Integrated Payments and Client Credit for Law Firms (Full Transcript)

[00:00:04] Speaker 1: Hello, everyone, and welcome to this afternoon's LinkedIn Live brought to you by Smokeball and LawPay. My name is Chelsea Lambert, and I'm joined by Rachel Sabodik, LawPay's Customer Success Manager. Thank you so much, Rachel, for joining us this afternoon. Of course. Thanks for having me. Happy to be here. Yeah, definitely. Well, we have an action-packed 30 minutes for you. We are going to go through, at a high level, ways to increase lead conversion, cash flow, and overall client satisfaction by using integrated payments. Rachel and I both have a tremendous amount of experience in this area, but Rachel would love to spend some time this afternoon really focusing on a few key areas, the first of which is consumer payment trends. And mobile payments, text message reminders, things of that nature have been growing in popularity prior to the pandemic, but we had not seen adoption by law firms, specifically consumer law firms or small to mid-sized law firms of 30 to 50 attorneys and under until the recent few years. From you and your team's perspective, what are some trends that you've seen in the consumer payment space that have really flooded into the legal industry since the start of the pandemic?

[00:01:29] Speaker 2: Yeah, I'd say one of the trends is how easily it's been adopted by the clients and the convenience that it provides. So many people throughout the day interact with mobile payments, whether it's paying a bill online or online shopping. So paying a legal service fee is really no different. You enter your payment information, enter your billing details, and then click submit. Something else that I'd see as a trend is the time saving aspect that mobile payments can really give firms and their clients. For example, the client doesn't have to drive across town and drop off a check or bring their card by the office, or they don't have to drop a check in the mail, which helps save the firm time and get paid faster.

[00:02:20] Speaker 1: Excellent. We have been receiving quite a few requests about your new client credit offering and would love to spend a few minutes just speaking about this option. It's new to legal, but it has been pretty prevalent. So we see buy now, pay later programs pretty much everywhere in e-commerce. You can finance $100 Amazon order if you choose to do so, in addition to everything else that you purchase online. And I think it's an interesting application of credit and financing for the legal space because it does increase conversion. So the ability to pay, so to offer the client a payment plan we've discussed before, but now giving a client the opportunity to, let's say, finance a portion of their legal fee, whether that be an estate planning package or the first retainer for a potential divorce or a business investment of some kind where legal guidance is necessary. Are you seeing a lot of adoption or interest from law firms around the client credit offering? And maybe we could actually just start with a little bit about what it is.

[00:03:30] Speaker 2: Yeah, totally. So client credit is a legal fee lending solution that's available exclusively through LawPay. So when a firm utilizes client credit, their client can apply for this. And if approved, they can decide to take on this loan. What that does is allow the firm to get paid upfront within a few business days. And then meanwhile, your client is actually making installment payments over time directly to our partner company for client credit. And you touched on something huge, which is upfront retainer costs. Those can be expensive. And sometimes legal work cannot wait. The client needs help immediately, and they may not always have the cash on hand or want to put that amount on a card that they already have. So client credit can really help a firm increase their client base as well as retain new clients that they might not have otherwise been able to work with.

[00:04:34] Speaker 1: And this is a solution that has been around in other industries like dental work is always known for leveraging a solution called care credit. So very similar business model here. You also see it in voluntary medical or uncovered medical expenses such as med spas and other large ticket items that clients will choose to finance through care credit or another private lending solution. A few questions that we've received from firms about the client credit option is, what is the fee? What is the cost to the firm of getting paid right away? So there has to be kind of a give and a take. And then we'll talk a little bit about how they can combat that on their side.

[00:05:18] Speaker 2: Yeah, exactly. And like with all payment methods that we offer through LawPay, there are processing fees associated. So the client credit processing fees are 4.95% for the firm.

[00:05:31] Speaker 1: Okay, great. And when thinking about offering your client either a payment plan that the firm is offering or the client credit option, you are able to provide two different fee structures. So it is common for firms to increase anywhere between 5% and 25% what the standard fee would be for offering a payment plan or a pay over time option. It's a reasonable ask and something that is also consistent with consumer expectations. So if you pay the balance of something upfront, you obviously avoid those interest payments. Everything from a car to furniture to any large purchase that you may be making in regular life, that same expectation can also be applied to legal fees and payment plans. I'm a huge proponent of payment plans, not only because it increases conversion rate during the initial consultation. So especially as we live in fairly uncertain economic times, the more clients that you have on the books, even if they are on payment plans, is always beneficial for cash flow. Over the last few years, have you seen more firms that would build traditionally upfront or not offer payment plans start to adopt these type of payment arrangements with their clients?

