Episode 58 - Cashflow for Law Firms

In this Financially Legal episode, host Emery Wager talks with Matt Darner, founder of Collbox, to uncover practical strategies for law firms to master cash flow and collections. With years of experience helping businesses recover millions in outstanding invoices, Matt offers a unique perspective on the intersection of accounts receivable management and legal practice operations.

This episode explores the common challenges law firms face with payment delays, the importance of setting clear expectations with clients, and actionable steps to reduce lockup time. From refining billing practices to leveraging technology, Matt shares insights to help firms improve their financial health and focus on what matters most: delivering exceptional legal services.

The Reality of Cash Flow and Collections

Matt began by addressing a common struggle for many law firms: lockup time—the period between performing legal work and receiving payment. Drawing from the Clio Legal Trends Report, Matt shared eye-opening data:

• Realization lockup (time from tracking billable hours to issuing an invoice): 38 days.
• Collections lockup (time from sending an invoice to payment): 45 days.
• Combined, law firms wait an average of 97 days to get paid.

This delay poses significant risks, especially when payroll and other expenses don’t align with delayed revenue. Matt emphasized that the lifeblood of any law firm—cash flow—requires intentional strategies to maintain sustainability. The good news, as Matt noted, “the easiest cash on the planet is getting paid for the work you’ve already done.”

How to Shorten Lockup Time

Matt shared practical tips to reduce lockup periods and improve collections:

1. Set Clear Payment Expectations During Intake
   Clients often avoid paying due to sticker shock or misunderstanding the value of services. Firms should clearly communicate cost structures upfront, offering estimates based on historical data and case complexity.

2. Streamline Billing Processes
   Instead of relying on monthly billing, Matt advocated for biweekly invoicing to align with payroll cycles and reduce sticker shock from large, unpredictable bills. Consistency in billing can also reinforce client trust.

3. Follow Up with a Human Touch
   Many unpaid invoices result from simple forgetfulness or minor client confusion. A friendly follow-up call can resolve issues faster than automated emails. Collbox’s data shows that adding personal touchpoints—like phone calls—can reduce payment times by up to 40%.

4. Offer Flexible Payment Plans
   For clients facing financial hardship, offering structured payment plans can ensure firms recover revenue without burning bridges. This also demonstrates empathy and client focus.

The Role of Technology

Matt highlighted how integrating practice management and payment tools like Clio, Smokeball, or Lawcus can streamline processes and automate reminders, freeing attorneys and staff from tedious tasks. AI and automation tools are also changing the landscape by reducing administrative burdens, potentially reshaping the reliance on billable hours.

However, Matt cautioned firms not to avoid innovation out of fear of reduced billable revenue. Instead, he recommended using historical billing data to test flat fee pricing models, potentially boosting profit margins and improving client satisfaction.

For more on flat fees, see our episode on designing and implementing flat fee services. 

Key Takeaway

Law firms must prioritize proactive cash flow management to stay competitive. Whether it’s implementing structured billing cycles, adopting new technologies, or seeking external expertise like Collbox, taking control of accounts receivable can mean the difference between thriving and merely surviving.

Going Further

Get in touch with Matt Darner on LinkedIn or reach out to Collbox directly.