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How to streamline your firm’s accounts payable

During these challenging times, every penny counts and streamlining your firm’s accounting processes can save a lot of pennies.

As law firms around the world pivot to post-COVID-19 operations, the one mandate that firms of all sizes are likely following is: save money. With continued uncertainty, even the largest firms could benefit from re-examining their accounting structure for gaps. Afterall, the speed of payments, methods and other details can greatly impact revenue. During these challenging times, every penny counts and streamlining your firm’s accounting processes can save a lot of pennies.

Make the switch from checks

With remote work continuing relying on paper checks is more inconvenient than ever. Not to mention the time associated with issuing payments in this form can tie up cash flow. Pending checks can make up 25%[1] of a business’s expenses, which means they must leave a large amount of cash in their accounts to cover the payments in progress. This doesn’t include the fees and manual work involved in sending, tracking and stopping checks. Either way, this is an effective way to reduce unnecessary costs and work for your accounting team.

Let vendors self-manage

How much time is spent answering queries about a payment’s status, changing bank details and similar tasks? Probably too much. Not only does this type of manual work become expensive but it is also open to human error. Automating this process can seem challenging at first but giving this option will keep these time-consuming tasks out of your firm’s scope in the future.

Pay in local currency

For US firms, paying international vendors, associates and other parties around the world can seem simple because USD is often widely accepted. However, the currency is not immune to fluctuation, meaning that recipients are undertaking a risk because they must eventually exchange the US dollars for their own local currency. To protect themselves against any possible loss, many add a buffer to their invoices, thus increasing the cost to the firm. By offering to pay in local currency, the firm is in a position to negotiate a lower fee.  

Consider ACH

Did you know that using ACH services is less expensive than wire transfers for both sending and receiving payments? It can be used for payroll, expenses, reimbursements and more. Plus, details can be included in the transaction for reference and automatic email notification can replace phone call inquiries on the status. Considering standard wire fees can range from $15 for incoming domestic transactions and over $40 for outgoing international payments[2], finding an alternative is worth a consideration.

Lock-in exchange rates

One of the biggest costs for any firm with international payables is the potential loss from a negative foreign currency exchange fluctuation. Often, invoices will have a thirty to ninety day period for payment, during which time the US dollar will move against the EUR for example. If the USD weakens when the invoice is being processed, suddenly the firm loses money and will either need to accept that loss or re-bill the client/vendor. Risk management solutions can help lock-in rates to avoid any movement and accurately budget.

Cash distribution

Sometimes a firm will need to payout a recipient without a bank account or permanent address, as in the case of class action settlements, pension disbursements and more. If this happens, consider utilizing retail money transfer options, which have convenient locations in popular public shops. This is a good option for a quick, simple cash distribution and since class action suits are on the rise with COVID-19, this may become a more widely used, low-cost option.

Credit cards

In the past, credit card payments and law firms didn’t really go together. Now, it is likely that a foreign client or vendor may wish to pay a US dollar invoice via Mastercard or Visa. On their end, they receive the bonus of mileage, points or other benefits, as well as a quick transaction. Adding this option can help a firm with swift processing and increase client satisfaction.

Consumer to business cash payments

Many firms deal with large volumes of incoming payments, such as immigration firms who must intake cash from all around the world. Services like QuickPay can be crucial for this function as the firm can receive near-real-time confirmation from a large selection of countries. Adding another option to an established accounting process can seem daunting but depending on the firm’s needs, it can also be a big upgrade.

How to get started

Because processes and practices relating to accounting are often long-established and involve several different systems, any change can be difficult. However, as uncertainty continues, firms would be wise to consider any of the above tips to reduce non-billable expenses, especially those related to international payments. Small one-time adjustments can lead to continued savings for years to come.

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Source: Finextra Research 2021 https://www.finextra.com/blogposting/16747/the-hidden-costs-of-cheques-for-your-business

Source: Business Insider https://www.businessinsider.com/personal-finance/wire-transfer-fees