“Debt management [is] basically managing effectively your outstanding invoices and payments from clients or payment arrangements from clients, especially in this climate. There [are] going to be more and more payment arrangement requests from clients coming through. We know that is the case already though. So, it’s critical to, you know, to focus on that, to improve your cash flow and then your financial stability,” he said.

“The traditional bill-by-the-hour type approach is still by far the most common, the sigma increments that are being recorded on timesheets or time systems that ultimately become an invoice for the work performed this month. That’s still the lion’s share of the invoices that are being issued by most firms. However, fixed-fee work is absolutely gaining traction, no doubt about it. And that’s a great thing because then we’ve got firms that don’t record time whatsoever and they are super efficient, and they are less likely to have billing challenges or disputes.

“The job was quoted, it’s a known dollar amount upfront by the client. It gets done and is super efficient. The other one that is certainly gaining popularity is a combination where it’s fixed, but it’s being billed monthly and directly debited from the client’s account monthly. So, something akin to a retainer-type scenario where the client doesn’t have to think about it each month, an agreed amount is being deducted from their account. And our system capability enables firms to do that efficiently.”

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In terms of tools to help firms improve their processes around debtors and cash flow, Simonovski said that there’s not actually a lot out there.

“I’d like to say there’s a huge selection of data management platforms out there. There isn’t. There’s really us in terms of full featured data management platforms; every firm has got a practice management system, but they’re not a data management system. And we integrate with many of those types of platforms to fill out the gaps that those platforms don’t have.

“Data management is, OK, those that haven’t paid. Are we sending out reminders? Are we doing that automatically? Are we providing hyperlinks on those reminders and on those invoices under those automatic statements that get issued on a timely basis? I’ll be providing hyperlinks to pay by card and other options and make it easy for the clients to do what we call self-service,” he added.

“And our system caters for all of that self-service ability. The reason for it is if you make it easy and convenient for your client to see their invoice, see their statement, give them the various options to pay 24/7 and so forth, then generally speaking, you’re going to get paid quicker.”

When it comes to client payments and billing, there are also a number of key challenges firms are currently grappling with, from the issuing of the invoice to late payments and the client’s own cash flow issues.

“A lot of firms still, to this day, will only generate the invoice at the start of the new month, for the previous month, effectively, and then it’ll sit. Those invoices need to be approved almost physically. In many cases, a partner needs to review them. They’ll take a few days, sit on a partner’s desk and so forth, and then they get issued. And when they get issued, only a handful of days later, even though the payment terms might be 14 days, but by the time the client gets it, they’ve only got five or six days to pay. So that’s not a good practice to start with,” Simonovski said.

“That’s certainly a challenge, and that upsets clients when they see that. And no wonder then they pay late. And what about those clients that just don’t have the cash flow to pay on time? How do they pay? Quite often, especially with legal firms, the matters that are being looked at by the law firm, they’re unplanned. So, the client didn’t factor in seeing a lawyer this month, this quarter, this year, and now there’s this unexpected bill.

“And we help with that scenario through a product that we refer to as fee finance. Essentially, a very simple loan between us and the end client. We pay in full the invoice value to the firm. So, the firm’s delighted, their debtors disappear. And the clients are delighted because they don’t need to get followed up by the firm, but they’ve also got that cash flow reprieve because we just get a monthly repayment from that client over a period of months that’s been re-agreed with them.”

In light of all of this, cash flow should be a top priority for law firms, emphasised Simonovski.

“A law firm is a business. A business should run a tight ship, a very efficient ship. And from a cash flow perspective, these are easy wins that I’m referring to. Very easy wins. I can’t see many things that would take precedence over getting paid. And the economic climate aside, I think it’s just good business practice to have great cash flow. And your clients will appreciate the various options you give them,” he concluded.

“They’ll appreciate even being reminded, believe it or not, because most clients, if you ask them, would not appreciate being unknowingly being overdue. A lot of people, like me, for example, I hate being overdue on something. But I’m busy. So, unless I get a prompt or a reminder or something from time to time, I’ll forget. But I’m not the only busy person in Australia. And that’s why these systems are critical.”

The transcript of this podcast episode was slightly edited for publishing purposes. To listen to the full conversation with Miki Simonovski, click below: