Recurring payments can make a law firm’s collections easier to plan, provided the firm is clear about what it is collecting and when it may use the money.
Why law firm cash flow is so hard to predict
Salaries are paid on the same day every month, although clients are sadly not always so obliging. In some months, you could have a full caseload, post a good month on paper, and still spend Friday afternoon working out which invoices have been settled.
It makes the bigger decisions harder too. You think twice about taking on another lawyer when you can’t say what will be in the bank next month, and even your own pay can depend on whether a few clients have paid.
Recurring payments help because the date is agreed in advance. The client knows when to pay, and the firm knows when to expect the money. But a payment date says nothing about what the money is for. A monthly payment might cover work you have already done, or it might be a deposit for work you have not yet started. Decide which it is before you offer the arrangement, because it affects when the firm is entitled to use the money.
A monthly payment can be a fee, an instalment or a deposit
Start with what each payment actually is. Three clients might pay the same amount every month for three different reasons.
The first is paying a monthly fee for ongoing legal advice within an agreed scope.
The second is paying off a larger bill in installments.
The third is topping up a deposit for work that has not yet been done.
These are not the same thing, and the Law Society of Singapore does not treat them as such. It separates fees from deposits held as security for future costs, and its guidance is that a security deposit belongs in the client account, with the relevant conditions met before any of it is transferred to pay the firm’s fees. (Source: lawsociety.org.sg)
Calling every monthly payment a “retainer” invites misunderstanding, because the client may think it is a fee when the firm treats it as a deposit. Name each kind of payment separately and say in writing what it covers.
How to structure a monthly legal fee arrangement
A monthly fee works only when the client understands the scope and the firm can serve it at a sensible cost. Take a business that regularly needs supplier contracts reviewed. A monthly agreement might cover a defined amount of that work, with separate fees for larger projects, so that the client knows what support is on offer and the firm can plan its lawyers’ time.
Problems start when “ongoing advice” means different things to each side. The firm owner expects a few calls. The client expects help with every legal problem that lands on their desk.
Write down what the monthly fee covers and what it does not, and say what happens when work falls outside it. If the package includes a set number of hours, say whether unused hours expire or carry forward. Settle this before the first quiet month, when the client may start asking what they are paying for.
If you want guidance on setting fees clearly, the Law Society of Singapore’s guidance on reasonable fees and fee arrangements is a good place to start. (Source: lawsociety.org.sg). In Malaysia, the Bar’s guide to appointing a lawyer also stresses clarity about fees and disbursements. (Source: malaysianbar.org)
Agree on payment dates and automatic charges before work starts
A clear fee is only half the arrangement. The client also needs to know when bills will arrive and when payment is due, and they should hear it before the work begins. Without agreed terms, the client is left guessing when payment is expected, and the firm’s accounts team ends up chasing, so confirm the billing and payment dates at the engagement meeting.
If the firm intends to collect payment automatically, for example by charging a saved card, it should first obtain the client’s clear authority. Explain how the client can change or cancel the arrangement and allow them to raise questions before the first charge. Each charge should be expected: if the amount differs from the previous month, notify the client before collecting it.
An instalment payment structure requires the same clarity. Do they settle fees already billed, or provide funds for future work? The answer, together with the applicable client-account rules, affects where the money should be held and when the firm can use it.
Why client account money is not operating cash
Money in the client account is held for clients, not for the firm. A large balance can make the firm look healthier than it is, because much of that money may be for work that has not yet been done.
Until the firm is entitled to apply it towards its fees, that money cannot be used for salaries, rent or other firm expenses, even though it is sitting in the bank.
Client account rules in Singapore
In a 2018 judgment, Singapore’s High Court explained that a firm must raise a bill before deducting its fees from client money and must have the client’s consent to the deduction. Firms should follow the applicable client-account rules before making a transfer. The judgment is also plain that asking for a deposit is not the same as billing for work performed. (Source: elitigation)
Client account rules in Malaysia
Firms practising under Malaysia’s Legal Profession Act 1976 should check client-account treatment against the Solicitors’ Account Rules 1990 and applicable Bar Council rulings, while firms in Sabah and Sarawak should check the rules governing their own practices. Setting up a monthly collection does not change the nature of the money received. (Sources: Solicitors’ Account Rules 1990 · Bar Council rulings)
What this means for your cash flow forecast
When you build the forecast, keep three kinds of money separate:
Expected fee receipts: payments the firm expects from clients, shown against the date each is due.
