Billing and Collection Cycles

Are You Paying Attention to Your Billing and Collection Cycles?

How often do you review your billing and collection metrics? For many firms, these critical numbers are often overlooked—but they directly impact your profitability and cash flow. Understanding and optimizing your billing and collection cycles isn’t just good practice; it’s essential for financial health.

Let’s Start with the Billing Cycle

Your billing cycle measures how long time sits in WIP (Work in Progress) before it gets billed to the client. In other words, how quickly are you turning your work into invoices?

This metric should be reviewed regularly—across multiple levels:

  • Firm-wide
  • Practice group
  • Area of law
  • Billing attorney
  • Individual clients

The key questions to ask:
What are the trends? Is the average time to bill getting shorter or longer?
Where are the bottlenecks? Are some areas performing better than others?

Note: Contingency cases or work billed upon completion (like real estate closings) can skew your data. Be sure to filter those out when evaluating cycle times to focus on what you can control.

The insights you gain can lead to valuable internal conversations—and potentially external ones with clients, especially if billing delays are caused by their requirements or processes.

Now, Let’s Talk About the Collection Cycle

Once the invoice goes out, the clock starts ticking on your collection cycle—the average number of days it takes to get paid.

Shortening this cycle has clear benefits:

  • More predictable cash flow
  • Reduced borrowing costs
  • Higher percentage of bills paid in full

Again, monitor this at the same levels as your billing cycle. But also consider your client experience:

  • Are you sending regular statements and showing any prior balance due?
  • Do you offer multiple payment options (credit cards, checks, ACH, wire transfers)?
  • Are there any roadblocks preventing clients from paying promptly?

Remember, in today’s world, convenience counts. Clients want clear communication and easy ways to pay. Make it simple, and you’ll get paid faster.

Better Metrics, Better Business

Consistently reviewing and improving your billing and collection cycles isn’t just about numbers—it’s about building a healthier, more sustainable firm. These cycles fuel your revenue, and small improvements can lead to big results.

Make it a regular conversation at your firm. Use the data to spot trends, ask questions, and make adjustments. Your bottom line will thank you.