Reformed attorney, current Founder & CEO at Headnote, passionate member of legal and entrepreneurial communities, proud wife and mother.
Jared D. Correia, Esq. is the CEO of Red Cave Law Firm Consulting, which offers subscription-based law firm business...
Law firms of any size can have accounts receivable issues. What changes can lawyers make to give their clients a professional and modern payment experience? In this episode of Legal Toolkit, host Jared Correia talks to Sarah Schaaf, CEO of Headnote, about how lawyers can optimize their payment processes with technology and automation. As high-end service providers, lawyers can serve their clients better when they use the best payment processes available. Jared and Sarah discuss how utilizing modern tools helps lawyers get paid faster and gives their clients a more professional payment experience.
Sarah Schaaf is the CEO of Headnote, a company that provides electronic payment processing to law firms.
The Legal Toolkit
Get Paid Faster: Using Technology in Accounts Receivable
Intro: Welcome to Legal Toolkit, bringing you the latest legal trends and business initiatives to help you manage your law firm, with your host Jared Correia. You are listening to Legal Talk Network.
Jared Correia: Welcome to a new episode of The Legal Toolkit here on the Legal Talk Network. If you are looking for Season Four of Fuller House, I am anxiously awaiting that on Netflix as well, let me tell you.
If you are a returning listener, welcome back. If you are a first-time listener, hopefully you will become a longtime listener. And if you are the family of coyotes that’s living in my backyard, please go away, it’s no longer cute.
As always, I am your show host Jared Correia, and in addition to casting this pod, I am the CEO of Red Cave Law Firm Consulting, which offers subscription-based law practice management consulting services for law firms, Bar Associations and legal vendors. The website for that is redcavelegal.com.
I am also the COO of Gideon Software, Inc., which offers chatbots and predictive analytics built specifically for law firms. Find out more at www.gideon.legal.com.
And lastly, believe it or not, this is not my only podcast. I have a travel podcast with my wife called The Lobby List, which you can check out on iTunes. We have got some brand spanking new Disney World content coming up. So subscribe, rate and comment.
But here on The Legal Toolkit, which is still my primary and favorite podcast, we provide you each month with a new tool to add to your own legal toolkit, so that your practices will become more and more like best practices.
In this episode we are going to talk about the value of electronic payment processing and accounts receivable or AR for those initiated automation, wait, for law firms.
But before I introduce today’s guests, let’s take a moment to thank our sponsors. First, I would like to thank our new sponsor, TimeSolv. TimeSolv is the number one web-based time and billing software for lawyers. Providing solutions since 1999, TimeSolv provides the most comprehensive billing features for law firms big and small. For more information, visit www.timesolv.com. Remember, timesolv.com.
Next, we would like to thank our sponsor, Thomson Reuters Firm Central, cloud-based legal practice management that streamlines your day and automates non-billable administrative tasks so you can accomplish more with less.
In addition, I would like to thank our sponsor, Scorpion. Scorpion crushes the standard for law firm online marketing with proven campaign strategies to get attorneys better cases from the Internet. Partner with Scorpion to get an award-winning website and ROI positive marketing programs today. Visit scorpionlegal.com/podcast.
And finally, we would like to thank our sponsor Answer 1. Answer 1 is a leading virtual receptionist and answering services provider for lawyers. You can find out more by giving them a call at 800-Answer-1 or online at www.answer1.com. That’s www.answer1.com.
My guest today is the one and only Sarah Schaaf. Sarah is the CEO of Headnote, which provides electronic payment processing and AR automation to law firms. Before founding Headnote, Sarah was a practicing attorney in all sorts of law firm environments, including solo practice.
She also worked as an in-house attorney for Google. Sarah is a podcast listener herself and a cyclist, though not necessarily in that order.
Welcome to the big show Sarah Schaaf.
Sarah Schaaf: Thank you so much Jared. It’s great to be here.
Jared Correia: Yes. As you can probably tell listeners, and Sarah, I have a little bit of a cold today but we are going to push through.
Sarah, you used to work at Google, so I am very interested in this, because you are the only person I know who worked at Google. So what’s the most cultish thing they do over there? Like I have heard rumors that Google sacrifices a goat every Thursday afternoon at 3 p.m. in order to acquire Satan’s help in building out the latest phase of its search engine algorithm, can you confirm or deny the truth of that rumor?
Sarah Schaaf: That’s a great question Jared.
