Cash flow is important to any business. In fact, it’s the canary in the coal mine for your business’ health. Poor cash flow is why most businesses fail. But it’s especially critical to litigation support service providers. You’re not just paying your own bills — you’re fronting thousands in court and witness fees before you ever see a dime back. If you’ve ever lost sleep over payroll or passed on growth opportunities because of tight cash, read on. And learn how to change your cash flow from a trickle to a fire hose—fast.
What is cash flow?
Simply put, cash flow is the money flowing in and out of your business, in real time. Cash flow is often confused with profit, but it isn’t the same thing at all. Profit is what you have left after paying your expenses. Even a profitable business can have problems with cash flow. For a deeper dive, check out the “Hello My Name Is Cash Flow” section of our recent article on running a successful litigation support service business.
Why is cash flow important, especially for legal support providers?
Covers immediate costs: Businesses need cash for those daily expenses that need to be paid now. That can include rent, payroll, and bills due. But litigation support service providers are in a whole other world when it comes to daily expenses. These businesses have to front the court and witness fees for their customers. These can add up to thousands, even millions of dollars.
Sustains operations: You need cash on hand to keep the lights on—literally! Healthy cash flow keeps you in business. If your vendors and employees don’t get paid, it could mean operations come to a halt.
Increases competitiveness: When you have money available, you can take advantage of business opportunities that come along. Say, securing a new customer with an urgent and large order. You can also spend on improvements that give your business an edge, like the latest legal technology or equipment.
Helps you track the health of your business: Paying close attention to your cash flow helps you detect problems early, so you can avoid them. Where is income shrinking? Where are expenses out of hand?
Supports growth: Having enough cash on hand gives you the confidence to invest in expansion, tech upgrades, and strategic initiatives.
Obstacles to healthy cash flow
If we know cash flow is important, why does it still sink most small businesses? There are a number of things that get in the way.
No surprise, the biggest culprit is time ticking by as you wait for customers to pay. We’ll address slow payments in a bit. Not paying attention is another obstacle—make sure you review and understand your cash flow report. Resistance to change can also gum up the works. Transforming your cash flow can sometimes require a mindset shift.
You may struggle to improve cash flow because of high overhead costs. Fixed expenses like rent, loan payments, and payroll can make it hard to catch a breath. As strange as it sounds, rapid growth can also be a problem. You need reserves to grow with the good times.
10 cash flow secrets for litigation support service providers
To improve your cash flow, you need to approach the solution from all angles: Think about ways to increase money in and reduce money out.
1. Let go of terms
The most powerful move you can make is to switch from net terms to daily payment processing. Yes, it’s a mindset shift, but one that can stabilize your cash flow overnight. You didn’t get into process serving, eFiling, and legal services support to be your customers’ bank. And terms may feel like the standard for the industry, but they’re quickly becoming old-school in a digital-first world. Your competitors are adapting. Will you?
2. Bill early, often, and with clarity
If letting go of terms isn’t right for you yet, at least make sure your billing process is working for you, not against you. Invoices should be sent promptly, and they should be easy to understand. This removes the bottleneck (you) and reduces the chance of delay because of disputes over charges.
3. Optimize expenses
Regularly review your expenses. This can help identify opportunities for cost-cutting. For example, you may uncover subscriptions to services you rarely use or opportunities to change to a better rate. You can lower spending without compromising on service.
4. Employ technology
Lean on legal software. By automating tasks, including payment processing, you can reduce labor costs and open up time for more strategic actions that can lead to increased cash in.
5. Add to your revenue streams
Think big. What other services can you offer your customers? If you’re only eFiling, consider adding process serving, physical court filings, document retrieval, courtesy copy delivery, secretary of state filing, and county recording. You can also expand your service area by county and state. Learn more about bundling services in one platform.
6. Understand your cash flow
Use your bookkeeping software to generate cash flow statements. Get to know them. A monthly review should be enough. They can give you insights into where you can improve cash flow. For example, maybe you’re paying bills too early or taking too long to collect payments.
7. Use a high-interest savings account
You need to have cash on hand to meet expenses. Why not make it work for you? With a high-interest savings account, the cash will be available when you need it but also earning interest.
8. Raise prices strategically
If it’s been a while since you’ve raised prices or you’re charging below market rates, it might be time to raise prices. If you communicate clearly, explaining your rising costs, your customers will likely understand and accept the change.
9. Increase operational efficiency
Lower your labor costs by streamlining or offloading tasks. For example, with LegalConnect, you have a customer portal where your customers enter orders directly, removing you from the process. This improves accuracy (since the client enters the data themselves) and frees you to take on the work of growing your business.
10. Negotiate with your vendors
Working with vendors is a great way to get more flexibility with your cash. Most vendors are agreeable, especially if they’ve been working with you for years. See if they’ll give you a discount for early payment or for bulk purchases. Ask for extended payment terms, so cash stays in your pocket longer. And always pay promptly to avoid late fees.
A partner to help you work smarter
Improving cash flow isn’t about working harder, it’s about working smarter. The most effective strategy? Break free from outdated terms and move to daily payments. With a legal support service platform like LegalConnect, you don’t just get the tools to make this transition, you get a partner that helps you grow stronger, faster, and more profitably.
Let’s talk about how to protect your cash and power your future.