Accounts receivable: Asset or liability?

Typically, a law firm’s accounts receivable is one of the largest current assets on the balance sheet. But unless given appropriate attention and management, they can all too quickly become a liability.

By Stephen Baird, MiniSoft Worldwide

Throughout my business career and management training I have always been told that my accounts receivable (AR), the money owed to me by my clients after invoicing, is an asset. If this is so, why does it take many firms so much effort to monitor, manage and get bills paid? An asset is a resource that should have a positive effect on your business, but how can the money from your unpaid bills do this if it is in another company’s bank account?

Accounting convention records your AR as an asset – I’m not going to argue against this. Not at all, my point is that unless properly managed this financial asset can all too easily become a liability to a firm, sometimes severely stifling its financial well being. Obviously liability is a play on words – here I mean a disadvantage for your firm rather than the accounting term.

The neglected child

Everyone involved in billing and the collection cycle needs to work together to prevent your AR becoming a liability, thus taking up valuable resource within your firm. It is not just the responsibility of the finance department, although most of the management and monitoring activity originates here, but involves the partners and the billing timekeepers too. But receivables collection is not glamorous and is often a neglected and undervalued business activity.

For law firms, the AR is very likely to be one of the largest current assets on the balance sheet. But for many it has little kudos. One key reason for this is with managing and maintaining client relationships. Almost at odds with each other are the need to get paid quickly, and the need to maintain a good client relationship. So, can a revenue-management tool build in the sensitivities of client-relationship management and also reduce the time to get paid?

A revenue-management tool specifically designed for your business will improve speed of payment and better manage client relationships. In addition, it will keep you and your clients better informed, reducing the risk of unpaid bills, and lowering operational costs.

But don’t take my word for it. The most successful firms in your industry have a billing and collection policy implemented by an industry specific revenue-management tool.

A breed apart

So technology can improve revenue management activity. But what should you be looking for?

A good strategy engine working at multiple levels is of prime importance. This is the thinking part of the revenue-management tool. Without the ability to process, report, manage and analyse at client, matter, payer and invoice level, any tool will impose restrictions on your revenue-management processes and activity. The ability to get the engine to work for you, and the uniqueness of your firm, requires a highly flexible processing module. MiniSoft’s strategy engine is generally regarded as the best in the industry, with many endorsements from leading practice-management-system providers.

Clearly, a strategy engine is important to any firm, but to work effectively a complete revenue-management tool must be able to:

Work within the firm’s culture, and the uniqueness of the client/partner relationship, to turn invoices into cash;
Drive the collections activity of the team to take advantage of skills and gain efficiencies;
Produce timely, informative and accurate reports to keep management and collection staff aware of the current status and enable the firm to make informed decisions in revenue management;
Contain collections intelligence about the client portfolio to be used in coordination with management’s strategic vision;
Allow for effective implementation of automation to remove the mundane tasks from the finance team while empowering them to become more efficient and effective.

MiniSoft Worldwide has a range of products and services designed for the legal industry. We have helped many law firms improve their revenue collections, achieve more with available resources, and maintain good client relationships.

To find out more email us at tellmemore@minisoftworldwide.co.uk or logon to www.minisoftworldwide.co.uk.

About MiniSoft Worldwide

MiniSoft Worldwide is the producer of ARCS, a specialist revenue-management tool for the legal industry. With expertise in revenue management, our consultants have provided a wide range of law firms, worldwide, with the tools to manage their revenue collections effectively and efficiently.

Our success comes from developing a tool specifically to meet the needs of the legal industry, based on our knowledge of the industry and revenue management.

MiniSoft Worldwide has operations in the UK and Europe, Australia and Asia Pacific, and North America.

About Stephen

Since joining MiniSoft Worldwide, Stephen has run the EMEA and APAC operations. Initially starting his career in data communications and IT, he transitioned through consulting into executive management. During his career, Steve has worked in various management positions in service-based industries for large and small firms, and has a substantial track record managing both domestic and international businesses. Steve graduated with an MBA from Kingston Business School, London, specialising in the strategic use of technology.

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