Jared Correia: Thank you.
Sarah Schaaf: It’s a common misconception. It’s actually Wednesdays that they do the sacrifice.
Jared Correia: And it is a goat, right?
Sarah Schaaf: Every week, yeah, and it is a goat. No, I can officially deny those rumors, but the most cultish thing, I mean the entire place is made so that you never want to leave. So they are like, do you want dry cleaning, package service, laundry, a class in making terrariums, like step right this way.
Jared Correia: Now, is that real? Could you really take a class in making terrariums at Google?
Sarah Schaaf: 100%, I took a class on making terrariums at Google.
Jared Correia: How did it go?
Sarah Schaaf: Terrarium was really good. I was told I was above average skill set at terrarium making.
Jared Correia: Nice. But I feel like Google is a place where they tell everybody that their terrariums are above average, would you say so?
Sarah Schaaf: I am pretty sure. I mean how do you make a bad terrarium I guess?
Jared Correia: I know, it’s kind of tough to screw up.
Sarah Schaaf: Exactly.
Jared Correia: The one thing you did make was a payment processing service for law firms, how about that segue?
Sarah Schaaf: That was a great segue.
Jared Correia: So let’s talk again, and this is also above average, just like your terrarium. So let’s start by talking about something you had addressed in your bio, like AR and collection Woes, like lawyers have tons of accounts receivable, they have a hard time collecting. So the most obvious question here I think is like law firms, like regardless of size, practice area, location, they all have accounts receivable issues.
They also seem to relentlessly apply manual processes to solving those issues, including traditional law firm payment methods like paper checks and cash, which are going so well, right?
So the obvious question to start is why should law firms start taking electronic payments like yesterday?
Sarah Schaaf: Yeah. I mean I think everybody on this podcast that’s listening is a consumer, right, like we all pay for everything with a digital payment method and when people kind of don’t understand or law firms or lawyers don’t understand the value, I like to remind them about the last time that they were at the grocery store and they got behind somebody in line who wanted to pay with a check.
And I might be dating myself because that hasn’t hopefully happened in a decade, but like if you are giving your clients that experience of making them pay you with an outdated manual paper process, you are that like old woman at the grocery store trying to write a check.
Jared Correia: I stood behind that old woman last week, that happens.
Sarah Schaaf: You saw her? Oh man, that poor thing.
Jared Correia: Yeah, it was her.
Sarah Schaaf: Yeah, that’s the experience you are giving your customers, your clients if you are not offering them the most modern way of doing business with you from start to finish and that includes the way that they are paying you after you have completed the work on an ongoing basis for work that you are doing month over month.
Jared Correia: However, if your clients are really old ladies who like to pay by check at the grocery store, like you are onto something by not using payment processing.
Sarah Schaaf: Right and then maybe you probably have other problems that we can talk about offline.
Jared Correia: There are probably other issues, yes. Contact Sarah offline to talk about those problems.
Sarah Schaaf: Sarah at Headnote.com. I think the other thing that goes along with what you had kind of mentioned is this kind of trend that we have seen in our industry in the past couple of years, really the past decade of applying automation and tech to different parts of our workflow. And so at one point lawyers didn’t know anything about marketing automation and now there is many companies that offer those services or CRM for Legal was a term none of us really understood three years ago and now there is companies like Lexicata or Lawmatics, there are multiple companies entering that space.
And so this process of how we are now tracking and overseeing and managing our accounts receivable is kind of the last dinosaur and if you are not applying simple tech to how you are managing your AR and therefore the health of your firm, then it’s the equivalent of dropping the ball on the one yard line, because what’s the point of applying tech in all those other places if you can’t actually get paid or have an understanding of what your accounts receivable looks like without doing everything on your own manually.
Jared Correia: Word up. Like I think a lot of people talk about automation and processes in terms of business management components of law firms, like related to substantive practice, but they don’t address it from a payment capture concept, so that’s really smart that you guys are thinking about that and working on that.
All right, so I think everything you said is true. Like these are new technologies for law firms. I am doing air quotes right now if you can’t see, but new technologies for law firms, but like for other businesses, these technologies have been around for a while and like even though payment processing, electronic payment processing has been around for law firms for a long time, like available to them for a while, like the thing that is staggering to me is how few attorneys know fundamentally how that works.
Sarah Schaaf: Right.
