Electronic Payments for Law Firms : Benefits, Best Practices & Implementation Strategies

When it comes to payments, is your firm giving clients the flexibility they desire and deserve? Electronic payments are essential if you want to provide an excellent client experience while increasing your firm’s efficiency and revenue.

The way that people want to pay for things—from everyday items to legal services—has shifted. In fact, according to the 2021 Legal Trends Report, the majority of consumers prefer electronic payment methods, with online payments being consumers’ top choice (66%), followed by automated payments (61%) and payments via mobile apps (61%).

While law firms may have been resistant to accepting online or electronic payments in the past, technology has changed the game. Today’s legal technology offers solutions that make electronic payments secure and convenient while helping firms meet their compliance and ethical obligations.

In the following post, we’re sharing the essentials of electronic payments for modern law firms. From the potential benefits to your law firm and your clients to tips on how to stay compliant while accepting online payments, we’ll break down what you need to know about electronic payments.

Electronic payments can take many forms. Many consumers now expect to use electronic methods of payment for all kinds of products and services in their lives. This expectation includes legal services.

Common electronic payments methods

Some of the common methods of electronic payments offered by law firms include:

• Online debit and credit card payments. Clients are used to the convenience and flexibility of paying for goods and services online via their debit or credit cards. With the help of a secure online payment processing platform like Clio Payments, law firms can easily accept debit, credit card, digital wallet or Pay-by-Bank payments from clients.  
• Fee schedules. The default fee schedule for Clio Payments transaction fees is a daily deduction for all transactions. Customers in the UK and Ireland also have the option to switch to the monthly fee schedule. With the monthly fee schedule, only chargebacks and refunds are deducted daily. Credit card, debit card, Pay by Bank payments, and client funds transaction fees are deducted at the end of the month.

Are electronic payments good for law firms?

Electronic payments can unlock numerous benefits for law firms—and clients. 

When done right, offering electronic and online payments gives clients a better experience while simultaneously streamlining processes and boosting revenue at your firm.

Below, we’ll walk through some of the key ways electronic payments can benefit law firms. Specifically, offering electronic payments can help your firm:

Increase revenue

While growing your law firm can be complex, the overall revenue advantages of accepting online payments are fairly straightforward. When your firm gets paid, it brings in revenue. When your firm gets paid faster, you bring in that revenue faster while saving time on follow-ups and streamlining the collections process. 

There are a number of factors that may contribute to the revenue-boosting benefits of electronic payments, including:

• Convenience for clients. When clients can pay with the click of a button, they’re more likely to pay their bills quickly. When paying is more convenient, and clients pay faster, your firm spends less time waiting for or following up on outstanding payments. 
• Quicker payment processing. Even if a client pays their bill the second they receive it, electronic payments make the process even faster. When you send out an invoice electronically through a legal payment solution, your client receives it right away. Then, if your client pays online, your firm will receive the payment quicker than if you had to wait for your client to mail a check and for your firm to receive it and manually deposit it.
• The flexibility of choice. For some clients, it may not be possible to pay a legal bill all at once via traditional methods (for example, a client paying by debit card may be limited by a daily spending limit). By offering multiple electronic and online payment methods, clients can easily find a payment method that works for them. They may also be able to break large bills into more manageable instalments over time, which means your firm will get paid in increments.

Get paid faster 

So, when your firm gets paid faster, you bring in more revenue. Giving your clients the option to pay electronically can speed up how fast your firm gets paid.

Research reported in the 2019 Legal Trends Report supports this point. The report found that accepting online payments allowed for faster collections, with:

• 57% of electronic payments getting paid on the same day they are billed, and 
• 85% getting paid within a week.

As previously mentioned, one of the key advantages of accepting electronic payments is speed. When you accept payments online, you can send bills instantly, and then clients can pay you right away.

Discover how using Clio’s legal billing and payment software helped FidLaw increase its revenue by 50%.

Improve the client experience

Today’s legal clients have many options to choose from, so it’s key for law firms to take a client-centred approach and think about what their clients want. 

By offering the option of electronic payments, you deliver a better client experience by:

• Letting clients pay in the way that they’re used to. Most consumers are already used to and comfortable with paying for things using electronic methods like online debit card payments. By letting clients pay the way they want to 
• Giving clients payment flexibility. Legal bills can be expensive, and it’s not always easy for clients to pay via cash or check. Offering multiple payment options, including electronic payments, gives clients the flexibility to choose the payment method that works best for them. Additionally, with online payments, you may offer additional payment flexibility for clients through payment plans or scheduled payment instalments that allow clients to make regular payments over a set period of time.

In addition to making the client experience smoother and more convenient for your existing clients, accepting electronic payments may also help attract prospective clients. According to the 2019 Legal Trends Report, for example, 50% of clients are more likely to hire a lawyer who takes electronic payments, and 47% are more likely to hire a lawyer who accepts automated payments or fund transfers. 

On the other hand, not accepting electronic payments in a world where electronic payments are the norm for all kinds of businesses may make your firm less attractive to potential clients. In fact, the 2019 Legal Trends Report found that 40% of clients said they would never hire a lawyer who didn’t take credit or debit cards.

Reduce non-billable hours

With lawyers spending an average of only 2.6 hours in each eight-hour workday on billable work, according to the 2022 Legal Trends Report, the opportunity to save time on non-billable tasks is an important benefit of electronic payments for law firms. 

