Accepting payments for a law firm is a nuanced topic since law firm payment processing can be quite different from other types of businesses. As a law firm, you want to make it as easy as possible for your customers to pay you for your services. Accepting credit cards for your law firm is critical to running a successful business, and there are many ways to do it. However, there are several unique considerations that law firms must consider when trying to assess how to accept payment as a law firm.
In this article, we will provide a complete guide to accepting credit cards for your law firm, including the different methods available for law firm payment processing and specific considerations, such as trust accounting, PCI compliance, and pricing, among others, that you must pay attention on how to accept payments as a law firm. Finally, we will also discuss some best practices to follow.
Accepting payments for a law firm that complies with the ABA
One of the most significant differences between law firm payment processing and other business payment processing types is the need to comply with legal and ethical standards. Law firms are subject to several regulations and guidelines when accepting customer payments, including trust accounting rules, client confidentiality, and attorney-client privilege. Law firms must work with payment processors that are familiar with these regulations and can help ensure compliance.
Trust accounting, also known as “client trust account” or “IOLTA” (Interest on Lawyers Trust Accounts), is a special type of bank account used by law firms to hold and manage customers’ funds. This accounting method is particularly relevant for law firms that handle client funds such as trust, retainer, and settlement funds. One of the most significant inquiries in how to accept payments as a law firm is that of client trust accounts.
A trust account is a separate account established by a law firm to hold money belonging to customers and money earned by the firm but held on customers’ behalf until it can be disbursed to them. These funds are considered “trust money” and are subject to special rules and regulations, including regulations concerning the deposit, withdrawal, and disbursement of funds.
Trust accounting is essential to the law firm’s financial operations, as it helps ensure that customers’ funds are protected and managed correctly. This is important not only because customers entrust their money to law firms and need assurance that it will be held securely and used appropriately but also because trust accounting ensures that any funds held on behalf of customers are handled properly as required by state laws.
Trust accounting also involves reconciling the trust account balance regularly and ensuring that the funds held in the trust account are being used for the benefit of customers. This means that the law firm must track all transactions and keep detailed records of all funds in and out of the trust account. Given all these nuances, many finance departments need clarification about how to accept payments as a law firm since merchant service providers deposit payments processed net of their merchant account fees.
For law firm payment processing, it is essential to note that any funds received from customers should be deposited into the trust account in its entirety. This applies to all forms of payment, including credit card payments, electronic funds transfer (EFT), and automated clearing house (ACH) transactions. Additionally, law firms must ensure that they comply with state regulations and rules regarding trust accounts, especially since these regulations can vary by state.
First, MSPs may have different policies or restrictions when processing trust account transactions. Many payment processors simply may not know how to accept payments as a law firm. Those familiar with the process may not be willing to offer law firm payment processing services because of the added compliance requirements and potential risk of mishandling trust funds. Others may require additional documentation or information from the law firm to ensure compliance with trust account regulations.
Secondly, certain MSPs may not provide the level of detail in transaction and deposit reporting required for trust account reconciliation when accepting credit cards for your law firm. This is important for law firms to have accurate records of transactions and balances in the trust account, as state laws require.
Additionally, MSPs may have different chargeback and refund policies which could be a problem if they conflict with trust accounting rules and regulations. Chargebacks or refunds for law firm payment processing may need to be explicitly handled as state laws dictate.
Lastly, MSPs may require the law firm to keep a minimum balance in the trust account, which could create a cash flow problem for the law firm. Some firms may prefer to maintain a lower balance to avoid having large sums of money tied up in the trust account for extended periods.
All the different ways how to accept payments as a law firm
One of the most common methods for accepting credit cards for your law firm is through a merchant services provider, also known as a payment processor.
A merchant services provider will process credit card payments on behalf of your law firm and deposit the funds directly into your firm’s bank account. Many merchant service providers offer payment processing options, including virtual terminals, point-of-sale (POS) systems, and mobile card readers. Law firms must choose a provider that offers the right payment processing solution.
There are several ways to set up with an MSP to start accepting credit cards for your law firm. One option is to use a traditional merchant account, which typically involves a long-term contract and a monthly fee. Another option is to use a pay-as-you-go service, which allows law firms to pay for each transaction individually and does not require a long-term contract. This can be especially useful for law firms that only process a few credit card payments, as it eliminates the need to pay a monthly fee.
Another alternative way to accept payments as a law firm is using a payment gateway. Payment gateways provide a secure and efficient way to process online payments and can be integrated with your law firm’s website. Payment gateways are typically easy to use and can be set up quickly. Additionally, they usually provide real-time payment processing, which means that payments are processed as soon as they are made, eliminating the need to wait for payment processing to be completed.
Another alternative method is to use online invoicing software to create and send invoices to your customers with the option of online payments. This can be especially useful for law firms that invoice their customers regularly. It can allow customers to make payments online with one click and help firms keep track of invoices and expenses in one central location.
How to accept payments as a law firm is somewhat different from other types of businesses. Law firms must consider several unique considerations when receiving payments from customers, including compliance with legal and ethical standards, security, and the need for payment processing solutions that meet the specific needs of their business.
By working with Host Merchant Services which specializes in professional services payment processing, such as law firm payment process, accepting credit cards for your law firm can be seamlessly initiated while ensuring that it is done securely, efficiently, and promptly.
The types of law firm payment processing
There are several types of methods on how to accept payments as a law firm from customers. The most common methods include credit and debit card processing, electronic funds transfer (EFT), and automated clearing house (ACH) transactions. Each method has its pros and cons, and the best option for your law firm will depend on your specific needs and preferences.