Jared Correia: So can you talk a little bit about what e-payment processing options there are for lawyers, how do those work and how can they get paid, from like not super technical, but just technical enough level?
Sarah Schaaf: Right, yeah, technical light. So I will say like what you said again is so true, like we as an industry obviously are not like what we call — I live in San Francisco and work in Silicon Valley, like we are not what we call early adopters of technology as an industry and so when I was working at Google, that was kind of a very interesting moment for me to see, like how we can apply simple tech to different parts of a workflow, like what can we take as an industry from tech companies and things that they are doing operationally to make things easier.
And so this idea of using like really simple technology or making it as simple as possible to the user, a/k/a the lawyer and offering kind of high end user experience, that’s going to be more like the consumer products we are used to using. So it’s going to be as easy for you and your clients to use this as like logging on to Facebook or something we are used to is a concept that’s near to legal. We are used to more clunky software and like outdated interfaces and so that kind of is what we have experienced up to now with payment processing.
There are a few things you mentioned we should talk about. So it’s important, the kind of high level technical process of payment processing for lawyers is that you need to pick a solution that’s going to address your needs and rules as an attorney who wants to transact to both trust and operating account.
So operating account is earned fees, that’s a little bit easier in most states as far as rules go, though I always say check your local rules. Trust accounting is something to take really seriously and any off-the-shelf payment platform is not going to protect your trust funds. They are not going to be deducting fees from operating, stopping chargeback access from the trust account and all of the things that you need to do under the ABA Model Rules of Professional Conduct, 50 Bar Associations in every state and IOLTA. And so it’s really important that you choose one that’s made for lawyers to make sure you are complying with all of those rules.
Jared Correia: Yeah, that’s good stuff. It’s amazing, like between the goat sacrifices and the terrarium building that you had so much time to think about this as well, you are truly amazing.
Sarah Schaaf: They actually probably would have rather I didn’t, because you are really just supposed to like show up and stay there all day and maybe like sleep in the yoga room.
Jared Correia: Maybe.
Sarah Schaaf: They had nap rooms, so you can just maybe sleep in the nap room and not go home.
Jared Correia: So one point you brought up I think is really important, because a lot of lawyers will go out there and say okay, I will just do a PayPal account or a Venmo account and you addressed a couple of reasons why that was not the way to go from the ethics side of it. But there are viable reasons that lawyers should be choosing payment processing tools that are built for the legal industry, so do you want to expand on that point a little bit?
Sarah Schaaf: Yeah. I mean first of all, there is kind of this issue of you want to be using something that’s going to be as easy as possible for your clients. You want to give them a really professional, modern payment experience. A lot of platforms within legal and outside of legal are going to do things like make your client open an account, register for an account. And how many times — think about the last time that you wanted to like finish reading an article, like you read the teaser and you are like yeah, I will finish reading that, and they like want to make you register for an account, and like that is the most frustrating experience.
If you are making your client register for an account when they go to pay you, you are giving them that same frustrating experience and that’s the opposite of what you want to do, because you are hopefully going to earn their business again or get their referral business. And this is something I recently spoke about at a conference that lawyers have no idea what — I bet you know Jared, but do you know what an NPS is, a Net Promoter Score?
Jared Correia: Of course I do. I have read the Clio Legal Trends Report.
Sarah Schaaf: Right. Thank you Jared, most people haven’t. And this idea of like we as an industry, our Net Promoter Score is essentially how likely someone is to recommend you to someone else. So when you are shopping online or something and it comes up and it’s like 1-10, like how likely are you to refer us to a friend, that’s that, they are trying to figure out what their NPS score is. And if we don’t do that as lawyers — and so based on that Legal Trends Report that you mentioned, we are like sandwiched at the bottom of the list of industries between like banks and health insurance companies, like people don’t like law firms.
Jared Correia: Cable companies.
Sarah Schaaf: Yeah. Like who knew, right, we got into this to help people and now we are like literally at the bottom of the list of worst offenders. So this idea of like being more aware of what an NPS is and how you can make it better like make them have a nice payment experience that is branded for your firm, that speaks to them, actually says like make a payment to your lawyer, like give them confidence and make it easy and convenient for them, like that’s super important, in addition to like are you actually making sure that you are not breaking your rules and risking disbarment.
Jared Correia: I didn’t know you were going to pull out Net Promoter Score, plus one for you.
Sarah Schaaf: Yeah, thanks.