[00:06:57] Speaker 2: Yeah, great question. Yes, we definitely have seen that trend. Like I mentioned, providing that flexible solution for either your client or your potential client could really be the difference between your firm working with that client or them choosing to go with another law office. And we want to help make it easy for you to get paid, but also increase your cash flow, as you mentioned, take on new clients that you may not have otherwise had. So yes, I definitely say that is a trend.

[00:07:30] Speaker 1: And if we compare the two options, offering a payment plan on behalf of the firm, the firm is taking responsibility for doing collections and seeing that payment plan completed and fulfilled all the way through to the end. If you refer a client to client credit and they're utilizing LawPay's financing solution, the firm receives payment upfront and then LawPay's team is responsible for collection and completion of that payment plan. Is that correct, Rachel?

[00:08:01] Speaker 2: Yes. So the firm would receive that full amount upfront, let's say it's a $5,000 retainer. And then if the client defaults on a payment or decides they simply do not want to pay back what they've agreed to, then our partner with client credit, they would go after them and figure that out. So that way the firm can focus on the work that they specialize in, which is the legal work and not have to worry about collections and billing.

[00:08:34] Speaker 1: Great. And which is a lot of the reason why firms sometimes don't offer the payment plan option because they are afraid of having to do that collections work on the backend. So it's a great solution if you don't have resources or time in-house to still be able to offer clients that flexibility and not have to worry about any of the administrative or billing tasks associated with collecting it to completion. Just also wanted to call out that when you do accept credit cards or you offer those payment plan options, whether it be through client credit or your own services, the payment processing fees and the financing fee, that 4.95 pale in comparison to the deductions or the fee reductions that often happen on an invoice that is 60, 90, 120 days past due. So one thing that we hear a lot is that they don't necessarily want to take on that 4.95 reduction or see that 4.95 reduction in fees. However, the average amount of fee deduction can be as high as 40% on an invoice when you're trying to collect it and it's delinquent. So when you compare 4.95 to a potential fee reduction just to get the client to pay later on because they are so delinquent, there are some advantages to offering them that upfront. Again, if you're offering that payment option or you're offering that financing option, you do have the ability to have those two rate structures. So pay in full upfront, this is your price. If you're going on a payment plan or you need financing, this would be your rate. It is a consumer expectation that there would be financing charges over the long term. In regards to processing fees in general, I see that we have a couple questions coming in. Let's take these really, really quick. What if the retainer becomes exhausted and requires replenishment before the client has finished paying down that initial retainer credit? Have you run into situations like this, Rachel, or I'm happy to take this one.

[00:10:57] Speaker 2: Yeah. So, and just to clarify, I don't know if that person who asked that can put that in the chat, but I wonder if they're asking specifically relating to the client credit option. If the client applies for that, say 5,000, all of that is exhausted. Maybe can they apply for a second application for that loan? Yes. So let's go that route. Okay, perfect. Then yes, they are able to apply for multiple loans and then our partner would just make a decision based on their credit worthiness and or any loans that they may already have. If that second loan could be approved, but they are able to apply for multiple.

[00:11:42] Speaker 1: Excellent. Thank you. And I think that the partner also takes into account, let's say that they have paid a portion of that initial loan down already. It does serve almost as a line, it is a line of credit essentially, only it's specific to working with the law firm. So if they've already paid down a portion of the balance out and they have on-time payments, those are factors that will play into that decision to extend them additional credit. And please feel free to enter your questions in as we go. That was a great one. Would love to see more from our audience. And going back to payment plans and predictable cash flow. So we do see this being a trend in the clients that with the law firms that we work with, having really taken off and really gravitated towards those payment plan options to increase conversion and to retain as many clients as possible, especially given that clients and cases are hard to come by sometimes. That said, navigating financials in the initial consultation is something that we teach here in our financial webinars for law firms. In the initial consultation, it's really important for you to get an understanding of the client's ability to pay, but that isn't necessarily just their income. They could be receiving income from other sources, help and support from family members. So when you're considering payment plan options or extending something like client credit to the client, some questions that you can ask is what day of the month do you get paid? Do you have additional revenue or income coming in from bonuses or commissions or performance-based plans that happen throughout the course of the year? Do you have any other sources of income, disability, Social Security, pension, other benefits or distributions that you may be receiving? So that from the attorney's office perspective, we have a complete picture or as much as they're willing to share as to what their financial capacity is so that you know what direction to go. Whether to offer them a payment plan that you're going to extend as a service to them on behalf of the firm or if they may have an interesting or self-employed or other multiple sources of income, it may be best to go the client credit route so that they can fully evaluate that client and their ability to complete that payment plan. So there is obviously the credit check that happens with client credit and you won't have to do that due diligence on your side if you're extending the payment plan to the client. Are there any other recommended questions or intake consultation practices, Rachel, that you have seen or that you work with law firms on to really refine and hone their evaluation process as far as payments are concerned in the first stage of working with a client?

