Studies show that almost 80% of consumers prefer to pay for goods and services with credit or debit cards. Frankly, people have gotten used to the convenience of electronic payments and online bills. The majority of consumers now expect to be able to pay for services online, and also expect the service provider to offer them a variety of payment options.
If your practice is committed to providing a 21st century law firm client experience, you have to adopt frictionless billing payment processes, which includes the adoption of online payments. Not only is doing so necessary to give your clients the service they want and deserve, but if your firm doesn’t step into the modern era with electronic billing and payments, you’ll discover another firm already has, which can make them more attractive to your clients. What’s more, recent studies concluded that firms who utilized online payments in their practice collected $10,000.00 more per attorney than firms who did not utilize digital payments.
Below we will discuss how you can get paid up to 62% faster, how to get more money in your pocket, and the ethical considerations you need to consider when adopting a frictionless billing process.
What is Frictionless Billing?
Frictionless billing is a payment process that involves fewer steps and simpler interactions between the client and your IOLTA or Operating Account. Law firms have been slower to adopt this system than their retail counterparts. For instance, online retailers and service providers have pioneered the frictionless transaction process for the digital age by removing the need for customers to visit physical store locations, instead implementing one-click purchasing, and offering automatic billing.
In the law firm context, frictionless billing involves making it easier for clients to pay their invoices or retainer by reducing the number of steps in the process. Like with online retailers, having electronic payment options is central to frictionless billing and a positive law firm client experience.
With frictionless billing, there is no waiting for a paper invoice to come in the mail, no need to get out a checkbook, no need to find an envelope and stamp, no need to put a check in the mail, and no uncertainty about whether payment has been sent or received. Instead, electronic payment options eliminate all these steps and all the waiting, reducing the payment process to just one click in many cases. And, you can get paid the same day a bill is sent out. Recent data from LawPay found that 62% of bills sent online got paid within 24 hours. That is unheard of in the paper check world.
How Electronic Payment Tools Reduce Friction for Clients
Electronic payment solutions simplify the billing process for your firm and increase the ease of submitting payment for your clients. Electronic payments can help remove difficulties and barriers for your clients and enhance the law firm client experience by doing the following:
Eliminating paper bills
Electronic payment solutions clean up the messy paper trail of old payment methods. Emailed invoices and online platforms that your clients can log into make it easier for clients to access invoices and payment records to see whether they need to make payments or to refer to information that they may need.
Offering instant confirmation
One of the keys to online retail’s success is the idea of instant gratification. Purchasing something on Amazon is as easy as clicking a button. Electronic payments can offer this same feeling to law firm clients, who can receive immediate automated payment confirmations to know that their payment has been received by their attorney. No more need for both lawyer and client to wonder where the client’s payment may be.
Facilitating preferred payment methods
Surveys of consumers show that the overwhelming majority of people prefer paying by credit or debit cards or other electronic means. This includes payments not only for consumer goods but for any bills they receive, including invoices from service providers like attorneys. If a law firm continues to require clients to pay by check, it only creates another point of friction in the payment process, especially for those clients who no longer use or own checks. In some cases, the friction may be too great for a client or prospective client, forcing them to look for another law firm willing to accept electronic payments.
Consider the following scenario: a potential new client comes into your office for an initial consultation. By the end of the meeting, they want to retain your services, and you quote them $5,000.00 for their retainer. Most clients would not have known to bring this large amount of physical cash with them to your office, and most clients rarely use their checkbooks or have them on hand. But, many clients are able to put this payment on their credit card. Are you willing to let that client leave your office to run to the bank and get a money order, when you could’ve had them sign a fee agreement and pay via credit card while they were still at your office?
Allowing clients to pay on their own schedule
The proliferation of electronic payments has taught us all the convenience of being able to pay our bills on our own schedule, at any time, 24 hours a day, seven days a week. If clients can pay your invoices on their own schedule rather than during your business hours, it represents a small but noticeable improvement in the client experience.
What Lawyers Should Consider When Accepting Electronic Payments
Of course, lawyers face unique issues in accepting electronic payments that many other retailers or service providers do not have to worry about. This mostly stems from attorneys’ ethical obligations with respect to client and third-party funds. Ethical requirements, found in every state bar’s rules of professional conduct, instructs lawyers to separate payments received from a client or third-party that do not represent expenses or earned fees into a separate trust account. To put it simply, that money remains the property of the client unless and until you have earned and billed for it.
In the earlier days of electronic payments, lawyers did not necessarily have the option to properly divert client payments taken digitally into trust accounts. However, in recent years, the legal industry has seen the launch of electronic payment processors targeted specifically for law firms, offering lawyers the ability to separate client payments into earned and unearned funds and send funds to their proper accounts.
Processing fees from electronic payments also pose ethics and operational issues for law firms. Lawyers cannot use payment processing to accept client payments representing unearned fees if the payment processing fees are deducted from the payment itself, i.e., from the lawyer’s trust account. Those funds still legally belong to the client, so deducting fees and expenses from client property represents a violation of ethical and fiduciary obligations.
However, payment processors for lawyers like LawPay allow firms to ensure that fees and expenses related to card processing are appropriately deducted from operating accounts rather than client funds. From a practical perspective, payment processing fees also represent an expense or overhead that lawyers have resisted. But more and more firms are recognizing that payment processing fees should be looked at as just another cost of doing business and factored into the firm’s financials accordingly. To put it bluntly, processing fees are the trade-off to providing a frictionless billing system for your clients. Many lawyers also note that the minimal costs of electronic payment processing are far outweighed by the benefit of immediate, confirmed payment.
If you have questions about how electronic payment options can allow your firm to provide a more modern, more efficient experience for your clients, you can schedule a demo with LawPay today to learn about how our payment processing solutions can assist you with converting your electronic payment methods into the most frictionless billing methods possible for your clients.