Jared Correia: So let’s talk briefly about like the process involved, like we are talking credit card payments, we are talking debit card payments and then we are talking processing fees and potentially other fees as well, like how does that part of it work?
Sarah Schaaf: Right. So there are a couple of options you mentioned, credit and debit cards, we are all familiar with that, and then there is something that’s really important, again, like it’s a vital payment method for law firms is eCheck. And so eCheck is something that is essentially built out with ACH trails, which are a lot of lawyers and law firms might have heard of, but this is actually a more proven payment method than credit cards. ACH trails have been around since the 70s. Like it’s whenever you have done a wire transfer, it’s essentially a more modern version of that, it’s like safer, less susceptible to fraud than credit and debit.
But the reason that the eCheck is so important is because if you are a law firm that has SMB clients, not just individual clients, a lot of them are not going to want to pay you. Small corporations don’t want to necessarily pay with credit cards, small companies, they want to pay directly from their bank. And so you need to be offering them a direct bank to bank payment method that doesn’t make them like login and create a wire.
So what you are kind of saying is across those payment methods there is different fees that apply and there is always going to be some kind of a base transaction fee and that’s really like the cost of doing business when you go to a store and you buy whatever you buy, the store is eating that transaction fee to let you pay with the digital paper method or credit or debit card. It’s the same, right, we have to start allowing and accepting transaction fees, it’s the cost of doing business and being professional and modern.
Then on top of that a lot of platforms are going to add additional fees and this is where the like hidden fee issue comes in, because you think like oh, I am supposed to be paying this one, and I only pay this percentage, and then when you look at your statement you are going to see network fees, merchant fees, fees for recurring payments, that is something to be really careful of because it all adds up.
Jared Correia: Okay, so hold that thought, we are going to take a quick break. I am going to process all of this. Here are some of the things you should buy.
Do you feel like your marketing efforts aren’t getting you the high value cases your firm deserves? For over 15 years, Scorpion has helped thousands of law firms, just like yours, to attract new cases and to grow their practices. As a Google Premier Partner and winner of Google’s Platform Innovator Award, Scorpion has the right resources and technology to aggressively market your law firm and to generate better cases from the Internet. For more information, visit scorpionlegal.com/podcast today.
Imagine billing day being the happiest day of the month instead of the day you dread. Nobody went to law school because they love drafting invoices for clients. At TimeSolv, our attorneys save on average over eight hours a month in billing work. That means more billable time and turning billing day into happy day. Learn more about how to get to your time and billing happy place at timesolv.com. That’s www.timesolv.com. Remember, that’s timesolv.com.
Jared Correia: Thanks for sticking around everybody. I am feeling better getting into the vibe. Maybe my cold is going away. This will pay off, trust me.
I am talking with Sarah Schaaf of Headnote and we are rapping about how to apply technology to how you are managing your firm’s AR, accounts receivable and electronic payment processing in legal.
All right, so we just talked about this Sarah, like how lawyers can engage online electronic payment options. The most basic objection I get from lawyers to this is something you just mentioned, they don’t want to pay payment processing fees. So why should a law firm pay those fees and essentially reduce their own revenue to access online payments?
Sarah Schaaf: Right. I mean this is just like we have kind of talked about and you and I have talked in the past about this offline, like if you are a modern business there are certain costs that you know you just have to have, like you have to have insurance, you have to have an office space if you do in-person client consults, like you just have to be able to accept online payments. I like to like think about if you ever go to a store, like I live in San Francisco, I know you live back East, in Boston area, in a city, we have bodega.
Jared Correia: In the woods, hence the coyotes.
Sarah Schaaf: Hence the coyotes. We have bodegas and like corner stores everywhere and if you go into one and they won’t accept credit cards or debit cards, like they are like cash only, I mean that’s almost a deal breaker for me, because I don’t have cash, like I am like very old — I am like what they call a gray-haired Millennial, I am like the oldest possible Millennial, like I don’t walk around with money in my pocket, which I think makes my dad like super uncomfortable. He is just like, how do you never have money?
But if I go to a place that’s cash only, I am right away like you have got to be kidding me, and there is this part of me that’s like stop being cheap, because like they obviously don’t want to pay the fees, but it’s inconvenient for me. And so it’s that if the guy who owns the bodega has to pay that 1.9% or whatever it is to process payments, like you should do that for your clients too. You are a high end service provider, you offer this like white-glove service, you care about your clients and providing them with the best possible legal representation, all those things, like don’t drop the ball in the end zone because now you’re making them do something that like they don’t even do at the bodega.