[00:14:57] Speaker 2: Yeah. So one recommendation we can make is using credit card authorization forms when working with a client. This can be done during intake or onboarding with your potential client, but it is them agreeing to the services and acknowledging that they are providing authorization to run their card. That is just something the firm can do to help protect themselves when accepting online payments. And that same form can be used for third parties. So if there is a family member or friend who is helping that client, you can still request authorization from them for their card to be charged.

[00:15:40] Speaker 1: Excellent. Thank you. And if you are a smokeball client, we do provide you with authorization forms that you can actually automate in the document assembly portion of the smokeball application and send to the client for signature. This also allows you to keep a card on file. So if you have language in your retainer agreement and that credit card authorization form completed by the client, you do have the ability to go back, replenish retainers, or run additional payments without having to enter that credit card information over and over. That is also the most ideal scenario from a compliance, a PCI compliance, and an ethical compliance perspective, is to not keep credit card information stored on paper or digitally in documents that are not encrypted or protected. And we could go on and on with security rules when it comes to that, but Rachel, can you share a little bit about how that functionality inside of LawPay and your integration providers works? So how are those credit cards stored? What ability do firms have to go back in and rerun or process whether payments declined or if they want to make additional payments in their installment plan?

[00:16:59] Speaker 2: Yeah, great question. And this is something that comes up a lot, especially with online payments is, is this secure? The simple answer is yes. So LawPay is a PCI level one compliance certified. So that is the highest level of compliance. What that means is that we have encryption and tokenization so that when a card is processed, you only see the last four digits and if the card brand, like Visa or MasterCard. So there's no way for you to go back and recover their full card number from the system or go and see their full bank account number that they entered. So from a security aspect, that is super important. We know for our firms, but you absolutely hit the nail on the head with if you, you know, write down a card number, shred that document, lock it up. Don't leave it just out where anybody could see that.

[00:17:57] Speaker 1: Great. Thank you, Rachel. We have a few minutes left. We're going to keep today's session pretty short, but before we go, a couple of things we wanted to touch on an area that is relatively new to LawPay functionality, but has been quite popular and that is surcharging. So when it comes to passing through the processing fees on an invoice, this is something where that law firms have asked for, for quite some time, because they would like to pass through that cost or pass through the expense. Can you tell us a little bit about that functionality? And I know there are limitations, it's not available in, I believe, three states. So if we could cover that before we move into Q&A, that would be great.

[00:18:45] Speaker 2: Yeah, definitely. So yes, surcharge is adding that automated fee to any credit card payment. Now, there are rules and regulations that are set by the card brands. One of them being debit cards cannot be surcharged. So even if you have a line item on your invoice, that can only be applied to a credit card payment. And there are also certain states that those are prohibited in. I can definitely get those for you in just a second. But what I also want to mention is, if you have any questions of, should I be adding a surcharge to this? We always recommend, it never hurts to double check with your state bar and get their guidance. Especially when it's adding a line item to a client fee. Something else that we see firms adopt is, instead of adding that line item, is increasing their cost of services if they don't want to have a standout line item that their clients may see on the invoice.

[00:19:46] Speaker 1: So just raising the overall fee by the 2.95% or the arrangement that they have with AllPay?

[00:19:55] Speaker 2: Yes.

[00:19:55] Speaker 1: Okay. Got it. We're going to move into Q&A. So please feel free to enter your questions in. And I think some of them actually have to do with collections. Always a popular topic because nobody enjoys chasing down invoices for payment. Just a few best practices that we can share. First question is, how do I reach out to a client and address an overdue invoice? And really the first step is that you want to understand what their situation is. So having an open conversation and having it not be threatening and just very honest. Tell me what's going on. This is, we're all human, things in life happen, unexpected medical expenses or a car breaks down or household repairs, things like that can come out of nowhere. And it's just important to understand where the client is at, what is going on in their life and how likely are they to be able to get back on track? Is this a temporary situation or are we dealing with something a little bit more serious where the firm may have to withdraw from the case? So find out what reasons they have for missing that payment, then ask them openly when do they think they will be able to address the invoice due. And this is really where payment plans can help out. So if they have an overdue balance or past due balance of five or $10,000, chances are that is going to be a very intimidating and scary number for them. So break it down. When would be the next time that you would be able to begin payment and what do we think that could look like? Getting them back on a cycle where they are just paying something is going to give you touch points to meet with them regularly to work on getting that balance down. Question for you, Rachel, if firms have outstanding AR balances, outstanding AR invoices, are those situations where the client would be able to apply for client credit?