When using a legal payment solution to offer electronic payment options to clients, you can streamline your firm’s billing and collections processes in multiple ways, including:

• Generating electronic invoices. By using an online legal payments solution to track time, create invoices, and send them to clients in just a few clicks, you save time on non-billable tasks before your client even sees their invoice.
• Accepting payments in an instant. When you accept electronic payments online, clients can pay their bills as soon as they receive them—so you spend less time following up.
• Enabling passive bill collection. When your clients can pay electronically (for example, by debit card, credit card, digital wallet or Pay-by-Bank transfers), you eliminate the need to spend time manually processing payments.
• Offering automated payment plans. Electronic payments solutions make it easy to offer automated payment plans. This means it’s easier for clients to pay you when they can, and you don’t lose time chasing payments.
• Managing payments online. When you use a payments solution like Clio Payments that’s integrated with your legal practice management software to accept electronic payments, those payments are automatically associated with your client’s invoice and sync to your accounting platform. This means less time spent on repetitive tasks and less risk of manual data entry errors. 

Make data-driven decisions 

Using an online payments solution integrated with your legal practice management software also makes it easier for you to track payments and stay on top of your law firm’s transactions and financial performance. Thus, you can make informed data-driven business decisions for your firm while spending less time manually sourcing payments data. 

Clio Payments, for example, offers financial reports, instant payment notifications, and a view of any outstanding balances so that you can get real-time insights into your firm’s finances. This information allows you to identify what’s bringing in the most (and least) revenue at your firm. 

Close the access to justice gap

Most people aren’t saving up for a lawyer just in case they need one in the future, and not everyone has the means to settle a large legal bill all at once—which can make the prospect of paying to hire a lawyer a serious challenge. 

This challenge is especially notable considering how tight budgets are for many people. With this in mind, it’s easy to see how legal services can be inaccessible for many potential legal clients. For example, the 2020 Legal Trends Report found that 61% of respondents said they cannot afford to deal with a legal problem. However, when people can’t afford necessary legal services, it can have a critical impact on many aspects of a person’s employment, home, family, and life in general.

Offering ways to make it easier to pay for legal services—such as electronic payments—can help close the gap and make your services more accessible and affordable. 

For example, when you use a legal payment solution to accept payments online and offer payment plans, clients who may not have the cash on hand for a large, one-time payment may be able to better afford legal assistance. 

As the 2022 Legal Trends Report notes, having a range of options for payments makes a difference for many consumers. Specifically:

• 70% want the option to pay their lawyer via a payment plan
• 65% want the option of legal insurance
• 53% want the chance to crowdfund their legal bills

By giving clients more flexible payment options via electronic payments, you help increase the chance that they’ll be able to afford to deal with pressing legal problems when they need help.

Are online payments secure?

While there are many benefits to accepting electronic payments for law firms and clients, you must, of course, ensure that you use a system that can keep your client’s financial information safe and secure. You are, after all, responsible for processing electronic payments securely in a way that protects your clients from threats like identity theft and fraud.

With this in mind, you must choose an online payment system carefully with security in mind. When choosing a payment system software for your firm, ask questions like:

• What security measures does it use?
• Does it use encryption for fund transfers while in transit? 
• Does it help you remain compliant with your jurisdiction’s regulations?
• Is it Payment Card Industry (PCI) compliant? 

The right payment software makes keeping compliant and secure when accepting online payments easier. 

For law firms using Clio Manage, for example, the software takes on most of the work needed to reach the above PCI goals by building and maintaining a secure network that protects cardholder data. When this is paired with Clio’s security and strong access authentication features (via user management), Clio makes it easier for your firm to meet PCI obligations. 

You can read more about data security for law firms in our guide here.

How do I stay compliant with my ethical obligations when accepting online payments?

Clients can pay their legal bills quickly and easily, and law firms can receive prompt payments through electronic methods such as ACH payments, eChecks, and online debit and credit card payments.

However, as with any element of practising law, it’s essential that you understand legal payment processing and online payments before implementing them at your firm. Accepting electronic payments requires careful consideration of your ethical obligations and regulatory requirements that apply in your jurisdiction. 

While it’s important to always research and abide by the requirements that apply to your specific situation, there are certain factors to consider to help you stay compliant while accepting online payments.

Client accounting compliance

Not all electronic payment solutions are the same, and—for law firms specifically—using a non-legal payment solution may put your firm at risk, especially when it comes to client accounting.

In order to stay compliant with your ethical and legal obligations, you must follow specific rules, including taking steps to:

• Maintain accurate records.
• Keep account funds (like the client account fund and matter fund) separate.
• Ensure credit card payments are correctly deposited (and that fees aren’t debited from a client account).
• Avoid moving unearned funds from a client account to an operating account.

In addition, you must use a payments solution that is built for lawyers and can ensure compliance when handling transactions according to trust accounting and IOLTA rules. For example, in order to help you stay compliant, law firm payment systems should not allow chargebacks on trust accounts and should not take fees from trust accounts. 

Clio Payments, for example, ensures separate operating and trust accounts. Clio Payments also only deducts processing fees from your operating account, so you don’t have to worry about accidentally having an ethics violation due to your payments system.

Final notes on electronic payments for law firms

The way that we all pay for things has changed. It’s in the best interest of your modern law firm—and your clients—to ensure you’re keeping up. Offering electronic payments improves your clients’ experience by making it easier and more convenient to pay your firm. As a bonus, your firm can save time on manual collection tasks while bringing in more revenue more quickly.

While you must take steps to ensure your clients’ financial data stays secure and that you meet your ethical responsibilities and stay compliant with trust accounting rules if you’re accepting electronic payments, the right payments solution can help. 

Part of Clio Manage, Clio Payments offers a built-in online payments solution that makes it easy for your firm to accept electronic payments via credit, debit, digital wallet or Pay-by-Bank transfers, or to set up automated payment plans.

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We published this blog post in July 2024. Last updated: August 7, 2024.

Categorized in: Legal Accounting