Money held for clients: the balance in the client account, which is not the firm’s cash.
Available office cash: money that belongs to the firm and is available for operating expenses, after allowing for upcoming commitments
Sometimes the firm is entitled to transfer money from the client account to its office account to settle a legal bill issued to that client. You can include that transfer in the forecast only if the firm is entitled to make it. In Singapore, for example, the High Court has said the firm must first raise a bill and have the client’s consent. Until the money reaches the office account, show it as expected, not as cash in hand.
Credit card payments for legal fees in Malaysia
Some clients may prefer to pay by card. In Malaysia, Bar Council Ruling 14.16 allows credit card payments for legal fees, on conditions that include protecting client confidentiality and complying with the applicable professional rules. (Source: malaysianbar.org)
That ruling covers accepting card payments. It does not expressly approve every automatic or recurring arrangement, so a firm that wants to charge a saved card each month needs to check the setup itself. Before it does, the firm should ask the payment provider three questions:
Where will the money be deposited?
How are refunds and fees handled?
What happens when a client disputes a charge?
The answers matter because the arrangement has to meet the firm’s accounting obligations as well as have the client’s consent. A provider’s standard setup may not satisfy both, so review it before committing.
Law firm billing: automatic payment still needs a clear statement
Automatic payment does not remove the need for a clear bill. The client should still be able to see what they are paying for, so each monthly statement should state the period it covers and explain any work charged outside the agreed fee.
The Law Society of Singapore points to the value of itemised bills in showing the work performed. (Source: lawsociety.org.sg). A clear statement also gives the firm and the client a record to turn to if a question comes up.
A monthly payment can arrive on time and still be a poor deal. If the cost of doing the work exceeds the fee, the arrangement loses money, even if the client pays consistently on time. Each month, compare the fee collected with the time spent and the cost of delivering the work. If the fee keeps falling short, revisit the scope or the price.
Forecasting law firm cash flow around receipts
Say a client’s payment is due on a set day each month. Show it in the forecast for that day, but do not treat it as cash until it has actually arrived in the bank. Until then, it is money you expect, not money you have.
When the due day passes, check whether the payment arrived. If it did not, contact the client straight away. Follow up after the first missed payment, rather than letting several months of unpaid payments build up.
Before offering monthly payments to every client, try them with a few. Choose clients whose work is regular enough to suit a monthly arrangement. Over the first few months, you will see which terms clients need explained and where your accounts team’s process is unclear, and you can fix both before rolling the arrangement out more widely.
Is your firm ready for recurring payments?
Recurring payments will not solve a firm’s cash flow on their own, but they can make collections easier to plan. That works when clients understand what they are paying for and the firm handles the money correctly. What you gain is practical: you know what is due each month, and you follow up when it is not paid.
Before you add automatic collections, check your billing against three questions:
Can your team explain every client’s balance?
Are bills going out on time?
Can you tell which money belongs to the firm and which is held for clients?
If the answer to any of these is no, fix that before you add automatic collections.
Bring your questions to a CoreMatter demo. We can show you the billing and accounting tools available today and talk through what a recurring payment arrangement would need.
Book a demo today: https://corematter.biz/signup-
Frequently asked questions
Is a monthly payment from a client the same as a retainer?
Not necessarily. A monthly payment might be a fee for ongoing advice, an instalment towards a larger bill, or a deposit against future work. Each is treated differently, so decide which one you are offering and put it in writing.
Can a law firm use client-account money to pay its own expenses?
Money held for clients should not be treated as available cash for the firm’s expenses. Where the firm is entitled to apply client money towards its fees, it must follow the applicable billing, consent, and withdrawal requirements before transferring the amount to its office account. The firm can then use its own funds to pay operating expenses. (Source: lawsociety.org.sg)
Firms practising under Malaysia’s Legal Profession Act 1976 should check the Solicitors’ Account Rules 1990 and applicable Bar Council rulings. Firms in Sabah and Sarawak should check the rules governing their own practices. (Source: malaysianbar.org)
Can Malaysian law firms accept credit card payments for legal fees?
Bar Council Ruling 14.16 allows it, on conditions that include protecting confidentiality and complying with the applicable professional rules. It is not a blanket approval of every automatic payment setup.
This article is general information for law firms in Malaysia and Singapore. Firms should check their proposed fee and collection arrangements against the rules that apply to their own practice. Nothing in this article confirms that a particular automatic collection method is permitted for every firm or payment arrangement.