Credit and debit card processing is the most popular and widely used payment processing method. It allows customers to make payments using their credit or debit cards, and the funds are transferred to your law firm’s bank account.
The main advantage of this method is that it is fast and convenient for customers, as most people already have a credit or debit card and are familiar with the payment process. Additionally, credit card processing can help boost your sales by increasing the number of customers willing to purchase your services, as it provides a flexible payment option.
The downside to credit card processing is that it can be expensive. There are typically fees associated with processing credit card transactions, such as transaction fees, monthly fees, and chargeback fees. To start accepting credit cards for your law firm requires that you comply with strict security regulations to protect customers’ information, on top of the existing compliance needs of the ABA. This is not the forte of just any merchant account provider.
Electronic funds transfer (EFT) is another popular method of payment processing for law firms. EFT allows customers to make payments directly from their bank account to your law firm’s bank account. This method is often used for recurring payments, such as monthly retainer fees.
The main advantage of EFT is that it is less expensive than credit card processing, and there are typically fewer fees associated with this method. Additionally, EFT can help you save time by automating the payment process, as you will not need to process payments manually.
Automated clearing house (ACH) transactions are a more recent payment processing method that is becoming increasingly popular for law firms. ACH transactions allow customers to make payments directly from their bank account to your law firm’s bank account. This method is similar to EFT, but it is processed through the Automated Clearing House network, which is a system that handles electronic transactions between banks.
The main advantage of ACH is that it is less expensive than credit card processing, and there are typically fewer fees associated with this method. Additionally, ACH can help you save time by automating the payment process, as you will not need to process payments manually.
Pricing
Cost is a significant factor when choosing a merchant service provider for credit card processing, as most firms consider it as soon as they confirm that a provider complies with bar regulations. However, comparing prices for credit card processing can be more complex than it may seem. Various billing models and additional options can make analyzing costs more difficult. Many attorneys have reported that their billing was more than expected, and they couldn’t explain why. This confusion appears to be due to the different models providers use rather than an issue with a specific processor.
Payment providers such as PayPal or Stripe typically charge a flat fee per transaction along with a percentage, around $0.30 and 2.9% of the transaction. This is easy to understand and predict, but it can also be more expensive compared to the more advanced pricing systems used by trust-compliant providers.
The two primary billing models for law firm payment processing. Interchange-plus and tiered pricing are two different pricing models that are used by payment processors.
Interchange-plus pricing, also known as “cost plus” pricing, is a pricing model where the business pays the actual cost of the interchange fee (the fee charged by the card issuer) plus a markup from the processor. This markup is a percentage of the transaction amount and a fixed fee per transaction. The advantage of this pricing model is that it is transparent and allows businesses to see exactly how much they are paying for each transaction.
Additionally, because firms only pay for the actual cost of the interchange fee, they can be assured that they are getting a fair price.
Tiered pricing, on the other hand, groups different types of transactions into different “tiers” and assigns a different rate to each tier. This makes it more difficult for businesses to understand what they are paying for each transaction, and can result in them paying more than they would with an interchange-plus pricing model.
This is because, with tiered pricing, processors will often combine different interchange categories (such as qualified, mid-qualified, non-qualified) and mark-up each tier differently, which can create confusion and hidden costs.
In general, interchange-plus pricing is considered to be the more transparent and fair pricing model, because firms can see exactly what they are paying for each transaction and can be assured that they are not being overcharged. However, tiered pricing can be more beneficial for law firms with a high volume of transactions, as processors may offer a lower overall rate for these businesses.
Additional factors for law firm payment processing
PCI Compliance – An essential consideration for law firms is security. Law firm payment processing often involves sensitive financial and personal information, such as credit card numbers and bank account details. Law firms must work with payment processors that use state-of-the-art security measures to protect this information and prevent fraud. Ensure that the processor adheres to strict security standards, such as using encryption and tokenization for data security.
Additionally, Host Merchant Services specializes in law firm payment processing and is adept at fraud prevention and detection, which can help protect your law firm and customers from unauthorized transactions.
Customer Support – Another factor to consider when choosing a payment processor for your law firm is the customer support level and service the processor provides. This can be especially important in case of any issues or problems with payments or transactions.
Look for a processor with a dedicated support team available 24/7, responsive and helpful in addressing any problems or questions you may have. Additionally, consider the processor’s track record for service, and read reviews from other customers to get an idea of the level of service you can expect.
Third-party Integration – This is another crucial factor when considering how to accept payments as a law firm. Contactless payment processing, mobile, cloud-based, etc., may be a requirement in accepting credit cards for your law firm, however, having an integrated solution for law firm payment processing is equally important. It would help if you also considered the flexibility of any payment processor’s integration options.
Integrating the payment processor with the law firm’s existing systems and processes can save time and reduce errors. It is essential to check if the processor can integrate with the law firm’s practice management software, invoicing system, or accounting software. Host Merchant Services also offer APIs allowing you to build custom integrations, which can be a great option if you have unique requirements.
Conclusion
When choosing a payment processor for your law firm, it’s essential to weigh these factors carefully. The right processor can make a big difference in efficiency, security, and customer service. Furthermore, there are many factors that law firms must consider when trying to grasp how to accept payments as a law firm. This includes considerations such as PCI compliance and pricing.
Trust accounting is also essential to accepting payments as a law firm. It is a way of securely protecting customers’ funds and ensuring that any funds held on behalf of customers are handled appropriately as required by state laws. Law firms must understand the rules and regulations of trust accounting to ensure compliance and proper handling of customers’ funds.