[00:22:14] Speaker 2: Yes, they could. There's no kind of barrier to entry to apply for client credit. That client credit system does not communicate with the scheduled payments within LawPay. So it's not going to say, oh, you have a scheduled payment, sorry, you can't apply. Anyone can apply for that client credit option.

[00:22:36] Speaker 1: Great. And that may be an excellent way, especially if you have clients that you are quite frustrated with, to be honest, or they have not been able to make their last few payments and you've lost time chasing them. Client credit may be a better option as opposed to sending that client out to a collections firm where they may take 20 to 30 percent of the receivable. So really thinking about your options, and I recommend not waiting past 30 days or 60 especially, the additional billing cycles, that 30, 60, 90, drastically decreases the amount that you are likely to collect on an invoice. So the sooner that you can hand them over to client credit or get them on an internal payment plan that the firm is monitoring, the better and the more likely you are to actually collect fees.

[00:23:32] Speaker 3: And I'm just checking for questions.

[00:23:56] Speaker 1: OK.

[00:23:56] Speaker 3: All right. And hold on just a second, we have one additional.

[00:24:05] Speaker 1: What is, are there fee differences between credit, debit, and e-check payments when using LawPay?

[00:24:14] Speaker 2: Yes. So there are going to be fee differences based on the payment method that the client chooses. What I would recommend is if you currently have LawPay, reach out to us. Let me give you our, if it's OK, our support number here on the phone, it's 800-459-5798. And then if you're not a current LawPay client, but you are interested in knowing what those fees are, just give us a call and we can definitely help you out.

[00:24:43] Speaker 1: Excellent. Thank you, Rachel. Next follow-up question, client credit is a popular topic today. What is the process for referring potential new clients or existing clients to client credit?

[00:24:56] Speaker 2: Yeah. So it is available on a LawPay payment link. So you can send that link directly to a client. At that point, they could see card, e-check, and the pay later option. They would just click on the tab for client credit and begin that application process. Another option we have is that we are able to create a page link for you that only has client credit. So if you know that particular client is interested in that payment option, you can send them that link. They don't have to click to a third tab. It's just right there and they can start the application process.

[00:25:34] Speaker 1: Excellent.

[00:25:34] Speaker 2: Thank you, Rachel.

[00:25:36] Speaker 1: And we are coming up on time. We want to make sure we get everybody back to their day. So last call for questions. We do have another one that came in. What is the deposit time frame difference between debit, credit, and e-check payments?

[00:25:54] Speaker 2: Yeah. Great question. So card payments deposit in two business days to the firm's account. And then e-check payments take five business days to fully process. And then deposit is successful. One thing I do want to mention is that card payments are instant verification. So we know right away if that client's card was approved or declined. With e-checks, since they go through the ACH network, they take longer to process. So that's why we don't have a final answer on that check until the fifth business day.

[00:26:27] Speaker 1: Got it. Thank you. One additional caveat to that, if the client is using a local credit union or a rural specific like location specific bank that does not have branches that are unique to that area, there may be an additional deposit delay just because it's a smaller banking system and has to make a few hops before it gets to yours. And last question. The last question is smokeball specific. So if it's okay with our audience member, we're going to address that directly with you post-session. So I'll personally reach out after the session and address the feature question about smokeball invoices. If we opt to offer client credit to a specific client, does it have to be a visible option for all clients clicking through LawPay? So can firms be selective about who they offer this option to?

[00:27:30] Speaker 2: Yes, that is possible. What we could do is your primary LawPay link, we could remove client credit from that and then create a second additional link that's separate from your normal link that you send to clients with only the client credit option. So that way, depending on the scenario, you can determine which link to send to clients.

[00:27:54] Speaker 1: And that would be the great use case for the client credit page, specific page as well. Yes, exactly. And we are just about at time. Rachel, thank you so much for joining us this afternoon. Really, really appreciate your expertise and insights. It's been fantastic working with you and your team. We look forward to doing more LinkedIn Lives in the future. And yes, we have a couple of questions. The link to this presentation will be distributed. If you have any questions, please feel free to email me, Chelsea.Lambert at Smokeball.com is my email address. You're always welcome to reach out to myself or any other member of the Smokeball team as well as the LawPay team via support. Any final thoughts, Rachel?

[00:28:48] Speaker 2: Yeah, I really appreciate everyone's time. I know fees was a question during this. I just want to mention that LawPay is in compliance with all IOTA regulations. We will never debit fees from your operating account. I know that's a concern for some firms when accepting online payments. So we've got you covered with the trust compliance.

[00:29:11] Speaker 1: Got it. Thank you so much, Rachel. And to everybody who shared their afternoon or late morning with us, we appreciate you being here and look forward to speaking to you again soon. Thanks so much. Bye-bye. Bye.