Law firms need to make credit management a core part of their client service, a partner from Pricewater-houseCoopers (PwC) claimed following the publication of its annual research into law firm finances.
The survey, ‘Financial Management in Law Firms’, found that fee collection among UK firms had worsened compared with last year. The top 25 firms are taking an average 76 days to collect fees, while 84 per cent are taking longer than 60 days. The latter figure is a slight improvement on last year’s 85 per cent, but is significantly behind 2001’s 65 per cent.
PwC partner Peter Buckle said law firms needed to address credit management from the point when the client walked through the door to the moment they pay the bill. “Firms need to develop sound client take-on and acceptance procedures,” he said. “They should also ensure they get bills out on time and that they call the client in advance of the due date to make sure there are no problems.”
The PwC research found that only 43 per cent of firms surveyed routinely checked a new client’s credit rating before taking them on. The survey also found that, despite a slight improvement in “billing processes”, there was still a “year-end billing bulge”. According to the survey, 36 per cent of the top 100 firms billed one-third of their 2003 fees in the last three months of their financial year.
Last year The Lawyer 100 survey found that only a handful of top 100 firms, including CMS Cameron McKenna, Lovells and Nicholson Graham & Jones, had less than 60 debtor days. The benchmark for lock-up (combining work-in-progress and debtor days) is 150 days.