7 Reasons Why Law Firms Should Accept Credit Cards
Although credit cards have been around for decades, many law firms are still reluctant to accept them. However, accepting credit cards as a form of payment comes along with many time-saving benefits for lawyers.
Below, we’ll discuss more information on the advantages of accepting credit card payments at your law firm. Then we’ll highlight the best ways for you to collect these payments. Keep reading to learn how to increase your range of potential clients.
The Benefits of Accepting Credit Card Payments
One of the main reasons law firms should accept credit cards is to save time and increase the speed at which clients pay invoices. Although many credit card processing companies charge a fee for each transaction, they are often tax-deductible. In addition, accepting credit cards will open your legal services to a broader array of clients.
When it comes to new advancements in technology, law firms are notoriously slow to adapt. The American Bar Association has approved credit cards as a means of payment for legal fees since 1974. This means if your firm still only deals with cash and checks, you could be losing out on potential clients. Some of the benefits of accepting credit card payments include:
- Online payments
- Quicker payments
- Integrated systems
- Easier bookkeeping
- Sizeable tax deductions
- A wider array of potential clients
- Always maintaining compliance
Now, let’s discuss how each of these factors can improve your daily operations.
Online Payments
One of the biggest gripes law firms have with accepting credit card payments is paying for the expensive equipment required to process cards in-house. However, with recent advancements in technology, none of these machines are required.
Instead of having your receptionist swipe credit cards, you can set up an electronic payment system. This allows your clients to pay their invoices or retainer fees via credit or debit card over the internet, using their mobile phone, tablet, or computer.
Accepting online payments is the best way to reduce the costs traditionally associated with credit cards. Just set up a hosted payment page on your website or send clients a payment link via email, have them enter their payment details, and you’re done! This not only saves you the hassle of purchasing expensive equipment, but it also saves clients the hassle of having to drive to your office with a check or cash payment.
Quicker Payments
According to a 2017 legal trends report by Clio, law firms that accept credit cards as a form of payment are paid 40% faster than those that do not. Since clients do not have to set aside any time to go down to your office to pay their legal bills, there’s a significant chance that you’ll be paid for services within the same week you send out the invoice.
Not only is this more convenient for everybody involved, but it also increases your firm’s cash flow. Since you’re not waiting nearly as long for payments, you’re able to spend the money where you need to when you need to.
Integrated Systems
Keeping track of the money you’re owed versus the money you have can be incredibly difficult when you only use traditional payment systems. Waiting for deposited checks to clear can be one of the most frustrating parts of legal accounting! However, certain card payment gateways use a seamless process to integrate your practice management system with your credit card processing system.
In most cases, the processes will work together in the following way:
- Your practice management system will generate a client’s monthly invoice and then send it via email.
- The email will contain a link the client can click to pay their legal bill online through your electronic payment gateway.
- After the invoice has been paid, the credit card processing system will alert the practice management system, which will then receive and record the payment.
- With the payment recorded in your books, an electronic receipt will be sent to both you and the client.
Easier Bookkeeping
The above point brings us to the next benefit of accepting credit card payments at your law firm: easier bookkeeping. Having a lot of open invoices at once can make it hard to keep track of things. You’ll have to manually reconcile each invoice as you receive a check or cash payment, and if you don’t do so as soon as you have each payment in hand, the work can get overwhelming and confusing.
Accepting credit card payments allows these invoices to be processed and settled electronically. You won’t have to wait for any checks to clear, nor will you have to dig through your records to find months-old invoices once they’re finally paid. In addition to making recordkeeping more straightforward, it can also help you better manage your expense budget by improving cash flow.
Sizeable Tax Deductions
Most credit card processing companies charge a small percentage of the total cost to process each transaction. Since legal fees can range into the hundreds, thousands, or even tens of thousands, these processing fees may be quite sizable.
While this factor alone deters a lot of law firms from accepting credit cards, you may be able to pass the processing fees onto the client. If this is not an option in your state, you can always write them off when it comes time for taxes.
Depending on the number of processing fees you incur throughout the year, this deduction may be a significant amount. While you may have to make the initial investment, you’ll have peace of mind knowing you’ll get the money back eventually.
A Wider Array of Potential Clients
One of the biggest advantages of accepting credit card payments is opening your legal services up to a wider array of clients. Some people explicitly search for law firms that will accept credit card payments, and since many still do not, you’ll gain an edge over your competition.
Think about this from the client’s standpoint. Many people who need legal services may not necessarily have all the cash on hand to make payments in full, and payment plans are often a headache when it comes to bookkeeping. On the other hand, some clients may just want the flexibility of getting rewards or making small payments over time by using a credit card.
Since people tend to gravitate more toward law firms that provide flexible, easy-to-use payment options, accepting credit cards will likely broaden your base of potential clients significantly. Over time, this can increase your revenue as well as your client acquisition and retention.
