No matter who you are, a biglaw or a newbie, keeping a healthy cash flow is crucial. The true picture of a law firm’s financial state is revealed by its cash flow. Your business cannot flourish if you are not carefully monitoring your bottom line. Most small and medium-sized law firms have unpaid invoices, which can ruin your law firm’s cash flow and prevent you from paying your staff and bills.  

Most successful companies manage their law firm finances using a variety of proven practices, many of which may be put into place quite quickly. We will outline ten distinct ways you can transform your practices in minor but meaningful ways increasing your firm’s revenue and maintain a constant and healthy cash flow.

10 proactive steps to manage your firm’s cash flow efficiently and sufficiently

Steps being prepared for streamlining work

1. Examine your Firm’s Financial Health

Start by looking closely at your law firm’s finances if you haven’t already. Making monthly and annual projections of your company’s cash flow is a good place to start. 

Learn about your fixed costs first, such as your rent and utility bills. Then include variable costs like payroll. If possible, try to negotiate lower rates with your service providers, such as your phone or internet providers, or set up a fixed payment schedule for your utilities so you can budget more effectively.
It’s essential to make an estimation about how much client income you anticipate earning once you’ve determined your costs. This will enable you to determine if you’ve got a negative or positive law firm cash flow. Improve the firm’s cash flow easily by analyzing costs.

2. Cash Flow Forecast 

You will be able to produce a precise cash flow estimate once you have a handle on your law firm’s current financial situation. Moreover, using a proper practice management software, you’ll be able to swiftly produce billing and trust accounting reports so you can comprehend your incoming receivables. Research the spaces where you’re making profit or loss. This will help you achieve improved firm cash flow over time.

Counting the money

3. Avoid Billing Leakage 

Legal professionals less likely focus on maintaining accurate records of billable hours, especially when they are busy and stressed. Billing leakage occurs when a firm’s lawyers fail to achieve high timekeeping and expense tracking. This is true if you are engaged in initiatives with fixed costs. 

Project scope creep is a common happening, and lawyers frequently provide services without being paid by their clients. Implement advanced timekeeping tech software that automatically records your lawyers’ time. This may include calls, messages, emails, appointments, and other activities throughout the day making it simpler to capture every billable minute.

4. Provide Flexible Payment Plans to Clients 

By establishing a formal payment schedule with the client, law firms can prevent accumulating unpaid invoices. Instead of requesting payment in full upfront, the agreement should include installments. It should specify the due dates for payments, the accepted payment options like credit card and debit cards, and the consequences of late payments. 

If you’re having trouble getting your customers to pay on time, there might be friction in your law firm’s payment plans. To simplify your billing and collection procedures, set up a system accepting multiple payment methods, including internet payments.

Accepting credit cards will typically speed up your payment process and make it simpler to keep track of incoming funds. It may be worthwhile to pay a little convenience fee to a processor in order to get payments through the door faster.

Calculating money with the use of the calculator

5. Offer Incentives for Fast Payments

By doing this, you may maintain cash flow while enhancing customer service. Instead of charging exorbitant interest rates for late payments, incentives like rebates for early payments are more effective. Another strategy is to provide customers with extras: like free webinars to make them feel special.

6. Set Aside a Cash Reserve 

In case of a financial emergency, you must have enough cash-in-hand to handle all expenses of your law firm. Predict your expenses using your law firm’s cash flow analysis, and set aside enough money to cover your company’s expenses for three months. You won’t have to be concerned if you face a seasonal dip or minor setback if you go planned. Law firms often arrange a line of credit providing a financial buffer in the case of a shortfall.

7. Develop Key Performance Indicators for Cashflow 

Setting reasonable KPIs, assist you in keeping your business on the right track. For instance, you may keep track of the number of days that payments are past due and see if that number decreases over time. Alternatively, you may reflect on how your working capital has changed over time, which is calculated as the ratio of your current assets to liabilities. 

Variances that could explain any deviations in your forecasts can also be considered. The opportunities are practically endless, especially if your billing or practice management platform has reporting capabilities.

8. No Surprise Billing

If you notice that your customer retainers are getting low, raise them before you run out to prevent spending money that won’t be refilled right away. Additionally, you should refrain from invoicing consumers unexpectedly for services they didn’t request. 

Make sure your contracts clearly state what prospective clients can expect up front. 

Before sending the client your invoice, prepare them with a brief call to ensure they fully understand the cost if you have an unforeseen spend or a huge bill. By doing this, you have a better chance of avoiding write-offs.

9. Negotiate with Suppliers 

Developing a relationship with suppliers and vendors will assist the business get through challenging times. The supplier may consent to grant discounts, adjustable payment schedules, or a line of credit. This will assist your law firm in maintaining a sufficient cash flow going forward.

10. Follow up on Unpaid Invoices 

Following up on outstanding invoices can be a time-consuming and difficult task. It’s natural if you’re uneasy with the idea of pursuing clients for money during a crisis. You might be concerned that your actions would adversely impact your client relationships. 

However, you can use this opportunity to adopt a client-centric approach providing clear solutions that benefit both your clients and your law firm.The first step toward optimizing your accounts receivable is establishing a clear and compelling accounts receivable management strategy. Send polite email reminders soon, if you find yourself with past-due invoices. A phone call might be required if the reminder emails don’t appear to be effective. Legal billing software can help automate parts of the collection time and save your law firm a lot of time.


Whilst increasing cash flow could be a difficult task, it is essential for the company’s future. The greatest approach to guarantee that the practice never runs out of money during a crisis is to utilise technology like legal billing software and work as a team. Planning consistently will guarantee that the upcoming years will be sustainable regardless of the economic fluctuations.

Most successful law firms use a cloud-based practice management software platform to streamline their accounting procedures, document management, time and expense tracking and many more which helps them increase their firm’s productivity, efficiency, and profitability.

By utilizing the correct technology, your firm can facilitate your timekeepers in saving unaccounted time that they would normally spend on administrative chores that reduced your revenue. You may analyze your historical and projected cash flow and project your company’s finances more quickly and precisely. This will help you plan more effectively and establish more achievable goals for the upcoming months and years.


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