Jared Correia: Yeah, I have to say like I have this conversation all the time with my family like I get really angry when I have to pay for things with cash, like will be driving somewhere and there will be a cash-only gas station and I’ll get back in the car and I’ll be heated, and my kids are like, let’s leave him alone for 10 minutes. I was like, what kind of place doesn’t take debit cards?
Sarah Schaaf: Great or like if you go to a bar or like a restaurant and you see the cash-only sign and it’s like, uh.
Jared Correia: I am out.
Sarah Schaaf: Now I am going to have to deal with something annoying. I’m going to have to go find an ATM and pay a precedent. I mean, I have to make my bank more than I pay the store or I’m going to have to go like if you’re an attorney, now I’m going to have to go find my checkbook, find a stamp, like it’s just silly at this point.
Jared Correia: Yeah, and I have to say like in terms of business expenses like if you are Google, for example, you have like this massive pen of goats that you have to maintain. So, these are just like modern day business expenses.
Sarah Schaaf: Exactly. Terrariums don’t just like pay for themselves.
Jared Correia: Yeah, exactly, like those terrariums aren’t going to bill themselves. So, like, do you think this is helping me to get a job at Google or no? How do you think this is going right now?
Sarah Schaaf: Yeah, I think it’s probably going fairly well. I think that you have a very individual voice and actually at my interview — at one of my interviews, it’s just totally true, you talk to like a panel of people and there’s like multiple different conversations that you have.
But, at one of them and in-person there I was in a little room and had to fill out some like little — not an application but like some kind of little like a little test like little — some things were related to like actual legal questions and then the last question was draw a picture of an elephant, and I had to draw a picture of an elephant and I’m not really bad. I mean, I got the job, but I’m not like particularly an artistic person, but I just remember I would be like, are they really looking at like how I draw the elephant or like is this just like some like kind of dorky version of an icebreaker? But in either case, it’s stuck with me, so there you go.
Jared Correia: That’s interesting. All right, quick story and then we’re going to get back on track. I once applied to a DA’s office and I gotten to the interview and they showed me a picture of someone who had been decapitated to kind of like get to see what I would — what my reaction to that would be. And then the DA was like, this kind of stuff happens every day in this town, and I was like, someone’s decapitated in this town every day? I did not get the job.
Sarah Schaaf: Yeah, they are like stopping a smart ass.
Jared Correia: I just tried for the best.
Sarah Schaaf: Every day, 365 times, this happens a year. Wow.
Jared Correia: It’s an epidemic.
Sarah Schaaf: The news isn’t even reporting on this.
Jared Correia: So, let’s talk about speed and payment processing. I don’t know if I can segue from that. So, a large part of choosing electronic payment methods is like the assumption that law firms will get paid faster, and I don’t think it’s an assumption, I think it’s like a truth at this point.
So, can you talk a little bit about the increased speed in terms of payment processing when law firms are using e-payments?
Sarah Schaaf: Yeah, so I mean, these are some stats that are actually taken from some of the reporting that the ABA does and some different reports on digital payment methods as well as actually the Clio’s Legal Trends Report that came out recently.
So, in general, lawyers are only collecting one report says 85 cents, one says 86, but let’s say 86 just to give it the benefit of the doubt. You are collecting 86 cents on the dollar that you billed and average payment time is 60 to 90 days, and what we actually have found is that the rate of actually getting paid period goes down to 22% after 90 days, like that your chances of collecting are really low and that’s when you start discounting.
And part of why this happens is like, just delay in getting paid and then the discount is something that I call client amnesia, which is this thing that happens and I do it all the time like when I’m a client, if it takes my lawyer too long to get me a bill and then they send me like a bill that I can’t just click and pay, I put it aside because I don’t have time to deal with it.
And by the time I get around to it, it’s like the last thing I want to do and instead of feeling like high value and like I was prioritized because, you know, I called the lawyer to say this is an emergency, this project has to get done, they drop something, they did the work, there’s good work. I said, great, then when I finally go to pay that bill like 60 or 90 days later, I’m like kind of pissed because I got sticker shock for my bill and my initial reaction is like, I’m going to ask for a discount.
