use this opportunity to make client payments both easier for you and them with Rocket Matter Pay, which gives you the ability to accept credit card payments, set up payment plans, or provide clients with user-friendly, mobile payment options. 

Time-tracking accuracy 

Are you tracking time accurately? 

Precise time tracking leads to fair billing, and it also enables you to send your clients detailed, transparent invoices.  

Deeply review time tracking records to see if there are any problems between billable hours recorded and invoices sent out. If you pinpoint any consistent issues, you can change your time-tracking protocols, making sure billable work is accurately documented and billed. 

Profitability by practice area 

Have you examined the profitability of your practice areas? 

Examining profitability based on your specific practice area(s) shows you how different cases impact your firm financially. Recognizing which practice areas or services generate the most revenue or consume too many resources, leaves you to focus efforts where the return on investment is highest. 

Trust accounting practices 

What do your trust accounting processes look like? Have there been any changes in applicable requirements?  

Trust accounting is vital for regulatory compliance and client trust. Thoughtfully assess whether your trust accounting protocol follows best practices and that client funds are handled in a manner that aligns with requirements in applicable jurisdictions.  

Operating expenses 

How much are you spending on routine expenses? 

Office supplies, subscriptions, and technology fees add up, and fast. An annual review of your operating costs gets to the bottom of where the firm’s money goes and shows any excessive or repetitive spending. From there, you can adjust or remove unnecessary expenses, freeing up funds for investment in financial management technology and other growth initiatives. 

Billing issues law firms face—and how to fix them 

Law firm billing is seen as complex, but it’s actually simpler than you might expect. The truth is, you could be making your billing processes much more difficult by trying to juggle nonbillable, redundant tasks instead of addressing root issues. 

Some common issues that plague law firms include:   

Inconsistent invoicing 

When invoices go out at random times and lack consistency, your cash flow is unpredictable. Law firms often struggle with a structured billing schedule, leading to delayed payments and very frustrated clients.  

Automated invoicing and payment collection by Rocket Matter Pay eliminates the guesswork, makes you more predictable, and helps your clients know what to expect. With lightning-fast funding, you can also get paid the same day. 

Delayed payments 

Legal bills can carry a heavy price tag, making on-time payments a struggle for some clients. Late payments complicate cash management and add an extra load of stress to your firm’s accounts receivable team.  

Offering flexible payment options, like online and mobile payment methods, encourages quick, convenient payment for your clients. The happier they are, the faster you get paid. 

Unclear billing statements 

Clients need transparency, and a confusing bill can lead to disputes and broken trust. Itemized, detailed invoices with clear breakdowns of costs reduce the need for client inquiries.  

Law firms greatly benefit from Rocket Matter’s customizable billing templates that create professional, easy-to-understand invoices based on your clients’ needs.  

Manual processes 

Manual invoicing, payment collection, and reporting gobbles up your time. Modern billing automates these processes so you can focus on what you’re good at, which is being a legal professional.  

By using billing software that’s integrated with your other practice management tools, you’ll get real-time financial insights and automated invoicing. Take the hefty load off your plate and the plates of your staff. Higher morale = a more productive team. 

Trust accounting compliance 

It goes without saying that mishandling trust accounts can lead to serious compliance issues. Your law firm needs simplified trust account management to automatically track client funds and flag potential problems.  

Compliance features built into our billing software keeps client funds separate, protects against errors, and supports adherence to regulations. Rocket Matter Pay is IOLTA Trust Accounting Compliant.  

Improve Your Financial Health with Rocket Matter Pay 

Conducting a year-end financial check can save you money, hours of time, and frustration based on the aftermath of bad decisions. Making the switch to an integrated legal payment solution makes this process even more convenient. 

Modern firms need modern billing software. Rocket Matter Pay is designed to take care of the technology so you can put your effort into being a lawyer. Schedule a demo with us today to generate faster invoices, generate more billable hours, and speed up your collections.