Cash still rules the payment roost

 Edward Poll, The Daily Record Newswire

Systems of payment have changed a lot over the years, and the trend is likely to continue. From cash/checks to credit cards, cellphone payments, Bitcoin payments, etc., the world of paying bills has expanded with each new technological advancement.

Although it’s important for law firms to keep up with the times and be able to accept all safe forms of payment, law firms are still largely cash businesses whose clients pay by personal or business checks that must be physically deposited in the firms’ bank accounts.

Understanding the most efficient, financially resourceful ways to deal with checks is important for the fiscal soundness of your firm.

• Personally depositing checks

The most important advice for dealing with checks is to deposit or cash checks personally. That may seem inconvenient, but it has two benefits.

The first benefit is safeguarding yourself against financial fraud by ensuring that your cash receipts are safe and secure. By going to the bank in person, you confirm a chain of possession for your receivables. By handling deposits yourself, no other person in your office can forget to make a deposit or lose track of deposit receipts.

Depositing checks should be part of a system of checks and balances that no other person, or even several people in collusion, can circumvent in handling funds and financial records.

A second advantage of personal deposit is that it enables you to establish a better business relationship with your bank. You become an individual, not a name or number.

That can have a variety of positive benefits, beginning with the likelihood that if an overdraft or check deposit problem arises, you can work out a solution with your personal contact at the bank. That same contact may refer business to you or be your ally in seeking a loan or credit line.

• Making speedy deposits

The check deposit transaction is the start of the entire cash management process, and the first rule is to be prompt and efficient.

Once you have the client’s check in hand, never wait to deposit it; otherwise, too many problems can arise: the client may become angry and stop payment, have insufficient funds when the check is finally presented for clearance, or become party to a lawsuit or other proceeding in which financial assets are attached.

Family law practices bear a specific vulnerability in this arena: Clients may file for bankruptcy after a divorce to get rid of their debt.

• Depositing incomplete payments

Deposit all checks even if the amount received does not match the amount due per the statement. Make a copy. After making the deposit, call the client and ask for an explanation of the difference. You will ultimately reconcile the amount paid with the amount due; however, in the meantime, you will have deposited and benefited from the amount sent to you.

A notable exception: When there is a disputed claim and a check is marked “paid in full” with the check amount being less than the amount owed.

• Bank drafts

A bank draft can be deposited into your account but must be returned to the bank account of the person who made the draft to get approved before cash can be placed into yours. Banks can refuse any deposit, and may do so with a bank draft.

Cashing rather than depositing the draft could be a solution. By doing so, the liability for any dispute or failure to cover the draft is on the account holder.

Remember, though, that the bank can assert that it does not assume liability in such instances.

—————

Edward Poll is the principal of LawBiz Management. He coaches lawyers to greater profits with less stress and is the creator of the new “Life After Law” coaching program, which enables lawyers to plan for profitable exits. He can be contacted at edpoll@lawbiz.com. Also visit www.lawbiz.com.

 

Comments

  1. No comments
Sign in to post a comment »