Law firms in financial difficulty
Posted on December 04, 2013 by Jeremy Frost
The Solicitors Regulation Authority (SRA) has identified at least 1,200 firms – more than 10% of the total number – with evidence of financial difficulty after a mass survey of at-risk sectors.
The SRA suggests that firms should seek advice and help at an early stage as this can lead to a better outcome for the firms and clients.
However, the SRA states that some firms refuse to acknowledge that they are in financial trouble until it is too late, which causes problems for clients, the firm and can also lead to investigations into conduct.
A further study has shown that 5% of the firms survey present a high risk of financial difficulty and they associate a number of poor practices associated with higher risk of financial difficulty:
- Inability to measure or control financial performance
- Excessive use of borrowing and debt
- Excessive partner drawings and remuneration in relation to profit and revenue
- Lack of transparency on financial performance amongst appropriate levels of management,
- Inappropriate use of client account
- Weak process for collecting on bills for completed work
- Over dominant senior partners or managers
- Inadequate planning and due diligence for diversification of legal practice or acquisitions of other firms
- Narrow focus on a single type of legal work
You can read the full survey report on the SRA website.
These are all areas we regularly come across at Frost Group, so please get in touch if we can help you assess and then address the issues facing your firm. The earlier you contact us the more opportunity there is to successfully resolve the issues facing your practice.