IN YEARS PAST, we simply considered some things unprofessional when it came to law practice and law firm administration. One of them was the way lawyers and law firms marketed or developed business. Yet methods and forms of promotion of a law practice seemingly unseemly in the past are now considered best practices in an increasingly competitive environment. Certain billing practices were likewise considered beneath the profession as a result of a similar antiquated mindset, but what was once considered tasteless or unprofessional may now offer a law firm, and its clients, an opportunity and convenience. Allowing clients to pay by credit card is one of those conveniences every firm should consider. If you have a credit card payment system, or if you are considering one—and if you do not have one, you should seriously mull it over—listed below are seven points to keep in mind.
1. Client convenience. Many firms try to hide that they take credit cards from their clients. Why, because clients might want to use that option? Certainly, many firms dislike having to pay fees to the credit card companies. But let’s face it: Today, everyone, including business organizations, uses cards to pay for just about everything. So don’t just break down and accept cards. Make it easy for your clients to pay you using a card.
2. Credit cards for prepaid deposits? Some clients want to pay everything with a card. Some like the points, others like the protections/security and still others just like the convenience of not mailing a check. But for prepaid deposits—that is, retainers—a firm must check with its state bar association first, to find out if it’s allowed. Also, be sure your processing company deducts all processing fees from your general account and not from your trust account. This could cause audit problems with some bar associations.
3. Get paid now—anywhere! I’ll avoid the claims that credit cards speed up fee receipts. I can’t prove it. In my view, the customer still waits until the 30th day and then has another 30 days to pay the card company, essentially giving them 60 days to pay their bill. But, aside from that, there are tons of mobile card processing apps and services these days. Everything from PayPal Here, Square, QuickBooks Payments, PayAnywhere and lots more. Investigate these options thoroughly, but you should consider them if your attorneys want to accept cards on location with customers. When the customer says, “When can I pay?” you can say, “Now!” They’ll be impressed with your immediate service attitude, it’ll be more convenient for the customer, and you’ll get paid immediately. If you have an iPhone, iPad, Android phone or almost any tablet, you already have most of what you need. Many of the services even provide the card reader for free. (It plugs right into your headphone jack.) As a piece of advice, get a signed engagement letter before you get the credit card swipe. Your client should always be very well informed of the engagement letter terms before committing any funds.
4. Ditch your old card swipe machine. Do you really have any client coming to your office to give you a card to pay with? Well, not in any of the firms I’ve worked for! Sure, some of the more retail-type shops might have one with the receptionist, but for the most part those machines can go. You’re likely renting them for $35 to $50 per month, and they are just old school. Get hip! Upgrade to a virtual terminal (i.e., online processing) if you rarely have physical card swipes. If you do get card swipes, move into the modern age with some of the gear I just mentioned.
5. Know the costs of your processing options. Although most of the card processing services cost about the same, some are more expensive than others. And more expensive doesn’t mean better. For example, PayPal Here charges you a 2.7 percent swipe fee to accept the card, or a 3.5 percent plus a 15-cent fee for manually entered transactions. Then, if you want to transfer the funds to your bank (which you likely do), your bank may impose an additional fee. Another example: If you want to accept credit cards directly through your QuickBooks Payments software, which is admittedly convenient, one of their options has a $20 monthly fee for the service, plus a swipe fee, plus a transfer fee. With almost all card-processing systems, the rate you pay is tied to how well they can validate the card. So if you swipe the card, you get the lowest rate. Then, if you key in the card number, including the billing address, zip code and card verification value code, you get the next lowest rate. And the most expensive transaction will be if you enter only the card number and expiration date. This gives little confidence to the card company that you had access to the card (or that your customer had access, either), thus giving you a much higher transaction fee, sometimes over 1 percent more. Some swipe fees can be as low as 1.75 percent, with manually entered transaction rates as high as 3.75 percent.
6. So, what’s the deal with accepting American Express? Well, I’m glad you asked. Many firms won’t accept American Express on principle because it simply costs more. Other reasons are that they take longer to deposit the money into your account, which I can attest to from direct experience. Their “default”—unless you instruct them otherwise—is to deduct their fees before depositing the money into your account. This makes it particularly difficult to reconcile your bank account when your accounting system says you received $100, but the bank statement says the deposit from AmEx was $96.88. So then you clear the $100 deposit and add a bank fee of $3.12. It’s just another step you don’t need. Ask them to take the fees out in one lump sum at the end of the billing cycle. Getting set up with AmEx can be a bit more of a pain, too. You get your processing company all set up to take Visa and MasterCard, and then they ask, “What’s your AmEx merchant account number? Oh, you have to contact AmEx directly to set up a merchant account first. They will give you the number and then we input that number into our system.” Eeeesh. And, of course, at one point I switched card processing companies, and they didn’t properly communicate with AmEx. This led to my invoice payments (i.e., general account) being processed into my trust account and vice versa. Fortunately, I caught it after the second transaction, but this did not make me happy. I don’t know who was to blame, but if I didn’t have to have two different merchant accounts for AmEx, this likely would never have been an issue.
7. Get a signed engagement letter. This statement can be attached to just about any legal article, but I found out recently that if a customer pays you online through your online payment portal (and thus you have no physical signature) and then the charge gets challenged, it’s super helpful to have a signed engagement letter on file to prove they are your customer. Of course it also doesn’t hurt if you kept the email or communication where you shared the payment instructions with the customer.
I have yet to see a law firm offer a branded credit card, but I hope to someday see the Heller Ehrman American Express card offered. Just something nostalgic for my former and—may she rest in peace—favorite firm. Happy processing!