Money TalksCash flow has long been known as the key to running a business effectively. With recent technological advances, attorneys finally have the ability to control cash flow through the use of credit cards and electronic payments. Gain control of your accounts receivables, and you gain control of your overall practice. If your practice currently maintains a significant outstanding amount of receivables, then you are effectively extending credit to your clients. In most cases, law firms do not have an “underwriting” process to determine the creditworthiness of their clients and have little insight into their ability to pay fees. Traditionally, law firms do not perform credit checks or report delinquent clients to credit agencies. By allowing your firm to accept credit card payments, you can effectively shift your receivables to the card-issuing banks. Visa- and MasterCard-issuing banks have already established the creditworthiness and financial capability of your clients. They are in the business of issuing credit, collecting debt, and monitoring credit, so you don’t have to be. You can stick to the practice of law.Credit cards and debit cards are becoming the payment of choice among consumers. According to a March 2009 report of the American Bankers Association, credit cards are responsible for more than $2.5 trillion in transactions a year, accepted at more than 24 million locations, and used in more than 200 countries and territories. Some 10,000 payment card transactions are made every second around the world. Based on these trends, attorneys can no longer ignore the importance of accepting credit cards, nor the risks associated with bad debts.
How Do I Get Started?If you are considering accepting credit cards in your practice, make sure the credit card processing company you choose understands the specific needs of a law firm. Most attorneys prefer to accept payment in a professional manner. As such, law firms do not have a checkout lane or ATMs stationed in their reception area. There are many custom payment options available to law firms, including credit card terminals and web-based solutions specifically designed for attorneys and their business. The total cost of a credit card transaction typically averages between 2 percent and 3.5 percent of the payment amount.
Separating Earned and Unearned FeesOne key feature to consider when opening your merchant account is the ability to separate earned and unearned fees when accepting credit cards. In order to stay in compliance with the guidelines of the American Bar Association and most state bars for accepting for credit cards, a merchant account must correctly separate earned and unearned fees into operating and trust accounts to prevent the commingling of funds. In addition, a compliant merchant account should enable an attorney to designate which account should be used for withdrawals of all processing fees.
The Law Firm MerchantIn the world of merchant accounts, law firms are unique business entities. Unlike a restaurant or retail store, law firms have special considerations when dealing with credit cards and client funds. Whether you are considering accepting credit cards or already offer an electronic payment option, using state-of-the-art technology will ensure you are paid quickly and securely. Some other tips to ensure a successful transition to the modern ways of getting paid as a law firm merchant:
1. Protect your trust and IOLTA accounts.Do not allow your merchant provider access to your trust account. Most merchant agreements will require you to give access to this account in the event of a charge back or fraud. There are merchant services specific to law firms that correctly protect and safeguard your trust accounts.
2. Avoid storing credit card information.If you bill clients on a monthly basis, you will potentially need the ability to recharge their credit cards. Accepting credit cards through a secure web-based solution will allow you to avoid keeping sensitive credit card information within the walls of your office. Modern law firms are quickly moving away from the traditional credit card machines, which sometimes require paper storage of client credit card numbers. This also limits the liability and risk to your firm of credit card information falling into the wrong hands.
3. Communicate to your clients.Let clients know what your payment expectations are on the front end by including due dates, late fees, and payment options as part of your fee agreement. It is much easier to establish these guidelines while your client is new and eager to get started. More importantly, continue to communicate to your clients what payment options you provide by including credit card logos or adding “Major Credit Cards Accepted” to your invoices and website. Clients will commonly look for an attorney who provides credit card options. Even popular legal websites such as Martindale-Hubbell have specific search criteria to find attorneys who accept credit cards.
4. Use the technology you have.Once you make the decision to accept credit cards, be sure to use the payment option that best suits your needs. Depending on your area of practice—and, more importantly, where you interact with your client—there are different choices to accept payment. For example, there are many options to accept credit cards with smartphones, including iPads and laptops.
5. Let your clients do the work.By taking time to establish payment options on your website, clients can run their own credit cards. Not only does this provide a convenience to clients, but it frees up the time you otherwise would spend processing credit card payments. This also allows you to avoid ever seeing credit card numbers, eliminating any responsibility to accept, store, shred, or protect credit card numbers.
6. PCI compliance.When you accept credit cards in your office, you also accept the responsibility of protecting cardholder data. Be sure your merchant solution is PCI compliant. PCI-DSS is the payment card industry’s security guidelines for merchants. More information can be found on the PCI Security Standards Council website or the websites of other PCI specialists, such as PCICentral.