And so the easier — the faster you can get your bill to them, which is another kind of topic outside of what we’re talking about, is one thing, but then the easier you can make it for them to actually pay you, like you are just going to collect more, you are going to collect faster and you are going to give a better impression to your client like have higher client satisfaction rates with the work you performed.
Jared Correia: Yeah, absolutely, great answer. Okay, so last question in this segment. One of the ways that law firms are competing nowadays because there’s a lot of competition out there for law firms, is they are trying to strike up more consumer-friendly pricing models for their clients and potential clients rather, how does using an electronic payment processing system help to do that, like potentially in terms of like subscription services, which I see a lot of law firms adopting these days?
Sarah Schaaf: Yeah, absolutely. So, I think this is awesome, like again, one of my favorite things from going from litigating as an outside counsel at law firms to working in-house was that I didn’t have to bill, and that was like incredible after I spent so much of my time with like tiny scraps of paper and like chicken scratch notes and like just terrible last day of the month kind of horror stories.
So, this idea of like how can we do away with that with something like subscription billing for your clients and flat fee arrangement is the future. I really believe that and it’s more convenient for your client too because they don’t have to do it with actually initiating payment or doing anything.
So, for sure, you want to be sure that you’re picking a payment processor that can accommodate that. Now, here’s something that’s like super-important and interesting.
Jared Correia: All right, listen up everybody.
Sarah Schaaf: Everyone listen up. There are certain payment platforms that only allow you on these plans to set up the reoccurring payment on like the 1st and the 15th, and a lot of law firms that doesn’t work because they are like, no, my client wants Thursday or whatever like their accounting is.
So, make sure you’re going to pick technology that’s moderate enough that it actually lets you set the schedule, it lets you do it via eCheck for your business clients, credit card for your individual clients, it’s trust compliant in case you are collecting that at the beginning of the month before the work is actually performed. But, having those capabilities and flexibility and subscription-based services, recurring billing and payment plans is really important.
And then you obviously are going to want a system that’s automating that process and showing you exactly what’s going on with your accounts receivable so that you can say by logging into a dashboard and having visibility as to, oh great, my system automatically pinged my client five days early, before the charge was going to go through to say, reminder client, this is happening and then it did it and then it sent the client an auto receipt and it updated my dashboard. Like, you just like got hours of your life back and you have got to pick it. So, just choose wisely.
Jared Correia: Yes. All right, so let’s leave off for a moment here so I can catch my breath; then we’ll come back for part three of the show.
We’re going to go a little long on the show, I’m seeing from the little clock in front of me, but I’m enjoying talking with Sarah so much I’m okay with that.
While I look for my other sock in the dryer, listen to some more words from our sponsors.
Is your firm experiencing missed calls, empty voicemail boxes, and potential clients you will never hear from again? Enter Answer 1 Virtual Receptionists. They are more than just an answering service. Answer 1 is available 24/7. They can even schedule appointments, respond to emails, integrate with Clio, and much more. Answer 1 helps make sure your clients have the experience they deserve. Give them a call yourself at 800-Answer-1 or visit them at answer1.com/podcast for a special offer.
Firm Central, a cloud-based legal practice management software for solo and small firms, provides a single online location for all of the tools you need to manage client files and perform client work, and offers unrivaled integration with Westlaw. With Firm Central, you can securely store and organize documents and case files, manage time tracking and billables, and collaborate with clients through a secure client portal from anywhere there is an Internet connection.
Jared Correia: Hey, thanks for coming back. This podcast is so packed with legal payment processing talk, it’s like a Linguica and Cheese Roll from Sunrise Bakery in New Bedford.
Now, let’s get back to our conversation with Sarah Schaaf of Headnote, who’s talking with me about electronic payment processing for law firms and AR automation.
Let’s talk about a topic that you truly and dearly love the time value of money. Since electronic payment processing allows law firms to get paid faster, what is the time value of money and how are lawyers advantaged by that?
Sarah Schaaf: You’re right, Jared, I do love this topic. I don’t know what it says about me, because it’s like fairly nerdy, but there’s two sides of the same coin. One is the time value of money and the other is the power of incremental change and they are the same thing essentially.
But, the time value of money the way that kind of I talked to law firms about it is like imagine if you had, like hopefully you know you are having your accounts receivable like or you might not, which is why you actually need to start applying the kind of techniques of automation and tech to that process, but, let’s say that you already know that you’ve got 20k and outstanding AR from a particular client.
