As law firms around the world navigate today’s challenging economic conditions, the one mandate that firms of all sizes are likely following is: save money and stay resilient.
With continued uncertainty and currency volatility, even the largest firms could benefit from re-examining their accounting structure for gaps. After all, the speed of foreign currency payments, accounts payable processes, and other details can impact cash flow and growth prospects.
During these challenging times, every penny counts, and streamlining your firm’s accounting processes can save a lot of pennies. Here are a few key steps that can help you.
Make the switch from checks
Due to regulatory requirements and court processes, checks remained a critical payment method in the legal industry far longer than in most other sectors. However, law firms are making a significant shift from paper checks to digital payment methods, such as wire transfers, ACH, credit cards, and others. There are several reasons for the switch, including clients’ demand, efficiency, and speed. For example, firms that accept digital payments get paid 39% faster on average, while the average cost of processing each paper check is $4, compared to $0.28 per digital payment. What’s more, checks continue to be the payment method most often subject to fraud. Not to mention the time associated with issuing payments in this form can tie up cash flow. Making the switch from paper checks is an effective way to reduce unnecessary costs and work for your accounting team.
Let vendors self-manage
How much time does your team spend answering queries about a payment’s status, changing bank details, and similar tasks? Probably too much. Not only is this type of manual work expensive, but it’s also prone to human error. Automating these processes can seem challenging at first, but it will keep these time-consuming tasks out of your firm’s scope in the future.
Pay in local currency
For US firms, paying international vendors, associates, and other parties around the world can seem simple because the USD is often widely accepted. However, the currency is not immune to fluctuation, meaning that recipients are undertaking a risk because they must eventually exchange the US dollars for their own local currency. To protect themselves against any possible loss, many add a buffer to their invoices, thus increasing the cost to your firm. By offering to pay in local currency, your business can negotiate a lower fee. Learn how Convera’s global currency accounts can help simplify cash flow.
Consider ACH
Did you know that using ACH services is less expensive than wire transfers for both sending and receiving payments? ACH payments can be used for payroll, expenses, reimbursements, and more. Plus, payment details can be included in the transaction for reference, while automatic email notification can replace phone call inquiries on the payment’s status. Considering standard wire fees can range from $15 for incoming domestic transactions to over $40 for outgoing international payments, finding an alternative is worth considering.
Lock-in exchange rates
One of the highest costs for any firm with international payables is the potential loss from a negative foreign currency exchange fluctuation. Often, invoices will have a thirty-to-ninety-day period for payment, during which time the currency rates can change. If the USD weakens when the invoice is being processed, your business will either need to accept the potential loss or re-bill the client/vendor. Foreign exchange (FX) risk management solutions* can help lock in currency rates to help accurately budget.
Cash distribution
Sometimes a firm will need to payout a recipient without a bank account or permanent address, as in the case of class action settlements, pension disbursements, and similar. If this happens, consider utilizing retail money transfer options, which have convenient locations in popular public shops. This is a good option for a quick, simple cash distribution.
Credit cards
In the past, credit card payments and the legal industry didn’t really go together. Now, most clients and vendors prefer to pay a US dollar invoice via Mastercard or Visa. On their end, they receive the bonus of mileage, points, or other benefits, as well as a quick transaction. Adding this option can help a firm with swift processing and increase client satisfaction.
Consumer to business cash payments
Many law businesses deal with large volumes of incoming international payments, such as immigration firms that receive payments from all around the world. Using a cross-country payment platform can be crucial in this case, as the firm can receive near-real-time confirmation from a large selection of countries.
Adding another option to an established accounting process can seem daunting, but depending on your needs, it can also be a big upgrade, support long-term growth, and help maintain business resilience.
How to get started
Because processes and practices relating to accounting are often long-established and involve several different systems, any change can be difficult. However, law firms would be wise to consider any of the above tips to reduce non-billable expenses, especially those related to international payments. Small one-time adjustments can lead to continued savings for years to come.
Get in touch with our global payments experts to learn how Convera can help streamline accounts payable.
* Convera’s hedging products are derivative financial instruments which may expose you to risk should the underlying exposure you are hedging cease to exist. They may be suitable if you have a high level of understanding and accept the risks associated with derivative financial instruments that involve foreign exchange and related markets. If you are not confident about your understanding of derivative financial instruments, or foreign exchange and related markets, we strongly suggest you seek independent advice before making the decision to use these instruments.
