How Professional Services Firms Can Improve Payment Turnaround

How Professional Services Firms Can Improve Payment Turnaround

Professional services firms, law firms, accounting practices, consulting firms, engineering consultancies, share a common characteristic: they bill for time and expertise delivered before payment is received.

For many, the gap between delivering advice and receiving payment has simply been accepted as normal. It does not have to be.

The Professional Services Billing Cycle

Many professional services firms bill monthly, at the end of the month for work performed throughout the month. This builds in an automatic delay of up to four weeks before an invoice is even raised.

Add 30-day payment terms, and you are waiting up to 60 days to be paid for work completed at the start of the billing cycle. For a busy practice billing $200,000 per month, that is $200,000-$400,000 consistently sitting in accounts receivable.

Bill More Frequently

Switching from monthly to fortnightly or weekly billing immediately cuts the receivables cycle in half or more. For firms on hourly billing, this is straightforward, bill for time as it accumulates rather than accumulating an entire month first.

Many clients actually prefer more frequent, smaller invoices to a large monthly bill. It is easier to approve and process, and it aligns better with their own accounting cycles.

Introduce Progress Billing for Larger Matters

For larger engagements or matters, a major transaction, a litigation file, a lengthy consulting engagement, structured progress billing reduces the total amount at risk at any one time.

Billing at defined milestones, rather than waiting until the end of a matter, improves cashflow and also provides natural check-in points with the client about the value being delivered.

WIP Reviews as a Cashflow Tool

Work in progress (WIP), time and effort that has been recorded but not yet invoiced, represents real economic value. Regular WIP reviews ensure unbilled time is identified and invoiced promptly rather than accumulating.

Many practices leave significant value in WIP for longer than necessary. A discipline of invoicing WIP regularly, weekly for active matters, monthly at minimum, materially improves cashflow.

Trust Account Clarity

For law firms and other firms that hold client funds, clear documentation of what is in trust and what is owed reduces confusion and disputes that can delay payment.

When Clients Are Slow

Corporate clients and government bodies often have payment cycles that are simply slow by policy. Net 45 or Net 60 may be their standard, and changing it requires a relationship conversation that is not always worth having for every client.

For professional services firms invoicing other businesses, FundTap provides access to invoice funds within 2 hours of approval. Rather than waiting 45 days for a corporate client to process payment, you advance those funds and maintain cashflow throughout your operations.

Frequently Asked Questions