Always Maintaining Compliance
One of the biggest concerns for law firms is how their credit card processing system will work while still maintaining legal compliance regulations. Many generic credit card processors will charge processing fees from the same account they deposit electronic payments to, which can be tricky when it comes to certain regulations.
The two types of accounts you have to consider here are trust accounts and operating accounts. Certain payments, such as retainer fees and other client funds, must be deposited into a trust account. Other types of payments, including bill payments and other earned money, should be deposited into an operating account. Since it’s unlawful to use money in trust accounts for operating expenses, any processing fees the company charges should only be deducted from an operating account.
There are a lot of specifics to consider here, but luckily, modern technology provides us with a solution. There are various law-specific credit card processing companies out there, and they are all aware of the compliance regulations law firms need to adhere to. As such, their platforms are equipped to meet compliance standards.
Choosing this type of processing company allows you to dictate exactly where funds are taken from and deposited. This ensures you’re always in compliance with local, state, and federal regulations.
Common Misconceptions About Credit Card Payments
There are many benefits to accepting credit cards as a form of payment for legal fees. However, several misconceptions may prevent lawyers from doing so. Below, we’ll highlight a few of the most common myths surrounding credit card payments and give you the information you need to feel more comfortable.
Myth 1: Credit Card Processing is an Unnecessary Expense
As we’ve discussed, credit card processing fees are a valid concern when you’re considering adding cards as an acceptable form of payment. However, it’s more logical to consider these fees as a modern “cost of doing business.”
Because credit card payments process and clear much quicker than cash or check payments, the increased cash flow and faster payments typically offset the processing fees you pay. Most lawyers consider the time and money accepting these payments save to be worth the fees.
Plus, there are certain ways to minimize the interruption processing fees cause. You can always deduct them when it comes time to do your taxes each year, and some states even allow you to charge your client an extra fee equivalent to the processing charge.
Myth 2: Accepting Credit Card Payments is Unsafe
Law firms are already huge targets for hackers and cyberattacks, which deters many from adding another level of personal information to their systems. Accepting credit card payments may seem like just another set of data to keep confidential, but online payment processing services can take this stress entirely off your hands.
While you should always look for a law-specific credit card processing company to maintain compliance, it’s also a good idea to look for one that’s PCI Level 1-certified. This certification means that the company offers advanced security measures specifically meant to protect clients’ payment data. Not only does this give your clients peace of mind, but it also takes away much of your personal or business liability.
Myth 3: You Cannot Accept Credit Card Payments While Maintaining IOLTA Compliance
Maintaining compliance with legal regulations is a big deterrent to firms that would otherwise accept credit card payments. Regulations dictate that a lawyer’s earned funds should always be deposited into an operating account, while client funds must be held in a trust account. Credit card processing fees will also need to be debited from your firm’s operating account.
Considering all the different accounts, it may seem difficult to maintain compliance with electronic credit card payments. Again, this is where a law-specific credit card processing company comes into play. Each payment you collect and all your processing fees will be deposited into the correct account.
Should Law Firms Accept Credit Cards?
In today’s age of technology, not accepting credit cards as a form of payment for legal fees could end up costing you big. With debit and credit cards becoming the main form of payment for many individuals, clients are likely to walk away from your firm if you do not accept these types of transactions.
The American Bar Association has approved credit card payments for nearly 50 years, so now is the time to step it up in terms of new technology. Many people these days do not even have a checkbook, and bringing a cash payment or cashier’s check to your office can be a hassle for everyone involved.
As time goes on, technologically-advanced law firms will become more and more popular, while those that are slow to adapt will fall by the wayside. To ensure your services are accessible to all demographics, especially the younger generations, accepting electronic payment forms like credit and debit cards is a must.
Final Thoughts
The legal industry is infamous for being slow to adapt to new technology. For this reason, most law firms still only accept traditional forms of payment, such as personal checks, cashier’s checks, and cash.
However, it would be incredibly beneficial for more law firms to understand the benefits of accepting credit and debit card payments. Among other things, it ensures quicker payments, makes bookkeeping and accounting simpler, and opens your business to a wider range of clients. And, when you use the right credit card processing company, you can always ensure you’re maintaining compliance.
All sources:
https://www.attorneyatwork.com/good-for-your-client-good-for-you-credit-cards/
https://www.cerenade.com/four-reasons-why-every-law-firm-should-accept-credit-cards/
americanbar.org/news/abanews/publications/youraba/2018/october-2018/does-your-law-firm-accept-only-cash-and-checks–youre-losing-mon/
https://www.lawtechnologytoday.org/2018/02/small-law-firm-guide-accepting-credit-cards/
https://www.emscorporate.com/news/law-firm-credit-card-processing