And, you are confident that like they are going to pay it eventually or so you hope, but if you have that money today instead of 30, 60, 90 days, 90 days like, that’s six pay periods; so, this is all about opportunity cost. So, like, what would you do with six pay periods of money? Would you hire more people, like do more marketing, buy a new technology tool that would actually like help you do things better or faster?
It’s not so much even about like getting paid faster. To a lot of firms it is, like cash flow issues is a real thing, but if you are like, well, I don’t have cash flow issues, then it’s like opportunity cost, and like what are you actually wasting and foregoing, like how much faster could you grow your firm or what could you do with that money if you had it now versus then, which is really the same thing as this like compounded, interest compounded monthly like if you put 20 bucks away a month since you were born, you’d like to be a millionaire by the time you are 18, it’s that same concept that like these little changes make a big difference, and so getting that money even a week, couple weeks a month sooner actually adds up in a big way to your firm, and the best way to do that is to make it as easy as possible if your client to pay you.
Jared Correia: If I had six extra pay periods of money or I had one Mega Millions, I would have bought a generally for myself, the car from ‘The Dukes of Hazzard’. What would you buy?
Sarah Schaaf: That was not what I thought you were going to say at all.
Jared Correia: I’m a simple man with simple needs.
Sarah Schaaf: If I won the — whatever Mega Millions, Powerball, whatever it is, I would definitely buy like a house in like the South of France before I — or Kauai; Jared, you know Kauai. I would buy a house in Kauai before I buy the car from Dukes Hazzard.
Jared Correia: Well, that would be like the second thing I would buy, because I’d be a billionaire, but that’s like totally the first thing I would buy.
We talked about this a little bit before ACH payments, eCheck payments, recently same day ACH and eCheck payments have become available, so why is that important and why should law firms know about that?
Sarah Schaaf: Yeah, again, like this is something that I love. Part of what I’ve done with my like post-practicing law career over the past few years is to work directly with banks and financial institutions to build really cool stuff, and Same Day ACH is just awesome. I mean, this essentially, if you use a provider that has a really cool eCheck or ACH platform, it’s going to allow your client to pay you without any of the traditional kind of friction.
So, think about when you signed out for PayPal or Bill.com at some point in your life, and it made you like enter your accounting and running number, and then you have to go check your account three days later for micro deposits, and then you have to go back to like PayPal or Bill.com and enter those amounts and like the whole thing takes like a week and you probably forget and then they start emailing you. So, that’s not something that your clients want to do, you don’t want to make your clients do that.
But if you can choose somebody who has made a really kind of cool modern eCheck experience, you can give your client the ability to pay directly from their bank account in 10 seconds or less without opening an account. So, that’s super-cool and it gives your client a great experience, but then ACH, unlike credit card, allows you to have if you work with the right provider, the fund is actually transferred into your account same day, and for sure within 24 hours.
So, I mean, again, I hear from firms all the time like that difference to them of it’s either three to five business days for credit card versus I can have my funds in my bank same day within 24 hours of when it was initiated by my client, that is a game-changer for a lot of firms out there.
Jared Correia: Yeah, that’s a great advancement. All right, here’s your open-ended question of the day. Sarah Schaaf, what does the future of AR and e-payments look like for us (law firms)?
Sarah Schaaf: I think I’m friends with a lot of really cool people that are making great technology in our industry, and I love all of them because I come from a family of lawyers and worked at their law firms and like we just didn’t have this kind of technology or this kind of forward-thinking lawyer-turned tech founder until the last decade or so.
Jared Correia: Yeah.
Sarah Schaaf: So now there’s cool products and one of my favorite things, I mean, like just this is not my company, but in the past couple of years we’ve seen CRM for Legal become really popular, and I remember, when this first came out three years ago or so like I was like CRM for Legal like no lawyer is going to know what that means and they didn’t, like they had to really educate the market like, what is CRM, why do I need it? Why do other industries do this as a best practice?
And now, there’s multiple companies that are doing it, some better than others, and we kind of get like check the box, I need to be automating in taking clients and tracking leads.
Over the next couple of years what I really believe is we’re going to see that same kind of methodology and attention to detail and automation and tech being applied to our back-end processes.
