4 Challenges Billing Software Helps Professional Services Firms Overcome

In the professional services sector, confidence in cash flow is waning. 55% of finance leaders are seeing an increase in requests for longer payment terms. 50% report an increase in partial payments. 

These changing customer behaviors are making cash flow forecasting less reliable. And with 71% of teams spending a moderate or significant amount of time every week chasing late payments, there’s less time available to spend on value-adding strategic work that would improve that cash flow confidence. 

That’s what our 2026 Cash Flow Clarity Report reveals. 

Yet professional services firms face unique challenges that can make it difficult to bring confidence levels up. Accounts receivable (AR) automation can help firms surpass these challenges and create more predictable cash flow for professional services teams.

Service-based businesses earn revenue through retainers, billable hours, milestones, and project-based engagements—and this type of project-based billing structure creates a unique accounts receivable landscape. But without accounts receivable automation that’s purpose-built for professional services in place, it can lead to challenges as well.

Some of those unique accounts receivable challenges include:

From longer payment approval processes to complex billing cycles, the invoicing process for professional services can be more complicated than in other industries. This can lead to irregular cash flow and delayed payments. 

Consider an architectural firm that invoices at set, pre-determined milestones for creating schematic designs. If fees are hourly, rates could vary based on the seniority of each person working on the project. Additional charges for expenses like travel may apply as well. Multiple client stakeholders may need to review each line item to ensure nothing looks incorrect before paying. When processes like tracking time, invoicing, capturing remittances, and reconciling payments are done manually, they can take extra time and slow down payment cycles. They may also lead to errors and customer disputes. 

Without automated billing software, it can also be more difficult for clients to pay, adding further barriers that slow down payment cycles. This is especially important as we’re seeing more clients expecting flexible, digital payment options: 36% of professional services firms have seen a shift toward card and virtual card payments, an even higher rate of change than the 21% seen across all combined industries.

For most service-based firms, the biggest invoicing challenges don’t come from the volume of invoices their finance teams are handling. Rather, they arise from the ambiguity that can often emerge in the invoice cycle. This ambiguity may originate from vague service and product descriptions, inconsistent time tracking, communication gaps with clients, non-standardized processes, or similar issues that can happen inadvertently—without any malicious intent—in the invoicing process. 

When fee structures are unclear in the original contract, communication lapses, or client expectations don’t align with the eventual invoice, conflicts can emerge. Subjective pricing can also make forecasting more difficult, impacting confidence in cash flow. 

One marketing firm, for example, may quote specific costs for their services, but also require additional payments for expenses like advertising fees or technologies that aren't surfaced until their invoices are sent. Yet another firm may take a more subjective approach and use value-based pricing. Their fees reflect the expected ROI of the project, rather than the hours spent completing the project. This can reduce some ambiguity, but makes it more difficult to forecast cash flow as rates change from project-to-project. 

Both cases may require multiple approvals from client-side stakeholders, which can delay payment. And disputes with clients can arise when there’s an ongoing lack of transparency, creating more friction in the customer experience.

Since professional services firms rely on ongoing client relationships to sustain revenue, the client experience doesn't end when the work does. Consider a law firm where a stable list of clients with ongoing legal needs builds a consistent flow of business. A quality customer experience, at all levels of the business, is critical. 

To nurture that customer experience, accounts receivable teams must take a relationship-driven approach to collections. But prioritizing customer experience above all else can extend already long payment cycles, especially when more customers are asking for longer payment terms and partial payments. Without collections software customized to the needs of law firms and other service-based businesses—with tools like predictive analytics to help prioritize collections based on customer risk and value—the right balance can be difficult for finance teams to achieve. 

For example, law firms may need to wait for cases to be settled before invoicing, making for higher billing amounts. Adding longer payment terms can then negatively impact cash inflows further, putting working capital at risk and impacting long-term strategic plans like hiring and borrowing decisions. Yet more rigid approaches to collections may also damage client relationships, leading clients to look elsewhere for future legal needs. 

This can make the collections process more challenging when teams manually try to balance relationships with payment requests. The data shows evidence of this, with 76% of professional services organizations seeing collecting outstanding receivables as a moderate to top challenge.

For finance teams, collaboration gaps can emerge on two fronts: with their internal teams and with the clients themselves. And according to our data, both are a concern in the professional services sector. 

Coordinating communication between internal teams represents a source of friction for nearly half (46%) of accounts receivable teams. And for 44% of those who have implemented accounts receivable automation, customer communication represents one of the areas of greatest return. 

Within the finance function, data is spread across ERPs and spreadsheets, making it difficult to work cross-departmentally from a single source of truth. And a lack of well-defined communication workflows can lead to client communication gaps and give customers limited transparency into time tracked, expenses accrued, and payments due. 

Consider a consulting group invoicing at project milestones. Accounts receivable teams must be able to collaborate effectively cross-departmentally to understand when those milestones are approaching, and access time and expense tracking data. They also need to communicate that information clearly to customers to avoid disputes later on. 

Without structured collaboration processes in place, they risk negatively impacting the customer experience and slowing down cash flow further. But AR automation and billing software can help firms achieve their goals.

68% of the professional services respondents we surveyed report that AR automation has decreased payment delinquency. Accounts receivable automation that’s purpose-built for this group can also help finance teams deliver better customer experiences, enhance collaboration, and strengthen confidence in their cash flow. It does this through: 

• Integrated data that provides a single source of truth, reduces manual work, and lowers the chance of errors by connecting ERP solutions with payment processing systems.
• Structured collaboration solutions that make it easier for accounts receivable teams to work cross-departmentally, through better communication and shared access to data.
• Automated communication workflows and customer payment portals that make payment agreements and transaction histories more transparent to remove friction from the customer experience.
• Flexible billing options that enable project-based billing, including hourly, retainer, and blended invoicing structures.
• Forecasting capabilities that offer real-time visibility into current cash flow, using tools like predictive analytics to predict payment behaviors.
• Cash application automation that automatically matches payments to open invoices to reduce errors and accelerate financial close.
• Added efficiencies across receivables functions to better handle ebbs and flows in client volumes without increasing finance team headcount. 

Versapay’s AR automation tools, collections solutions, and billing software support professional services businesses like law firms, consulting teams, and more—helping take them control of the invoice-to-cash process, maintain predictable cash flow, and create a friction-free customer experience.