We asked 50 law firms about their cash flow: Here’s what we found
CollBox Team
Leading and guiding a law firm gives you enough to think about. Therefore, managing finances can often take a back seat to client work. But what happens when those unpaid invoices start piling up? At CollBox, we decided to dive deep into this issue by surveying 50 law firms about their accounts receivable (A/R) practices. The results were eye-opening, to say the least.
The $200,000 Elephant in the Room
Our survey revealed a startling average: each firm is carrying approximately $206,000 in outstanding invoices. That’s not pocket change – it’s a significant chunk of revenue that could be reinvested in the firm, used to hire new talent, or simply improve cash flow. Even more concerning, 73% of firms reported outstanding balances between $100,000 and $500,000, with some firms carrying up to $2.5 million in unpaid invoices.
The Aging Problem
It’s not just the amount that’s concerning, but how long these invoices have been outstanding. A whopping 41% of firms reported having invoices that were 90+ days past due. When you add in the 60-90 day past due invoices (26%), you’re looking at 67% of outstanding invoices being at least two months overdue. This isn’t just a minor hiccup – it’s a systemic issue that’s affecting law firms across various practice areas.
Practice Areas Feeling the Pinch
While A/R issues seem to be universal, certain practice areas appear to be more susceptible. Family Law (14%), Estate Planning (12%), Civil Litigation (11%), Administrative Law (10%), and Employment Law (9%) were among the most represented in our survey. These fields often involve complex, high-stakes cases where billing can become complicated and clients may be more likely to dispute or delay payment.
When we asked firms about their biggest A/R challenges, a clear pattern emerged. The most common issue, cited by 35% of firms, was simply chasing past-due bills. Other significant problems included inconsistent billing processes (8%), lack of adequate workflows or systems (6%), inaccurate accounting or financial metrics (5%), and irregular trust account replenishment (5%).
One respondent summed it up perfectly: “My team doesn’t know how to handle it internally. We need help.” This sentiment was echoed across many responses, highlighting a crucial gap in law firm operations.
The Human Cost
It’s easy to look at these numbers and forget the human element. Behind every unpaid invoice is a lawyer or staff member spending valuable time on collections instead of billable work or client service. This not only affects the firm’s bottom line but can also impact morale and job satisfaction.
Our survey didn’t just identify problems – it also revealed what law firms are looking for in a solution. The overwhelming majority expressed interest in a “done-for-you” A/R solution that doesn’t add to their administrative burden. Many were interested in a one-time clean-up to regain control and re-establish cash flow, while others sought ongoing support and systems to prevent future A/R issues.
One interesting finding was the varying levels of awareness about the impact of A/R issues. While some firms were acutely aware of the problem, others seemed to underestimate its effects on their business. This suggests a need for education in the legal community about best practices in A/R management and the true cost of delayed payments.
The CollBox Solution
At CollBox, we’ve developed our services in direct response to these needs. Our approach isn’t about adding another complex software system to your tech stack. Instead, we offer a human-centered, done-for-you solution that can adapt to your firm’s specific needs.
Whether you need a one-time clean-up to get back on track, ongoing A/R management to keep your cash flow healthy, or help with particularly difficult accounts, we have a solution. Our team of experts understands the unique challenges of legal billing and collections, and we’re committed to helping you recover what you’ve earned without damaging client relationships.
Moreover, we believe in empowering law firms. That’s why we also offer training and systems to help your team better manage A/R in the future. Our goal isn’t just to solve your current A/R problems, but to help prevent them from recurring.
The Path Forward
The results of our survey make one thing clear: A/R management is a significant challenge for law firms, but it’s also an opportunity. By addressing these issues head-on, firms can unlock hundreds of thousands of dollars in revenue, improve cash flow, and free up valuable time for billable work.
If you recognize your firm in these survey results, know that you’re not alone – and that help is available. Whether you choose to work with CollBox or explore other solutions, taking action on your A/R management is a crucial step toward a healthier, more profitable practice.
Remember, every dollar in A/R is a dollar you’ve already earned. It’s time to bring that money home where it belongs – in your firm’s bank account.
