UK Law Firms Suffer As A Result Of Poor Financial Management

by Robin Pilgrim, LawAndTax-News.com, London

16 February 2004

A survey recently conducted by PricewaterhouseCoopers entitled "Financial Management in Law Firms" has revealed that delays in collecting payment and failure to conduct credit checks before accepting clients are impacting adversely on the financial affairs of many UK law firms.

According to PwC, fee collection was worse in 2003 than the previous year, with the top 25 UK law firms taking an average of 76 days to collect payments owed to them.

Although the accountancy firm revealed that billing processes within law firms had improved, it still pointed to a significant "year-end billing bulge", with 36% of the country's top 100 law firms billing around one third of their 2003 fees in the last three months of the financial year.

Additionally, the survey revealed that 43% of the top 25 law firms do not as a matter of course undertake credit checks before accepting clients.

Commenting on the results of the poll, PwC partner and head of the firm's Receivables Management Group, Peter Buckle observed that:

"The slight improvement last year in billing shows that firms are paying more attention to working capital management, but fee collection remains a costly area of weakness. There seems to be an unsubstantiated and outdated perception that pro-actively managing cash collection will somehow undermine client relationships."

He concluded:

"Better performing firms approach debtor management as an extension of client service, identifying issues early and communicating effectively to facilitate prompt payment."

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