So, as of now, we’ve kind of said, all right, I’m going to automate my marketing, my intake, I would communicate with my client, I would bill my client, but we don’t have automation for our accounts receivable and how we’re actually getting paid and managing and understanding the health of our business. That is to me what is really the next wave is kind of continuing to optimize that payment process and make it as easy as possible for your client and for you, and then really start applying technology to your accounts receivable so that the same way you now kind of interact with your CRM is how you’re going to be interacting with your AR.
Jared Correia: Good stuff. You’ve been bringing the heat this whole podcast. So now you can settle back, breathe for a little bit, retreat to the yoga room. I have one more question for you. Answer one of these two questions and I think we spoiled one of them, but anyway.
Choose between Napa Valley or Sonoma Valley, or tell me your favorite Hawaiian island and why?
Sarah Schaaf: Well, I’ll choose the first question, because I think I already gave away my favorite Hawaiian island, but —
Jared Correia: Which is Kauai?
Sarah Schaaf: Which is Kauai, yes, it’s amazing because the mountains go right into the ocean and it’s like Jurassic Park.
Jared Correia: — and the roosters.
Sarah Schaaf: — and the Roosters. Jared’s favorite. I would say Sonoma like in a hot second and it’s because it’s amazing and that’s actually where I got married, and if you want something that’s just as good of wine as Napa with like a little bit less kind of pretension, no hate Napa, but the grapes are just as good in Sonoma and everyone is really approachable and it’s just a beautiful part of the world.
Jared Correia: Beautiful, wonderful answer, and my choice as well —
Sarah Schaaf: Really?
Jared Correia: — would be Sonoma. Yes, I like, Sonoma, is way more low-key than Napa in my opinion.
Sarah Schaaf: Yes.
Jared Correia: And I’m kind of a low-key dude.
Sarah Schaaf: Yeah.
Jared Correia: This is a really fun show. Sadly, sadly we’ve reached the caboose of another episode of The Legal Toolkit podcast.
We’ve been talking with Sarah Schaaf of Headnote about electronic payment processing in legal and automation of accounts receivable.
Now, remember me, I’ll be back on future shows with further insights into my soul, the soul of America and the soul of the legal market.
If you’re feeling nostalgic from my dulcet tones however, you can check out our entire show archive anytime you want at legaltalknetwork.com.
So, thanks again to Sarah Schaaf of Headnote for making an appearance as my guest today.
All right, Sarah, here’s the big moment. Tell everyone how they can find out more about you and about what you do at Headnote?
Sarah Schaaf: Absolutely. Easiest way to learn more about Headnote and kind of really dig in on if e-payments and AR automation is right for you, is to go to headnote.com, with the Headnote at the beginning of the case that you’re about to start reading, and you can always email me with any questions, [email protected], or if it’s easier to remember [email protected], really anything at headnote.com and I will get back to you.
Jared Correia: But don’t literally email anything at headnote.com?
Sarah Schaaf: I swear, if you do, it’s like it goes to me because it doesn’t, that address doesn’t exist. So, whatever you want, I will get it.
Jared Correia: Thanks again. Sarah Schaaf of Headnote; and finally, thanks to all of you out there for listening.
I’m going to get a soft serve ice cream before it gets too cold to enjoy one.
Outro: Thanks for listening to Legal Toolkit, produced by the broadcast professionals at Legal Talk Network. Join host Jared Correia for his next podcast covering the current business trends for law firms.
If you’d like more information about today’s show, please visit legaltalknetwork.com. Subscribe via iTunes and RSS. Find Legal Talk Network on Twitter, Facebook, and LinkedIn or download the free app from Legal Talk Network in Google Play and iTunes.
The views expressed by the participants of this program are their own and do not represent the views of nor are they endorsed by Legal Talk Network, its officers, directors, employees, agents, representatives, shareholders, and subsidiaries. None of the content should be considered legal advice. As always, consult a lawyer.
Legal Toolkit highlights services, ideas, and programs that will improve lawyers' practices and workflow.
Sarah Schaaf talks about how lawyers can optimize their payment processes with technology and automation.
Andrea Cannavina gives advice to lawyers on how to increase efficiency this holiday season.
Milena Higgins talks about the ways automation and AI can help lawyers turn over cases with ease and efficiency.
Talitha Kozlowski talks about the practical consideration of freelancing, how the process works, and the potential risk law firms could face with freelance attorneys.
Jeremy Richter talks about what lawyers can do to buid confidence both in their practice and business skills.
Alan Fanger gives his thoughts on what lawyers can do in order to improve their client’s performance within the litigation process.