Law firm cash flow reaching crisis point: Many firms carrying huge liabilities as under-strain courts system leads to big delays in bill payments

Burcher JenningsCosts-based funding could rapidly improve firms’ cash flow

The recent trickle of law firm and legal supplier firm failures could become a stream unless new ways are found to manage severe cash flow problems affecting the industry, according to Martyn Jennings, founder and chief executive of Burcher Jennings and a leading expert on legal costs.

Martyn Jennings says:

“There just isn’t enough money moving swiftly enough around the legal system. The Jackson reforms may have added to the problem, but the biggest issue is the slow progress of cases through an under-strain court system. This is leading to the build-up of vast debt mountains in the industry as firms incur litigation costs they can’t cover through settled bills for prolonged periods of time.

“Without healthy cash flow, firms are finding their business plans restricted and their growth plans stuck on the ground. New ways are required to ensure worsening cash flow issues and risks are shared between firms and suppliers or are better mitigated.”

Burcher Jennings is today announcing it has facilitated the development of a funding solution which offers firms the means to smooth the unsustainable payment delays and debt build-ups that are causing such major problems in the sector. Operating as a costs-based funding facility, the solution allows firms who have independently-prepared bills of costs to receive an advance of up to 75% against those bills. Because a funder can rely on an independent and expert assessment of the bills of costs, the advance can be offered at interest rates much lower than available from other funding sources – in many cases at rates as low as 4% per annum.

Martyn Jennings continues:

“It is the nature of the highly regulated legal sector that difficulties in law firms can be masked as the consequences of a business failure are so stark and have such great implications. As such the sporadic failures and emergency buy-outs we’ve seen recently should be seen as a highly significant ‘canary in the mine’. Firms that are struggling with cash flow should pay heed, as this is a trend that could quickly engulf other law firms. However, by unlocking income tied up in recoverable litigation costs, firms can significantly mitigate the problem, freeing funds for growth.”

Associate News is provided by Legal Futures Associates.
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