Following a poor financial year, Hammonds has changed its drawings policy to reduce monthly drawings by 7 per cent for this financial year and delay the payment of deferred drawings by over 12 months.
Earlier this month, Hammonds announced that profits per partner for 2003-04 were down by 18 per cent on last year to an average of just £272,000.
Hammonds paid out deferred drawings for 2003-04 in three tranches, but what little profits remain to be distributed are now expected to be withheld until July 2005.
Senior partner Richard Burns said decisions on drawing levels were made annually. “Inevitably, what you draw out revolves around the working capital cycle,” he said.
He added: “The borrowing position of a law firm can vary by up to £5m a month.”
However, Burns indicated that if the firm had a good year it might be possible to pay out money more quickly than expected.
He said the decision to cut drawings was made within a week of the year-end, but explained that it took much longer to inform